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Fisher v. JP Morgan Chase & Co.

March 31, 2010

ISADORE FISHER, ON BEHALF OF HIMSELF AND A CLASS OF PERSONS SIMILARLY SITUATED, AND ON BEHALF OF THE JP MORGAN CHASE 401(K) SAVINGS PLAN, AND JANNA M. WOOTEN, KELLI M. BUNN, TAMMY T. SOILEAU AND AMY K. HARVEY, PLAINTIFFS,
v.
JP MORGAN CHASE & CO., J.P. MORGAN INVESTMENT SERVICES, THE PLAN INVESTMENT MANAGEMENT COMMITTEE, THE BENEFITS FIDUCIARY COMMITTEE, INA R. DREW, DINA DUBLON, PATRICK L. EDSPARR, JOHN J. FARRELL, PETER H. KOPP, MARIA ELENA LAGOMASINO, BLYTHE S. MASTER, EDWARD L. MCGANN, MARC J. SHAPIRO, JOHN C. WILMOT, RICHARD DONALDSON JR., WILLIAM B. HARRISON, HANS W. BECHERER, RILEY P. BECHTEL, FRANK A BENNACK, JR., LAWRENCE A. BOSSIDY, M. ANTHONY BURNS, H. LAURANCE FULLER, ELLEN V. FUTTER, WILLIAM H. GRAY, III, WILLIAM B. HARRISON JR., HELENE L. KAPLAN, LEE R. RAYMOND, JOHN R. STAFFORD, LLOYD D. WARD AND JOHN DOES 1-30, DEFENDANTS.



The opinion of the court was delivered by: Sidney H. Stein, U.S. District Judge.

OPINION & ORDER

Table of Contents

I. BACKGROUND ......................................................................................................................... 3

A. Parties.................................................................................................................................. 3

B. The Plan .............................................................................................................................. 5

C. This Action.......................................................................................................................... 6

II. DISCUSSION ........................................................................................................................... 7

A. Motion for Judgment on the Pleadings Standard................................................................ 7

B. Count I: Defendants Allegedly Offered JP Morgan Chase Stock as an Investment Option When They Should Have Known that It Was an Imprudent Investment ................................... 8

1. Plaintiffs Have Failed To State a Plausible Claim that Offering JP Morgan Stock as an Investment Option Was Imprudent....................................................................................... 11

2. The Allegations in the Complaint Do Not Establish a Plausible Claim That Overcomes the Presumption of Prudence ................................................................................................ 13

C. Count II: All Defendants, Except JP Morgan Investment Services, Allegedly Misrepresented and Failed To Disclose Material Information To Plan Participants................ 16

1. Defendants Had No Affirmative Duty To Disclose Information About JP Morgan Chase's Financial Condition................................................................................................. 17

2. Plaintiffs' Amended Complaint Fails To Allege What Statements Defendants Made That Were Materially Misleading......................................................................................... 18

3. Defendants Were Not Acting as Fiduciaries When They Made Statements About JP Morgan Chase's Financial Condition ................................................................................... 20

D. Count III: JP Morgan Chase and the Director Defendants Allegedly Failed To Appoint Fiduciaries with the Knowledge and Experience Necessary To Manage Plan Assets ............. 21

E. Count IV: JP Morgan Chase and the Director Defendants Allegedly Failed To Monitor Plan Fiduciaries......................................................................................................................... 22

F. Count V: JP Morgan Chase and the Director Defendants Allegedly Failed To Provide Sufficient Information For Plan Fiduciaries To Perform Their Duties .................................... 23

III. CONCLUSION...................................................................................................................... 23

Plaintiffs bring this action pursuant to the Employee Retirement Income Security Act of 1974, Pub. L. 93-406, Sept. 2, 1974, 88 Stat. 829 ("ERISA"). The plaintiffs are current or former employees of JP Morgan Chase & Co., and its predecessor, Chase Manhattan Corp., (collectively, "JP Morgan Chase") who participate in or otherwise stand to benefit from a JP Morgan Chase deferred employee compensation plan, a defined contribution plan intended to qualify for tax benefits pursuant to I.R.C. § 401(k). At least some of the plaintiffs' individual plan accounts were invested in the JP Morgan Stock Fund or a predecessor fund, which invested in the company's own common stock. Plaintiffs allege that the decision to offer the JP Morgan Stock Fund was improper because JP Morgan Chase failed to disclose certain banking, accounting, and investment malfeasance largely connected with Enron Corporation. The plaintiffs claim that the defendants are liable under ERISA for the imprudent investment, negligent misrepresentations and omissions about the plan's management, and negligent supervision of the plan's fiduciaries. Defendants have now moved for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). For the reasons set forth below, defendants' motion is granted.

I. BACKGROUND

The following facts are taken from the amended complaint or from documents attached to or incorporated in that complaint and are presumed to be true. See, e.g., ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007) (a court "may consider any written instrument attached to the complaint," as well as "statements or documents incorporated into the complaint by reference," in deciding a motion to dismiss).

A. Parties

Plaintiffs Isadore Fisher, Janna M. Wooten, Kelli M. Bunn, Tammy T. Soileau and Amy K. Harvey were employees of Chase or JP Morgan Chase & Co., ("JP Morgan Chase") or a subsidiary of JP Morgan Chase during the relevant time period. Plaintiffs invested money in the JP Morgan Chase 401(k) Savings Plan (the "Plan"). (Amended Complaint ("Am. Compl.") at ¶ 8.) Fisher seeks to represent all "current and former participants in the Plan for whose individual accounts the Plan held shares of common stock of the Chase Manhattan Corporation ("Chase") and/or JP Morgan Chase & Co" from April 1, 1999 and January 2, 2003*fn1 (the "Class Period"). (Id. ¶ 1.)

Defendant JP Morgan Chase is a financial holding company and one of the largest banks in the country and is the sponsor of the Plan. (Id. ¶¶ 9-11.) The other defendants are various individuals and entities associated with the Plan.

Defendants Hans W. Becherer, Riley P. Bechtel, Frank A. Bennack, Jr., Lawrence A Bossidy, M. Anthony Burns, H. Laurence Fuller, Ellen V. Futter, William H. Gray, III, William B. Harrison, Jr., Helene L. Kaplan, Lee R. Raymond, John R. Stafford and Lloyd D. Ward ("Director Defendants") were members of the Board of Directors of JP Morgan Chase during all or part of the Class Period. (Id. at ¶ 18.) The Board of Directors of JP Morgan Chase has limited fiduciary responsibilities: (a) designation and removal of the Plan Administrator; (b) designation and removal of the Benefits Fiduciary Committee members; and (c) designation and removal of the Plan Investment Management Committee members. (Id. at ¶ 11; Ex. H to Decl. of Jonathan Youngwood dated April 16, 2009 ("Youngwood Decl.") at § 13.4.)

Defendant Richard Donaldson Jr. was a Vice President of JP Morgan Chase and the Benefits Administrator at JP Morgan Chase. According to the Complaint, Donaldson acted as a ...


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