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Bruce Laboy, Individually, On Behalf of A Class of All Others v. Board of Trustees of Building Service 32 Bj Srsp

March 6, 2012

BRUCE LABOY, INDIVIDUALLY, ON BEHALF OF A CLASS OF ALL OTHERS SIMILARLY SITUATED, AND ON BEHALF OF THE BUILDING
SERVICE 32 BJ SRSP FUND, PLAINTIFF,
v.
BOARD OF TRUSTEES OF BUILDING SERVICE 32 BJ SRSP, HOWARD I. ROTHSCHILD, JOHN SANTORA, CHARLES DOREGO, FRED WARD, MICHAEL P. FISHMAN, KEVIN J. DOYLE, HECTOR J. FIGUEROA, BRIAN LAMBERT AND LARRY ENGLESTEIN, DEFENDANTS.



The opinion of the court was delivered by: Hon. Harold Baer, Jr., District Judge:

Before the Court is a motion to dismiss the First Amended Complaint brought by the Board of Trustees of Building Service 32BJ Supplemental Retirement Savings Plan, Howard I. Rothschild, John Santora, Charles Dorego, Fred Ward, Michael P. Fishman, Kevin J. Doyle, Hector J. Figueroa, Brian Lambert, and Larry Englestein (collectively "Defendants"). Plaintiff Bruce Laboy ("Laboy"), a participant in the Building Service 32BJ Supplemental Retirement Savings Plan, brought a putative Class Action Complaint alleging claims against the Trustees for breach of fiduciary duty under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). For the reasons set forth below, the motion to dismiss is GRANTED.

OPINION AND ORDER

BACKGROUND

Local 32BJ ("32BJ") is a union with more than 120,000 members within the Service Employees International Union. Compl. ¶ 17.*fn1 After a qualifying period, members of 32BJ are eligible to participate in the Plan, a defined-contribution 401(k) plan that helps covered members save for retirement. Id. at ¶ 18. Putnam Investments provided investment services to Plan participants from January 1, 2001 until June 2011. Id. at ¶ 25. Plan participants had the option of self-directing investments among fourteen alternative funds or allowing their funds to be invested in the default fund, Putnam Asset Allocation: Conservative Portfolio (the "Default Fund"). Id. at ¶¶ 27, 31, 38. The Default Fund was comprised of about 70 percent bonds and 30 percent stocks. Id. at ¶ 46.

DISCUSSION

Laboy's complaint alleges two causes of action under 29 U.S.C. § 1104(a)(1) for breach of fiduciary duty. To state a claim for breach of fiduciary duty, a plaintiff must allege that (1) the defendant was the fiduciary of the plan, (2) the defendant's acts or omissions constituted a breach of duty; and (3) the breach caused harm. Pegram v. Herdrich, 530 U.S. 211, 225-26 (2000). Defendants do not dispute that they are plan fiduciaries.

A. Legal Standard

"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' " Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In the ERISA context, the Court may consider the Plan, where it is "directly referenced in the complaint and is the basis of [the] action." Faber v. Metro. Life Ins. Co., No. 08 Civ. 10588, 2009 WL 3415369, at *1 n.1 (S.D.N.Y. Oct. 23, 2009), aff'd, 648 F.3d 98 (2d Cir. 2011).

B. Count I Fails to State a Claim

Count I alleges that Defendants violated their fiduciary duty by reason of inappropriate selection of the alternative funds and the Default Fund and inappropriate monitoring of the Default Fund.*fn2 The claim that Defendants imprudently selected the Default Fund is almost certainly time-barred.*fn3 In support of the monitoring claim, the Complaint alleges that eight comparable funds outperformed the Default Fund over the last five years, by amounts ranging from 6.6 percent to 21.8 percent; Compl. ¶¶ 61-70, however, the Complaint acknowledges that over the last ten years, the Default Fund was in the top 37 percent of all comparable funds. Id. at ¶ 53. The Complaint further alleges that the Plan should have offered at least one alternative in each of the nine investment styles of Morningstar, Inc.'s "Style Box." Id. at ¶¶ 40-42. Plaintiff also asserts that the Plan should have offered "corporate bond funds or high yield bond funds" and criticizes the fact that the Plan offered just "one international fund option." Id. at ¶ 42.

Failure to remedy an investment that later becomes imprudent constitutes a breach of fiduciary duty. See, e.g., Leber v. Citigroup, Inc. (Leber II), No. 07 Civ. 9329, 2011 WL 5428784, at *4 (S.D.N.Y. Nov. 8, 2011). But, "[t]he ultimate outcome of an investment is not proof of imprudence or breach of fiduciary duties." Flanigan v. Gen. Elec. Co., 93 F. Supp. 2d 236, 254 (D. Conn. 2000) (citing Debruyne v. Equitable Life Assurance Co., 920 F.2d 457, 465 (7th Cir. 1990)). Decisions in which courts have allowed allegations of imprudence to go forward rested on allegations that the defendants selected certain funds out of self-interest or demonstrated clear incompetence. See, e.g., Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 592-93 (8th Cir. 2009) (concluding that "the process by which [fiduciaries] selected and managed the funds in the plan [was] tainted by failure of effort, competence, or loyalty"). There is no similar allegation here: Laboy claims that eight funds outperformed the Default Fund, while acknowledging that it was in the top 37 percent of comparable funds, and that it was inappropriately volatile.*fn4 Similarly, his alternative funds claim is that the fiduciaries ought to have included specific types of funds, a claim courts have rejected. See, e.g., Hecker v. Deere & Co., 556 F.3d 575, 586 (7th Cir. 2009) ("[N]othing in the statute requires plan fiduciaries to include any mix of investment vehicles in their plan."). Laboy fails to specifically allege that any of the alternative funds underperformed or to compare their performance to any comparable funds. Laboy has failed to state a claim that either the Default Fund or the alternative funds was imprudently selected or monitored.

B. Count II Fails to State a Claim

Laboy's second claim is for excessive fees and administrative expenses of the Default Fund ...


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