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In re UBS Erisa Litigation

United States District Court, S.D. New York

September 29, 2014

IN RE UBS ERISA LITIGATION

Plaintiffs are represented by Mark C. Rifkin and David Lloyd Wales, Wolf Haldenstein Adler Freeman & Herz LLP, New York, NY, Thomas James McKenna, Gainey McKenna & Egleston, New York, New York, and Todd S. Collins, Berger & Montague, P.C., Philadelphia, Pennsylvania.

Defendants are represented by Robert Joseph Giuffra, Jr., Andrew Paul Giering, Matthew Alexander Schwartz, Suhana S. Han, and Thomas Charles White, Sullivan & Cromwell, LLP, New York, New York.

OPINION AND ORDER

RICHARD J. SULLIVAN, District Judge.

Lead Plaintiff, Debra Taveras ("Plaintiff"), brings this putative class action against UBS and certain of its committees, committee members, and directors (collectively, "Defendants"), alleging violations of fiduciary duties established by the Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq. [1] Now before the Court are Defendants' motion to dismiss Plaintiff's remaining claims pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure, and Plaintiffs motion to file an amended complaint pursuant to Rule 15(a) of the Federal Rules of Civil Procedure. For the reasons set forth below, the Court grants Defendants' motion to dismiss and denies Plaintiff's motion to amend.

I. BACKGROUND

The facts underlying this case were thoroughly discussed in the Court's March 24, 2011 Memorandum and Order. See In re UBS AG ERISA Litig., No. 08-cv-6696 (RJS), 2011 WL 1344734, at *1-3 (S.D.N.Y. Mar. 24, 2011) ("March 24 Order"). Nevertheless, a brief recitation of key facts and procedural history is needed to place the instant motion in context.

A. Facts

UBS is a Swiss bank and financial institution that provides wealth management services to clients worldwide.[2] (Compl. ¶ 16.) In 2000, UBS developed a plan to expand into the United States investment banking market by, among other things, acquiring large quantities of fixed-income assets. These assets included residential mortgage backed securities ("RMBS") and collateralized debt obligations ("CDOs"), which were made up almost exclusively of American subprime mortgages. (Compl. ¶¶ 99, 103.) Over the next several years, UBS amassed a $100 billion portfolio consisting of these assets. (Compl. ¶ 103.) In October 2007, UBS began taking large write-downs of these holdings, eventually resulting in $43 billion worth of write-downs by August 2008, leading to the Company's first ever annual loss and a precipitous drop in its share price. (Compl. ¶¶ 120, 160).

During this time, UBS offered its employees several retirement benefit plans, including the UBS Savings and Investment Plan (the "SIP").[3] (Compl. ¶¶ 38-48.) The SIP, which is an "individual account" plan governed by ERISA, "provides for individual accounts for each Participant and for benefits based solely upon the amount contributed to the Participants' account, and any income, expenses, gains and losses, and any forfeitures of accounts of other Participants which may be allocated to such Participants' accounts." (Compl. ¶ 41 (emphasis added).) Thus, a participant's "retirement benefits provided by the SIP are based solely on the amounts allocated to each individual's account." (Compl. ¶ 41 (emphasis added).)

Under the terms of the plan, participants voluntarily contribute to the SIP and "direct the SIP to purchase investments with those contributions from options pre-selected by [the SIP Committee] which are then allocated to Participants' individual accounts." (Compl. ¶ 42; see also Declaration of Robert J. Giuffra, Jr., dated Sept. 25, 2013, Doc. No. 85 ("Giuffra Decl."), Ex. 2 ("SIP Plan Doc."), art. 9.1(b) ("[I]nvestment... shall be made in accordance with the Member investment elections in effect from time to time." (emphasis added)). The SIP's "assets are invested in a master trust which in turn invests in mutual funds, commingled funds, separately-managed accounts, and the UBS Company Stock Fund, " in accordance with individual participants' investment elections. (Compl. ¶ 44; see also SIP Plan Doc. art. 9.1(b) ("Contributions and all other funds credited to Member Accounts under the [SIP] shall be invested in the Investment Funds provided for under the Plan.").) Thus, each participant had control over the composition and size of their investments in the specific investment options presented by the SIP.

The UBS Company Stock Fund - which "tracked the performance of underlying common stock of UBS" (Compl. ¶ 2) - was offered as an investment option to SIP participants throughout the putative class period[4] despite UBS's lack of diversification and heavy investment in RMBS and CDOs. (Compl. ¶¶ 2, 4.) Under the terms of the SIP, the SIP Committee was also empowered to amend the menu of investment options by eliminating an existing choice and/or adding new options. (SIP Plan Doc. art. 9.2.) Because the SIP offered the UBS Company Stock Fund as an investment option to UBS employees, it is termed an employee stock ownership plan ("ESOP").

B. Procedural History

Plaintiff filed the initial complaint on behalf of herself and all others similarly situated on July 28, 2008. (Doc. No. 1.) Plaintiff's complaint was then consolidated with those of three other plaintiffs, and an Amended Complaint was filed on November 14, 2008, alleging that Defendants breached their duties to the SIP by failing to eliminate the UBS Company Stock Fund from the menu of investments at the time of the financial crisis. ( See Doc. No. 22.) On March 24, 2011, the Court granted Defendants' motion to dismiss the Amended Complaint in its entirety pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure ( see March 24 Order) and, on March 23, 2012, denied Plaintiffs' motions to alter the judgment or amend the Amended Complaint ( see Doc. No. 69 (the "March 23 Order")). On appeal, the Second Circuit affirmed the dismissal of claims related to another UBS employee benefits plan - the UBS Financial Services Inc. 401(k) Plus Plan (the "Plus Plan") - but vacated the dismissal of Plaintiff's claims related to the SIP, remanding the case to this Court. See Taveras v. UBS AG, 708 F.3d 436, 446 (2d Cir. 2013) (holding that claims against the SIP were improperly dismissed because this Court applied a presumption of prudence to the SIP-related claims). Thus, the following claims brought solely by Plaintiff Taveras remain before the Court: breach of the duties of prudence and loyalty against UBS, the Board, and the SIP Committee (Count I); breach of the duty to monitor against UBS and the Board (Count III); and co-fiduciary liability against UBS, the Board, and the SIP Committee (Count V). ( See Doc. No. 77.)[5]

On June 7, 2013, after the Second Circuit vacated the dismissal of Plaintiff's claims against the SIP, the Court granted Plaintiff leave "to amend the current Amended Complaint by shortening the putative class period." (Doc. No. 77 at 2.) Plaintiff did not avail herself of this option. Defendants then moved to dismiss the remaining SIP-related claims on July 22, 2013 and submitted a memorandum in support of their motion on the same day. (Doc. Nos. 78, 80.) Before Plaintiff responded, however, the Court denied the motion without prejudice to renewal, noting that similarly situated appellants in a separate action before the Second Circuit - Rinehart v. Akers, No. 11-4232 (2d Cir.) - had petitioned the Second Circuit for a rehearing in that case and that resolution of that motion for rehearing could be informative in the instant case. (Doc. No. 82.) Following the Second Circuit's denial of the petition ...


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