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Feinberg v. T. Rowe Price Group, Inc.

United States District Court, D. Maryland

August 20, 2018

DAVID G. FEINBERG, and all others similarly situated Plaintiffs
v.
T. ROWE PRICE GROUP, INC. et al. Defendants

          MEMORANDUM

          JAMES K. BREDAR CHIEF JUDGE

         The Court has before it Defendants T. Rowe Price Group, Inc. et al's Motion to Dismiss Plaintiffs' First Amended Complaint [ECF No. 35], Plaintiffs' Motion to Exclude Exhibits 1 to 15 Attached to Defendants' Motion to Dismiss [ECF No. 38], and the materials relating thereto submitted by the parties. The Court has also reviewed a recording of a hearing held before the Honorable Marvin J. Garbis on April 5, 2018, just before he retired from judicial service, and just before the matter was transferred to the undersigned.

         I. BACKGROUND[1]

         Defendant T. Rowe Price Group, Inc. (“T. Rowe Price”) is a large mutual fund and financial services organization that provides a broad range of services to consumers and corporate customers.

         Plaintiffs[2] are, or were during the relevant time period, [3] employees of Defendant T. Rowe Price and participated in the T. Rowe Price U.S. Retirement Program (“401(k) Plan” or “Plan”), which is a defined contribution 401(k) Plan. Plaintiffs have filed this purported class action pursuant to the Employee Retirement Income Security Act of 1974, as amended, (“ERISA”), 29 U.S.C. §§ 1132(a)(2) and (a)(3), for violations of ERISA's fiduciary duty and prohibited transaction provisions.

         T. Rowe Price is the sponsor, a fiduciary of the 401(k) Plan, and a party-in-interest to the Plan under 29 U.S.C. § 1002(14). Defendant T. Rowe Price Associates, Inc. (“T. Rowe Price Associates”) is a wholly-owned subsidiary of T. Rowe Price and provides investment advisory services to all of T. Rowe Price's in-house mutual funds. Defendant T. Rowe Price Trust Company (“T. Rowe Price Trust”) is also a wholly-owned subsidiary of T. Rowe Price. It offers trustee services and is the investment manager of the T. Rowe Price Collective Investment Trust funds in the 401(k) Plan. Plaintiffs refer to T. Rowe Price Associates and T. Rowe Price Trust collectively as T. Rowe Price Investment Affiliates.

         Plaintiffs also name as Defendants T. Rowe Price U.S. Retirement Program Trustee Does 1-40 (“Trustees”).[4] The Trustees are named Plan fiduciaries and had the authority and responsibility to select, monitor, and remove or replace investments offered in the 401(k) Plan. Plaintiffs name two committees as responsible for appointing and removing Trustees: T. Rowe Price Management Committee (“Management Committee”) and T. Rowe Price Management Compensation Committee (“Management Compensation Committee”).[5] At some point during the relevant time period, the Management Compensation Committee assumed the responsibility from the Management Committee for appointing and removing Trustees. Plaintiffs refer to the “Appointing Fiduciary Defendants” as the group of Defendants T. Rowe Price, the Management Committee and its individual members, and the Management Compensation Committee and its individual members.

         By the First Amended Complaint (“FAC”) [ECF No. 32], Plaintiffs allege violations of ERISA's fiduciary duties and prohibited transactions in seven Counts:

• Count I - Breach of Duties of Loyalty and Prudence for Imprudent and Disloyal Monitoring and Selection of 401(k) Plan Investments during the Class Period, which Caused Losses to the 401(k) Plan (Violation of ERISA, 29 U.S.C. § 1104)
o Against Trustees (Does 1-40)
• Count II - Breached of ERISA Fiduciary Duties by Failing to Remove and Prudently Monitor the 401(k) Plan Trustees o Against the Appointing Fiduciary Defendants (T. Rowe Price, the Management Committee and its individual named members, the Management Compensation Committee and its unknown individual members Defendant Does 1-40)
• Count III - Breach of Duties of Loyalty and Prudence by Providing Imprudent and Self-Interested Investment Advice to [Plan Trustees][6] (Violation of ERISA, 29 U.S.C. § 1104)
o Against T. Rowe Price Investment Affiliates (T. Rowe Price Associates and T. Rowe Price Trust)
• Count IV - Liability for Breach of Co-Fiduciary (Pursuant to ERISA, 29 U.S.C. § 1105)
o Against the Appointing Fiduciary Defendants (T. Rowe Price, the Management Committee and its individual named members, the Management Compensation Committee and its unknown individual members Defendant Does 1-40), and T. Rowe Price Investment Affiliates (T. Rowe Price Associates and T. Rowe Price Trust)
• Count V - Liability for Failing to Remedy Breach of Predecessor Fiduciaries o Against Trustees (Does 1 -40)
• Count VI - Liability for Committing Prohibited Transactions (Violation of ERISA, 29 U.S.C. § 1106)
o Against Trustees (Does 1-40) and T. Rowe Price Investment Affiliates (T. Rowe Price Associates and T. Rowe Price Trust)
• Count VII - Other Equitable Relief Based on Ill-Gotten Proceeds (Violation of ERISA, 29 U.S.C. § 1132(a)(3))
o Against T. Rowe Price and T. Rowe Price Investment Affiliates (T. Rowe Price Associates and T. Rowe Price Trust)

         For reference, the following summarizes which Counts are asserted against each Defendant:

• T. Rowe Price - Counts II, IV, and VII
• T. Rowe Price Investment Affiliates (T. Rowe Price Associates and T. Rowe Price Trust) - Counts III, IV, VI, and VII
• Trustees (Does 1 -40) - Counts I, V, and VI
• The Management Committee and its individual named members, and the Management Compensation Committee and its unknown individual members Defendant Does 1-40 - Counts II and IV

         Generally, Plaintiffs allege that Defendants favored the economic interests of T. Rowe Price and its affiliates over the interests of their employees and the 401(k) Plan. Defendants offered only their own in-house investment funds in the 401(k) Plan, thereby collecting windfall profits through excessive fees. Additionally, the funds performed poorly in comparison to other non-proprietary investment funds that a prudent investor, who was acting on behalf of the Plan's participants' interests, would have selected. In other words, Plaintiffs allege that Defendants chose their own funds for the 401(k) Plan because of the financial benefit to the company regardless of the detriment to the Plan's participants. Plaintiffs allege that in some cases, Defendants selected the retail versions of in-house funds that charged higher fees to the Plan than identical in-house funds (those offered to higher net worth investors such as retirement funds) that would have been less expensive.

         By the instant motion, Defendants seek dismissal of all Counts in Plaintiffs' FAC for failure to allege plausible claims pursuant to Rule[7] 12(b)(6) of the Federal Rules of Civil Procedure. Defendants also assert that Count VI is substantially time-barred by ERISA's six-year limitations period.

         II. DISMISSAL STANDARD

         A motion to dismiss filed pursuant to Rule 12(b)(6) tests the legal sufficiency of a complaint. A complaint need only contain “‘a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to ‘give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (alteration in original) (citations omitted). When evaluating a 12(b)(6) motion to dismiss, a plaintiffs well-pleaded allegations are accepted as true and the complaint is viewed in the light most favorable to the plaintiff. However, conclusory statements or “a formulaic recitation of the elements of a cause of action will not [suffice].” Id. A complaint must allege sufficient facts “to cross ‘the line between possibility and plausibility of entitlement to relief.'” Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009) (quoting Twombly, 550 U.S. at 557)).

         Inquiry into whether a complaint states a plausible claim is '"a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.'” Id (quoting Ashcroft v. Iqbal 556 U.S. 662, 679 (2009)). Thus, if “the well-pleaded facts [contained within a complaint] do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not ‘show[n]' - ‘that the pleader is entitled to relief” Id. (quoting Iqbal 556 U.S. at 679 (alteration in original)).

         III. MOTION TO EXCLUDE

         In its Memorandum in support of the instant motion, Defendants requested that the Court take judicial notice of various documents that were attached as exhibits. Mot. Mem. 4 n. 1, ECF No. 35-1. Plaintiffs take no issue with certain exhibits that related to the 401(k) Plan, i.e., Declaration of Clay Bowers, Exs. A-O [ECF Nos. 35-4 to 35-18]. However, Plaintiffs move to exclude exhibits consisting of various Securities and Exchange filings, excerpts of Department of Labor Form 5500 filings, and a T. Rowe Price-drafted “Financial Services Fund Fact Sheet, ” i.e., Declaration of Deanna M. Rice, Exs. 1-15 [ECF Nos. 35-20 to 35-34]. Plaintiffs assert that the Rice exhibits are inappropriate for the Court's consideration under a Rule 12(b)(6) motion, because they were not relied upon nor referenced in the FAC (except generally), and they are being offered for the truth of their contents in order to contradict factual assertions advanced in the FAC.

         In considering a Rule 12(b)(6) motion, the court may take judicial notice of public records, including statutes, and “may also ‘consider documents incorporated into the complaint by reference,' ‘as well as those attached to the motion to dismiss, so long as they are integral to the complaint and authentic.'” United States ex rel. Oberg v. Pennsylvania Higher Educ. Assistance Agency, 745 F.3d 131, 136 (4th Cir. 2014) (citations omitted).

         Accordingly, the Court will take judicial notice of the Plan documents and statements attached to the Declaration of Clay Bowers, Exs. A-O [ECF Nos. 35-4 to 35-18]. The Court will also take judicial notice, to the limited extent relevant, [8] of public documents filed with the Securities and Exchange Commission and the Department of Labor, Declaration of Deanna M. Rice, Exs. 1-11, 13-15 [ECF Nos. 35-20 to 35-30, 35-32 to 35-34]. The Court does not take judicial notice of the truth of the underlying facts in such public documents, and shall not consider the content of the documents to the extent that Defendants seek to use them to ...


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