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Karg v. Transamerica Corp.

United States District Court, N.D. Iowa, Cedar Rapids Division

August 20, 2019

JEREMY KARG, MATTHEW R. LEMARCHE, and SHRILEY RHODES, on behalf of themselves and all others similarly situated, Plaintiffs,



         This matter is before the Court on defendants' Transamerica Corporation (“Transamerica”) and Trustees of the Aegon USA, Inc. Profit Sharing Trust's (“Aegon”) (collectively, “defendants”) Motion to Dismiss. (Doc. 23). Plaintiffs timely filed a resistance (Doc. 29), and defendants timely filed a reply (Doc. 32). For the following reasons, defendants' motion is denied.

         I. BACKGROUND

         A. Factual Background

         Transamerica sponsors the Transamerica 401(k) Retirement Savings Plan (“Plan”) as a means for employees and participants to save for retirement. (Doc. 10, at 1, 6). Over 17, 000 current and former employees had over $1.9 billion invested in the Plan as of December 31, 2017. (Id., at 7). Plaintiffs are current and former participants in the Plan. (Id., at 4). Plaintiffs seek to certify a class action against defendants on behalf of all participants and beneficiaries of the Plan for the class period of December 28, 2012, to the date of final judgement in this action. (Id., at 34-35). Does 1-20 are officers and directors of Plan sponsor Transamerica, who had the authority and responsibility to appoint, monitor, and remove Plan trustees. (Id., at 5). Plaintiffs allege that under the Employee Retirement Income Security Act (“ERISA”), Title 29, United States Code Section 1001, et. seq., Does 1-20 and Transamerica are fiduciaries of the Plan and monitoring fiduciaries of Aegon and Does 21-40. (Id., at 40-41). The Plan appoints Aegon to manage the assets of the Plan. (Id., at 5). Aegon is “responsible for selecting and monitoring the investment options offered to Plan participants.” (Doc. 25, at 11 (citing Doc. 23-2, at 110, 112)).[1] Does 21-40 are individual trustees of Aegon who manages the assets of the Plan. (Doc. 10, at 5). Plaintiffs allege that Does 21-40 and Aegon are also fiduciaries of the Plan under ERISA. (Id., at 5-6).

         Plaintiffs' Amended Complaint for Damages (“complaint”) asserts two counts under ERISA. First, plaintiffs allege that defendants' retention of six poor-performing investment portfolios (“challenged funds”) in the Plan breached defendants' fiduciary duty of prudence. (Id., at 37-40).[2] Second, plaintiffs allege that Transamerica and Does 1-20 breached their fiduciary duties to monitor the performance of Aegon and Does 21-40. (Id., at 40-42). Plaintiffs allege that these breaches caused the Plan and its participants, including plaintiffs, to suffer “hundreds of millions of dollars of damages and lost-opportunity costs which continue to accrue.” (Id., at 39-40). Plaintiffs seek various declaratory relief, monetary damages to “restore all losses to the Plan that resulted from the breaches, ” and attorney's fees and costs. (Id., at 42-43).

         B. Dennard Settlement

         In 2015, certain Plan participants filed a class action suit in the Northern District of Iowa against Transamerica and its affiliates (“Dennard defendants”) regarding the Plan and the challenged funds. Dennard v. Transamerica Corp., No. 15-cv-30-EJM (N.D. Iowa) (“Dennard”). The Second Amended Class Action Complaint in Dennard (“Dennard complaint”) alleged that the Dennard defendants violated their ERISA fiduciary duty of loyalty by causing the Plan to invest funds with unreasonably high expenses and engaged in prohibited transactions by charging the Plan management fees that benefited the Dennard defendants. (Doc. 23-2 at 178-79).[3] On May 19, 2016, United States District Court Judge Edward J. McManus approved a class action Settlement Agreement and Release between the plaintiffs and defendants in Dennard. (Id., at 6-36). The settlement agreement required Transamerica to implement specified structural changes to the Plan and establish a settlement fund to distribute monetary damages to the class members. (Id., at 17-25). The named plaintiffs and putative class members in this case are all members of the Dennard class of plaintiffs.[4] The settlement agreement included a provision releasing Transamerica and its affiliates from future claims “arising out of or related to the conduct alleged in the plaintiffs' operative complaint, whether or not included as counts in the complaint.” (Doc. 23-2, at 10-11).

         Defendants' Motion to Dismiss asserts four grounds for dismissal. (Doc. 23, at 1). First, defendants assert that the imprudent conduct alleged in the instant suit is identical in all relevant aspects to the conduct alleged in Dennard, therefore plaintiffs' claims are barred by both the Dennard settlement agreement release provision and res judicata. (Id., at 1-2). Second, defendants contend that plaintiffs' complaint does not allege a plausible violation of defendants' fiduciary duty of prudence. (Id., at 2). Third, defendants argue that plaintiffs' imprudence claim is barred by ERISA's three-year statute-of-limitations because plaintiffs had “actual knowledge” of the challenged funds' performance well outside of the limitations period (which extends to December 28, 2015). (Id.). Finally, defendants assert that plaintiffs' Count II, alleging failure to monitor fiduciaries, does not state a claim because the claim it derives from, an alleged breach of fiduciary duty of prudence, is not facially plausible. (Id.).


         A complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Rule 8 does not require “detailed factual allegations.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Nevertheless, it “demands more than an unadorned, the-defendant-unlawfully-harmed- me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A complaint that relies on “naked assertion[s]” devoid of “further factual enhancement, ” “labels and conclusions, ” or “a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555, 557.

         “[W]hen ruling on a defendant's motion to dismiss, a judge must accept as true all of the factual allegations contained in the complaint.” Erickson v. Pardus, 551 U.S. 89, 94 (2007). The Court must also “grant all reasonable inferences from the pleadings in favor of the nonmoving party.” United States v. Any & All Radio Station Transmission Equip., 207 F.3d 458, 462 (8th Cir. 2000). “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.” Iqbal, 556 U.S. at 678. “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. Plausibility is not equivalent to probability, but it is something “more than a sheer possibility that a defendant has acted unlawfully.” Id. “The question . . . is not whether [a plaintiff] might at some later stage be able to prove [his claims]; the question is whether [a plaintiff] has adequately asserted facts (as contrasted with naked legal conclusions) to support his claims.” Whitney v. Guys, Inc., 700 F.3d 1118, 1129 (8th Cir. 2012).


         A. Release Provision and Res Judicata

         The parties agree that because Dennard was resolved by a judgment entered on a court-approved settlement agreement the scope of res judicata is coextensive with scope of the release in the settlement agreement. (Docs. 25, at 25; 29, at 7 (citing In re Gen. Am. Life Ins. Co. Sales Practices Litig., 357 F.3d 800, 803 (8th Cir. 2004))). Because the scope of the release dictates the res judicata effect of the judgment in Dennard, the Court will analyze the scope of the release but will not separately address the applicability of res judicata. Cf. Boddicker v. Esurance Inc., 770 F.Supp.2d 1016, 1021 (D.S.D. 2011) (“Courts generally decide issues on the narrowest possible grounds.”).

         The settlement agreement provides that it “shall be governed by and construed in accordance with the laws of Iowa without giving effect to any conflict of law provisions that would cause the application of the laws of any jurisdiction other than Iowa.” (Doc. 23-2, at 35). Iowa law “enforces a settlement agreement much like any other contract.” Walker v. Gribble, 689 N.W.2d 104, 109 (Iowa 2004) (citation omitted). Plaintiffs do not contest defendants' assertion that the settlement agreement is a valid and enforceable contract. ...

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