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Joe M. Groussman, et al v. Motorola

January 18, 2011

JOE M. GROUSSMAN, ET AL., PLAINTIFFS,
v.
MOTOROLA, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Samuel Der-yeghiayan, District Judge

MEMORANDUM OPINION

This matter is before the court on Defendants' motion to dismiss. For the reasons stated below, we deny the motion to dismiss.

BACKGROUND

During the period from July 1, 2007 through December 31, 2008, Plaintiffs were participants in the Motorola 401(k) Plan (Plan) for employees of Defendant Motorola, Inc. (Motorola). Defendants were allegedly all fiduciaries of the Plan. Defendants include certain individuals that were on Motorola's Board of Directors (collectively referred to as "Director Defendants). Director Defendants allegedly delegated their responsibility to appoint the administrator of the Plan (Administrator Committee) to the Compensation Committee (Committee). In 2007, the Retirement Benefits Committee allegedly acted as the Administrator Committee and in 2008, the Retirement Benefits Committee was split into the Motorola 401(k) Plan Committee and the Motorola Pension Plan Committee. The Motorola 401(k) Plan Committee allegedly served as the Administrator Committee beginning in 2008. Defendants also include individuals that were members of the Administrator Committee (collectively referred to as "Administrator Defendants"). According to Plaintiffs, all Defendants controlled the management of the Plan investments. Defendants allegedly controlled which stock was available for Plan participants to invest in, and Defendants allegedly imprudently decided to continue to offer Motorola stock as an investment option in the Plan. Defendants allegedly breached their fiduciary duties by allegedly failing to conduct an appropriate investigation into whether Motorola stock was a prudent investment, failing to develop appropriate investment guidelines for the Plan, failing to divest the Plan of Motorola stock, failing to remove Motorola stock as an investment option for Plan participants, failing to consult with or appoint independent fiduciaries to investigate the wisdom of investing in Motorola stock, and failing to resign as fiduciaries of the Plan if they could not loyally serve the Plan and its participants. Defendants allegedly possessed negative information about Motorola's business and failed to either act based on such information in administering the Plan or communicate such information to Plan participants. Defendants' alleged breaches of fiduciary duties allegedly caused millions of dollars in losses to the Plan and its participants. Plaintiffs include in their complaint claims brought under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq.,alleging a failure to prudently and loyally manage the Plan and Plan assets (Count I), ERISA claims based on a failure to provide complete and accurate information to Plan participants and beneficiaries (Count II), ERISA claims based on a failure to monitor Plan fiduciaries (Count III), ERISA claims based on a breach of the duty to avoid conflicts of interest (Count IV), and ERISA co-fiduciary liability claims (Count V). On October 7, 2010, we granted Plaintiffs' oral motion to voluntarily dismiss Defendant Motorola Retirement Benefits Committee. The remaining Defendants move to dismiss the instant action.

LEGAL STANDARD

In ruling on a motion to dismiss brought pursuant to Federal Rule of Civil Procedure 12(b)(6) (Rule 12(b)(6)), a court must "accept as true all of the allegations contained in a complaint" and make reasonable inferences in favor of the plaintiff. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009)(stating that the tenet is "inapplicable to legal conclusions"); Thompson v. Ill. Dep't of Prof'l Regulation, 300 F.3d 750, 753 (7th Cir. 2002). To defeat a Rule 12(b)(6) 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, 129 S.Ct. at 1949 (internal quotations omitted)(quoting in part Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A complaint that contains factual allegations that are "merely consistent with a defendant's liability . . . stops short of the line between possibility and plausibility of entitlement to relief." Iqbal, 129 S.Ct. at 1949 (internal quotations omitted).

DISCUSSION

Defendants contend that Plaintiffs have failed to state a valid claim for relief against Administrator Defendants, Defendant Directors, or Motorola. Defendants also argue generally that Plaintiffs have failed to state a valid claim for relief against any Defendant.

I. Administrator Defendants

Defendants contend that Plaintiffs have failed to allege sufficient facts to indicate that Administrator Defendants breached a fiduciary duty.

A. Prudence of Investment Offering Decisions

Defendants argue that Plaintiffs have not shown that any investment offering decisions by Administrator Defendants were imprudent. Defendants argue that considering Motorola stock's long history of trading on the New York Stock Exchange, it is "patently absurd" that an investment in Motorola stock would be imprudent, and that a mere decline in Motorola stock price is not sufficient to establish a breach of fiduciary duty. (Mem. Dis. 11). Defendants also contend that, if the Plan had actually sold its Motorola stock, that action in turn would have caused the Motorola stock to plummet and ultimately harmed the Plan's interests. Such arguments, however, relate to the merits of Plaintiffs' claims, rather than whether they have pled valid claims for relief. Whether Administrator Defendants were responsible for imprudent investment offering decisions and the extent of any imprudence cannot be determined at the pleadings stage. Plaintiffs have pled sufficient facts plausibly suggesting that Administrator Defendants improperly managed the Plan to such an extent that it caused significant losses to the Plan. (Compl. Par. 4-7). Defendants' arguments in this regard to the prudence of investment offering decisions are premature at this juncture.

B. Knowledge of Business Information

Defendants also contend that Plaintiffs have failed to plead facts showing that Administrator Defendants possessed knowledge of Motorola's business information. Plaintiffs contend that Administrator Defendants possessed certain negative information about Motorola's business and should have acted based upon such information by, among other things, avoiding making Motorola stock a Plan investment option. (Compl. Par. 4, 6). Defendants argue that in order to be actionable, Administrator Defendants' conduct must have been intentional and that their conduct could not have been intentional absent knowledge of Motorola's negative business information. Defendants cite to Lingis v. Motorola, Inc., 649 F. Supp.2d 861 (N.D. Ill. 2009), pointing out that the court concluded that certain defendant fiduciaries did not possess knowledge about the business operations of the company in question, and thus could not have intentionally ignored such information in executing their duties. Id. at 873. Defendants contend that in Lingis, the court ruled on facts similar to those in the instant action, and that this court should follow the holding in Lingis. (Mem. Dis. 3-4). However, the court in Lingis was ruling on the parties' motions for summary judgment. Id. at 864. The court held that the plaintiff did ...


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