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Gerber Plumbing Fixtures LLC v. Bryan, Pendleton, Swats & McAllister, LLC

United States District Court, N.D. Illinois, Eastern Division

November 5, 2015

GERBER PLUMBING FIXTURES LLC, Plaintiff,
v.
BRYAN, PENDLETON, SWATS AND MCALLISTER, LLC and CHEIRON, INC., Defendants

          For Gerber Plumbing Fixtures LLC, Plaintiff: John M. O'Bryan, LEAD ATTORNEY, Michael F. Tomasek, Freeborn & Peters LLP, Chicago, IL.

         For Bryan, Pendleton, Swats and McAllister, LLC, a Tennessee Limited Liability Company, Defendant: Karla L. Johnson, LEAD ATTORNEY, Reed Smith LLP, Pittsburgh, PA; Melissa Ann Mickey, Reed Smith LLP, Chicago, IL.

         For Cheiron, Inc., a Delaware Corporation, Defendant: James Brandon Hiller, Ryan Thomas Brown, LEAD ATTORNEYS, Brian M. Roth, Gordon & Rees LLP, Chicago, IL.

         ORDER

         Hon. CHARLES RONALD NORGLE, United States District Judge.

         Defendant Cheiron, Inc.'s Motion to Dismiss Plaintiff's First Amended Complaint [30] is granted. This case is set for a status hearing on December 4, 2015.

         STATEMENT

         Before the Court is Defendant Cheiron, Inc.'s (" Defendant" ) motion to dismiss Plaintiff Gerber Plumbing Fixtures LLC's (" Plaintiff" ) complaint against it, which alleges violations of the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. (" ERISA" ) and assorted violations of Illinois common law. The matter has been fully briefed. For the following reasons, Defendant's motion is granted.

         As this case is before the Court on a motion to dismiss, the Court takes all well-pleaded facts as true, construes all reasonable inferences in favor of the plaintiff, and strikes any conclusory statements from the complaint. See Runnion ex rel. Runnion v. Girl Scouts of Greater Chi. & Nw. Ind., 786 F.3d 510, 526 (7th Cir. 2015); Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). A statement is conclusory when it does no more than recite the bare elements of the complaint, in a " defendant-unlawfully-harmed-me" fashion. Iqbal, 556 U.S. at 678.

         The following facts are taken from Plaintiff's First Amended Complaint. From 2006 until February 6, 2009, Defendant provided actuarial services to Plaintiff's defined contribution plans, the Globe Valve Division--UAW Pension Plan and the Woodbridge Sanitary Pottery Division Pension Plan (collectively, the " Plans" ). At all relevant times, federal law required these Plans to have at least three years' worth of liquidity. See 26 U.S.C. § 430(j)(4). At the same time, the law also required Defendant to certify parts of an annual report that stated either that the Plans were in compliance with the applicable federal liquidity requirements, or that the plans had a liquidity shortage. See 29 U.S.C. § § 1021(d), 1023(d). If a plan has a liquidity shortfall, and does not correct the shortfall, the Internal Revenue Service (" IRS" ) is authorized to exact a 10% excise tax on the underfunded amount, in addition to other various fines and penalties. See 26 U.S.C.

         Plaintiff alleges that, starting in 2006, the Plans began to experience liquidity shortfalls. Plaintiff complains that Defendant failed to inform Plaintiff about the funding shortfalls and failed to disclose the shortfalls on the Plans' annual reports. Plaintiff did not learn about the liquidity shortfall until January 2013.

         On April 10, 2015, Plaintiff filed its complaint against Defendant and Bryan, Pendleton, Swats and McAllister, LLC (" BPS& M" ), alleging various violations of ERISA and Illinois' common law, all arising out of allegations that Defendant and BPS& M failed to report the liquidity shortfall to Plaintiff or the government. Subsequently, Plaintiff retained outside counsel to " file[] a request for a private letter ruling with the [IRS] asking for relief from the imposition of the excise taxes . . ." which the IRS granted on July 16, 2015. First Am. Compl. ¶ 17.

         Defendant now moves the Court to dismiss the First Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(1) and (6). Defendant makes two principal arguments regarding its motion to dismiss. Defendant argues initially that it is not liable for breach of fiduciary duty under ERISA because actuaries fulfilling purely actuarial roles are not plan fiduciaries, and thus, have no liability for breach of fiduciary duty under ERISA.

         In order to state a claim for breach of fiduciary duty under ERISA, the defendant must be, inter alia, a fiduciary of the plan. 29 U.S.C. § 1109(a); Nauman v. Abbott Labs., 669 F.3d 854, 859 (7th Cir. 2012). ERISA defines a fiduciary as a person that (i) " exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets," (ii) " renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so," or (iii) " has any discretionary authority or discretionary responsibility in the administration of such plan," which includes the fiduciary's assignees. 29 U.S.C. § 1002(21)(A). In an interpretive bulletin, the Department of Labor stated that " while attorneys, accountants, actuaries and consultants performing their usual professional functions will ordinarily not be considered fiduciaries, if the factual situation in a particular case falls within one of the categories described in [29 U.S.C. § 1002(21)(A)(i)-(iii)], such persons would be considered to be fiduciaries within the meaning of [ERISA]." See 29 C.F.R. § 2509.75-5 (emphasis added).

         Discretion is " [w]ise conduct and management exercised without constraint; the ability coupled with the tendency to act with prudence and propriety" or " [f]reedom in the exercise of judgment; the power of free decision-making." Discretion, Black's Law Dictionary (10th ed. 2014); see also David P. Coldesina, D.D.S., P.C., Emp. Profit Sharing Plan & Tr. v. Estate of Simper,407 F.3d 1126, 1132 (10th Cir. 2005) (quoting Webster's Ninth New Collegiate Dictionary 362 (1991) (" Discretion exists where a party has the 'power of free decision' or 'individual choice." '); Krukowski v. Omicron Techs.. Inc., No. 10 C 5282, 2011 WL 1303416, *6 (N.D. Ill. Mar. 31, 2011) (finding allegation that sponsor had authority to terminate plan's insurance policy sufficient to state claim against sponsor as a fiduciary). Furthermore, " the terms 'discretionary authority,' 'discretionary control,' and 'discretionary responsibility' in [29 U.S.C.] ยง 100[2](21)(A) speak[] to actual decision-making power rather than to the influence that a professional may have over the decisions made by the plan trustees she advises." ...


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