Dana Ltd. v. Aon Consulting, Inc.

984 F.Supp.2d 755

DANA LIMITED, et al., Plaintiffs

v.AON CONSULTING, INC., Defendant.

Case No. 3:13CV456.

United States District Court,

N.D. Ohio,

Western Division.

Nov. 22, 2013.

John M. Stephen, Sara Hutchins Jodka, Porter, Wright, Morris & Arthur, Columbus, OH, Ann M. Caresani, Porter, Wright, Morris & Arthur, Cleveland, OH, for Plaintiffs.

H. Buswell Roberts, Jr., Blacksburg, VA, Janine T. Avila, Connelly, Jackson & Collier, Toledo, OH, Amanda S. Amert, April A. Otterberg, Craig C. Martin, Jenner & Block, Chicago, IL, for Defendant.

ORDER

JAMES G. CARR, Senior District Judge.

In this case under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq., and state tort and contract law, plaintiffs (collectively, “Dana”) allege that defendant, Aon Consulting, violated its fiduciary duties under ERISA by authorizing pension payments to ineligible recipients. Dana also asserts Aon, in failing to administer the plan properly, committed a host of torts and breached the parties' contract.

Jurisdiction is proper under 29 U.S.C. § 1132 and 28 U.S.C. §§ 1332(a)(1) & 1367(a).

Pending is Aon's partial motion to dismiss the complaint for failure to state a claim. (Doc. 17). For the reasons that follow, I grant the motion.

Background

Dana established a trust fund to hold contributions to two of its defined-benefit plans (Plan). The Northern Trust Company, as Trustee of the Plan, maintains custody of Plan assets and distributes them to Plan participants per Dana's instructions.

In 2008, Dana decided to outsource Plan administration to Aon. According to the complaint, Aon induced Dana to select it as the Plan's third-party administrator by falsely representing, inter alia, it: 1) had “state of the art benefits outsourcing capabilities”; 2) “enforce[d] stringent controls around data integrity”; and 3) would “spend [ ] significant time analyzing, testing and editing” the data on which Plan administration depended. (Doc. 1 at ¶¶ 20, 24, 26).

The parties entered a five-year Employee Benefits Outsourcing Services Agreement (the contract). Under the contract, Dana would provide Aon all data needed to administer the Plan, while Aon would “follow the directions of the plan administrator”—plaintiff Dana Holding Corporation Investment Committee (the Investment Committee)—when performing its contractual obligations. (Doc. 1–2 at 19).

An exhibit to the contract, the “Scope of Services Document” (SSD), defined each party's duties in greater detail. The SSD gave Dana responsibility for “Plan design” and ultimate authority to “make final appeal determinations” with respect to disputed claims. (Doc. 18–1 at 31, 46). In a section of the SSD addressing “Plan Compliance Services,” the parties assigned Dana the duty to “[e]xecute fiduciary responsibilities.” ( Id. at 54).

After entering the contract, Dana notified the Trustee that Aon would act as Dana's representative for purposes of “provid[ing] the Trustee with information to make benefit payments.” (Doc. 1–3 at 1). Dana advised the Trustee to act “on the basis of ... information [it received from Aon] as if such information constitute[d] a direction from” the Investment Committee itself. ( Id.).

Dana alleges Aon was responsible for ensuring the accuracy of the data on which it relied in directing the Trustee to pay benefits. According to Dana, Aon should have “periodically reconcil[ed] its payment information with ... the payment data in the records of the Trustee.” (Doc. 1 at ¶ 33). However, “Aon failed to conduct a single reconciliation ... until 2012.” ( Id. at ¶ 36).

Dana also alleges its actuary observed “data discrepancies” when performing annual valuations of Plan assets. ( Id. at ¶ 41). Between 2009 and 2012, the actuary sent Aon “multiple emails” about the discrepancies, but Aon “failed to investigate” them. ( Id. at ¶¶ 41, 97).

In February, 2012, a union representative notified Dana that a union member had received “an early retirement supplement to which the member was no longer entitled.” ( Id. at ¶ 43). Though Dana notified Aon of the error, the member continued to receive the supplement.

Thereafter, Dana opened an investigation into Aon's administrative practices and discovered that, “between 2009 and 2012, Aon's ... directions to [the Trustee] resulted in pension overpayments of approximately $1.9 million to at least 167 [Plan] participants.” ( Id. at ¶ 46). The investigation also revealed that an Aon employee had stolen $216,653 in Plan assets. The employee, Tisa Crawford, established four accounts under fictitious names and directed the Trustee to make payments to those accounts.

Dana then filed this suit alleging Aon breached its fiduciary duties under ERISA by directing the Trustee to make $1.9 million in pension payments to ineligible recipients.

Dana also asserts Aon negligently performed its duties as third-party administrator and breached the parties' contract. Dana further contends Aon converted plan assets and negligently entrusted control of, and supervision over, those assets to Crawford. Finally, Dana alleges Aon fraudulently induced Dana to select it as its third-party administrator.

Aon seeks dismissal under Rule 12(b)(6) of all Dana's claims except the claim for breach of contract.

Discussion

“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

“This standard demands that the factual allegations raise a right to relief above the speculative level and nudge the claims across the line from conceivable to plausible.” Erie Cnty. v. Morton Salt, Inc., 702 F.3d 860, 867 (6th Cir.2012). Although the plausibility standard “is not akin to a probability requirement,” a plaintiff must plead “more than a sheer possibility that a defendant has acted unlawfully.” Iqbal, supra, 556 U.S. at 678, 129 S.Ct. 1937.

A. Proper Plaintiffs

Before turning to the merits, I note Aon's argument that two of the plaintiffs, Dana Holding Corporation and the Investment Committee, are not entitled to bring certain claims.

Aon contends I should dismiss all of the Holding Corporation's claims because the complaint does not allege the Holding Company: 1) is a party to the contract; 2) is a Plan fiduciary entitled to raise ERISA claims; or 3) was injured by Aon's conduct. Aon also asserts the Investment Committee cannot raise a breach of contract claim because it is not a party to the contract.

Plaintiffs have not responded to either argument, thereby conceding the points. Cf. Mekani v. Homecomings Fin., LLC, 752 F.Supp.2d 785, 790 n. 2 (E.D.Mich.2010) (court may treat plaintiff's failure to respond to argument raised in motion to dismiss as concession).

Accordingly, I will dismiss the Holding Corporation's claims and the Investment Committee's breach-of-contract claim.

B. ERISA Claims

At the center of the complaint is Dana's contention that Aon was an ERISA fiduciary obligated to act “solely in the interest of [Plan] participants and beneficiaries[.]” (Doc. 1 at ¶ 71).

In count one, Dana alleges Aon breached its fiduciary duty by: 1) failing to reconcile its payment records with those of the Trustee; 2) failing to respond to the union representative's report about the unwarranted early-retirement payment; 3) failing to administer the Plan properly; and 4) directing the Trustee to distribute Plan assets “outside the terms of the Plan[.]” (Doc. 1 at ¶ 72).

In count two, Dana appears to contend Aon engaged in a prohibited transaction under 29 U.S.C. § 1106 by accepting an $8 million fee while failing to administer the plan properly. Count three alleges Dana is entitled to “appropriate equitable relief” for the $2.2 million in losses “direct[ly] and proximate[ly]” caused by Aon's fiduciary breaches. (Doc. 1 at ¶ 87).

Aon argues I should dismiss the ERISA claims because the complaint's allegations fail on their face to sustain Dana's claim about Aon's fiduciary status.

1. Fiduciary Status Under ERISA

“Fiduciary status is the key to unlocking ERISA's civil-enforcement scheme” because any person “found to be a fiduciary [is] personally liable to the ERISA-covered plan for any damages caused by that person's breach of fiduciary duties.” Briscoe v. Fine, 444 F.3d 478, 486 (6th Cir.2006).

In cases alleging a breach of ERISA fiduciary duties, “the threshold question is not whether the actions of some person employed to provide services under a plan adversely affected a plan beneficiary's interest, but whether that person was acting as a fiduciary (that is, was performing a fiduciary function) when taking the action subject to complaint.” Pegram v. Herdrich, 530 U.S. 211, 226, 120 S.Ct. 2143, 147 L.Ed.2d 164 (2000).

A person is a fiduciary to the extent “(1) he exercises any discretionary authority or discretionary control respecting management of such plan or (2) exercises any authority or control respecting management or disposition of its assets[.]” 29 U.S.C. § 1002(21)(A); Guyan Int'l, Inc. v. Prof'l Benefits Admin., 689 F.3d 793, 798 (6th Cir.2012).

a. Control Over Plan Assets

Dana seeks to hold Aon liable on the theory that Aon had control over Plan assets. In support, Dana alleges Aon: 1) exercised “practical control” over Plan assets when, rather than following Dana's instructions, it “took short-cuts in implement[ing]” the Plan (Doc. 1 at ¶ 26); and 2) must have had control over Plan assets because a former employee managed to divert Plan assets to bank accounts she controlled.

“ERISA fiduciary status is broadly triggered with any control over plan assets, [but] the inquiry in each case is granular, asking whether an entity is a fiduciary with respect to the particular activity in question.” Pipefitters Local 636 Ins. Fund v. Blue Cross & Blue Shield of Mich., 722 F.3d 861, 866 (6th Cir.2013).

The Sixth Circuit has found third-party administrators like Aon liable as fiduciaries under a...