Dover v. Yanfeng U.S. Auto. Interior Sys. I LLC

563 F.Supp.3d 678

Jason DOVER, et al., Plaintiffs,

v.YANFENG US AUTOMOTIVE INTERIOR SYSTEMS I LLC, et al., Defendants.

20-CV-11643-TGB-DRG

United States District Court, E.D. Michigan, Southern Division.

Signed September 28, 2021

Darryl Bressack, Nathan J. Fink, David H. Fink, Fink Bressack PLLC, Bloomfield Hills, MI, Eric Lechtzin, Berger & Montague, P.C., Philadelphia, PA, Marc H. Edelson, Edelson Lechtzin LLP, Newtown, PA, for Plaintiffs Jason Dover, Eric Simpson.

David H. Fink, Fink Bressack PLLC, Bloomfield Hills, MI, for Plaintiff Steven Leggett.

Dane Steffenson, Dane Law LLC, Wesley Earl Stockard, Littler Mendelson, Atlanta, GA, Danielle K. Herring, Littler Mendelson PC, Houston, TX, Jaclyn R. Giffen, Littler Mendelson, P.C., Detroit, MI, for Defendants Yanfeng US Automotive Interior Systems I LLC, Board of Directors of Yanfeng US Automotive Interior Systems I LLC, Yanfeng Global Automotive Interior Systems Company Ltd. Employee Benefits Policy Committee, Yanfeng Global Automotive Interior Systems Company Ltd., Investment Committee.

Danielle K. Herring, Littler Mendelson PC, Houston, TX, Jaclyn R. Giffen, Littler Mendelson, P.C., Detroit, MI, Wesley Earl Stockard, Littler Mendelson, Atlanta, GA, for Defendant John Does 1-40.

ORDER DENYING DEFENDANTS’ MOTION TO DISMISS

TERRENCE G. BERG, United States District Judge

The Plaintiffs in this case seek to represent a class of persons who were participants or beneficiaries of Defendants’¹ employer-sponsored retirement plan ("the Plan"). Plaintiffs’ First Amended Complaint ("FAC") claims that Defendants breached their fiduciary duties towards plan participants, and failed to adequately monitor other fiduciaries, resulting in tangible losses to the retirement savings accounts of Plaintiffs—as well as to those of potential class members. Defendants argue that Plaintiffs cannot sufficiently plead fiduciary breach. For the reasons that follow, Defendants’ Motion to Dismiss is DENIED .

I. BACKGROUND

This is a proposed class action on behalf of persons who were participants or beneficiaries of retirement plans offered by Defendants to employees from June 22, 2014 to present. The Named Plaintiffs alleged they participated in the Plan during their periods of employment with Defendant Yanfeng. All three Plaintiffs allege they suffered financial harm due to Defendants’ actions as related to sixteen of the twenty-five investment options in the Plan. FAC ¶¶ 9, 16 (a full listing of all twenty-five investment options is at ¶ 73, ECF No. 24, PageID.759-60).

The "Plan" in question is defined in the FAC as being composed of twenty-five different funds (investment options) in which participants may invest. Its current form is the result of the change and/or merger of several Predecessor Plans. FAC ¶¶ 55-59. The current Plan, also known as the "Yanfeng Plan," represents a merger of the previously existing Yanfeng USA Plan and the Interior Savings and Investment Plan. Id. ; see also n. 3, ECF No. 32, PageID.849.

Plaintiffs make a variety of allegations as to why Defendants’ conduct with respect to each fund violates ERISA, and they make several distinct arguments regarding Defendants’ mismanagement of the funds overall. These allegations all contribute to two claims in the FAC: first, that the corporate and committee Defendants breached their fiduciary duties of loyalty and prudence, and second, that the corporate and board Defendants failed to adequately monitor other fiduciaries.

Defendants filed a Motion to Dismiss the FAC on December 14, 2020. ECF No. 32. The Court held a hearing on the motion on July 14, 2021. The Court notes that each of the parties have also filed extensive supplementary briefing (see ECF Nos. 50, 52, 53, 62, and 63 by Plaintiffs and ECF Nos. 54, 56, 59, 65, and 66 by Defendants) and the Court has considered the authorities submitted therein as well.

II. STANDARD OF REVIEW

Defendants’ Motion is brought under both Fed. R. Civ. P. 12(b)(1) and 12(b)(6). A Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction generally comes in two varieties: a facial attack or a factual attack. Ohio Nat'l Life Ins. Co. v. United States , 922 F.2d 320, 325 (6th Cir. 1990). A facial attack on the subject matter jurisdiction alleged in the complaint questions only the sufficiency of the pleading. Id. When reviewing a facial attack, the court takes the allegations in the complaint as true. Id. At all times, the plaintiff has the burden of proving jurisdiction to survive the motion.

Rogers v. Stratton Industries, Inc. , 798 F.2d 913, 915 (6th Cir. 1986). A factual attack, on the other hand, is not a challenge to the sufficiency of the allegations, but a challenge to the factual existence of subject matter jurisdiction. On such a motion, "no presumptive truthfulness applies to the factual allegations" and "the court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case." United States v. Ritchie , 15 F.3d 592, 598 (6th Cir. 1994) ; see also 2 James Wm. Moore, Moore's Federal Practice § 12.30[4] (3d ed. 2000) ("[W]hen a court reviews a complaint under a factual attack, the allegations have no presumptive truthfulness, and the court that must weigh the evidence has discretion to allow affidavits, documents, and even a limited evidentiary hearing to resolve disputed jurisdictional facts.").

Rule 12(b)(6) of the Federal Rules of Civil Procedure permits dismissal of a lawsuit or claim where the defendant establishes the plaintiff's "failure to state a claim upon which relief can be granted." Jones v. City of Cincinnati , 521 F.3d 555, 562 (6th Cir. 2008). Consideration of a Rule 12(b)(6) motion is confined to the pleadings. Id. In evaluating the motion, courts "must construe the complaint in the light most favorable to the plaintiff, accept all well-pled factual allegations as true and determine whether the plaintiff undoubtedly can prove no set of facts consistent with their allegations that would entitle them to relief." League of United Latin Am. Citizens v. Bredesen , 500 F.3d 523, 527 (6th Cir. 2007) (citing Kottmyer v. Maas , 436 F.3d 684, 688 (6th Cir. 2006) ).

Though this standard is liberal, it requires a plaintiff to provide "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action" in support of her grounds for entitlement to relief. Albrecht v. Treon , 617 F.3d 890, 893 (6th Cir. 2010) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). Under Ashcroft v. Iqbal , the plaintiff must also plead "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citation omitted). A plaintiff falls short if she pleads facts "merely consistent with a defendant's liability" or if the alleged facts do not "permit the court to infer more than the mere possibility of misconduct." Albrecht , 617 F.3d at 893 (quoting Iqbal , 556 U.S. at 678-79, 129 S.Ct. 1937 ).

III. ANALYSIS

A. Standing

Defendants make a factual attack under Fed. R. Civ. P. 12(b)(1) that the named Plaintiffs do not have constitutional standing to challenge Defendants’ selection and/or management of some of the funds that comprise the Plan. There are eleven challenged funds in the Plan that none of the Named Plaintiffs personally participated in. See "Challenged Fund" Table, ECF No. 32, PageID.852-53. Therefore, Defendants say they have suffered no "injury in fact" with relation to these funds, as is required for standing. Cleveland Branch NAACP v. City of Parma , 263 F.3d 513, 523-24 (6th Cir. 2001) (quoting Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. , 528 U.S. 167, 180-81, 120 S.Ct. 693, 145 L.Ed.2d 610 (2000) ).

Specifically, Defendants argue that a key fact is the Plan's "defined contribution" structure: participants’ money is only invested in the funds they choose. This is in contrast to plans with a "defined benefit" structure, where all monies contributed to the plan are pooled and invested on behalf of the participants. Because Plaintiffs’ benefit payments are not affected by the performance of the funds in which they are not invested, Defendants argue that they suffer no injury-in-fact related to them and therefore cannot show standing.

Plaintiffs argue that this does not matter because they are alleging wrongdoing through "general practices" taken by the Plan fiduciaries across their management of all the plans. Additionally, they argue that because this is a derivative lawsuit they have standing as to all the challenged funds even if the named Plaintiffs did not personally participate in them. ECF No. 42, PageID.1504-07. These allegations include the decision to include mostly actively managed funds over passive ones (FAC ¶ 113) and the failure to review individual funds and make sure the Plan was getting the lowest-cost share class options (FAC ¶¶ 143, 145, 147, 166).

There is support in the caselaw for Plaintiffs’ position: as long as the Complaint contains broad allegations that the fiduciaries violated ERISA, claims regarding specific funds are allowed to move forward at the motion to dismiss stage even if not all of the named plaintiffs participated in every one of the individual funds. See, e.g. , Davis v. Magna Int'l of Am., Inc. , No. 20-11060, 2021 WL 1212579, at *4-5 (E.D. Mich. Mar. 31, 2021) (Edmunds, J.) ("The Plaintiffs have satisfied the requirements of Article III because they allege actual injury to their own plan accounts and they allege injury in fact that is causally related to the conduct they challenge on behalf of the Plan."); see also Kurtz v. Vail Corp. , 511 F.Supp.3d 1185, 1192-94 (D. Colo. 2021) (collecting cases). Patterson and the other cases cited by Defendants represent the minority position.²

The Sixth Circuit has said little directly relevant to this issue: the parties cite cases developed in the Second and...