Moitoso v. FMR LLC

410 F.Supp.3d 320

Kevin MOITOSO, Tim Lewis, Mary Lee Torline, and Sheryl Arndt, individually and as representatives of a class of similarly situated persons, and on behalf of the Fidelity Retirement Savings Plan, Plaintiffs,

v.FMR LLC, FMR LLC Funded Benefits Investment Committee, FMR LLC Retirement Committee, Fidelity Management & Research Company, FMR Co., Inc., and Fidelity Investments Institutional Operations Company, Inc., Defendants.

CIVIL ACTION NO. 18-12122-WGY

United States District Court, D. Massachusetts.

Filed October 8, 2019

Brock J. Specht, Pro Hac Vice, Carl F. Engstrom, Pro Hac Vice, Jacob T. Schutz, Pro Hac Vice, James H. Kaster, Pro Hac Vice, Kai H. Richter, Pro Hac Vice, Mark E. Thomson, Pro Hac Vice, Paul J. Lukas, Pro Hac Vice, Nichols Kaster & Anderson LLP, Minneapolis, MN, Jacob A. Walker, Jason M. Leviton, Pro Hac Vice, Block & Leviton LLP, Boston, MA, for Plaintiffs.

Christina L. Hennecken, Pro Hac Vice, M. William Jay, Pro Hac Vice, Michael K. Isenman, Pro Hac Vice, Goodwin Procter LLP, Washington, DC, Alison V. Douglass, Benjamin S. Reilly, David Rosenberg, John J. Falvey, Jr., Paul E. Nemser, Goodwin Procter, LLP, Boston, MA, for Defendants.

MEMORANDUM AND ORDER

YOUNG, D.J.

I. INTRODUCTION

Our civil justice system regularly relies on citizen juries to decide intricate fact issues. Indeed, "[i]n the fact-finding line, anything a judge can do a jury can do better. The best sociological evidence confirms this truth." Marchan v. John Miller Farms, Inc., 352 F. Supp. 3d 938, 947 (D.N.D. 2018) (citing James Surowiecki, The Wisdom of Crowds (2004)). Nevertheless, the Seventh Amendment to the U.S. Constitution does not endow parties with a right to a jury trial in all civil cases but only "[i]n Suits at common law."

Here, the parties present the Court with a close call as to whether their dispute includes a claim best characterized as a suit at common law. The plaintiffs seek a money award on behalf of a plan subject to the Employee Retirement Income Security Act of 1974 ("ERISA"), Pub. L. No. 93-406, 88 Stat. 829 (1974), for the plan fiduciaries' alleged breaches of fiduciary duty. Class Action Compl. 1-2, ECF No. 1. The plan fiduciaries object to a jury trial and insist no such right exists here notwithstanding the principle that "[m]oney damages are, of course, the classic form of legal relief." See Mertens v. Hewitt Assocs., 508 U.S. 248, 255, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993). After close study of historical practice and ERISA's text, this Court concludes that a money award, if any, that the plaintiffs might win would be an equitable surcharge, not legal damages. As a result, the Court rules that the Seventh Amendment does not require a jury trial in this case.

A. Procedural History

The plaintiffs, Kevin Moitoso, Tim Lewis, Mary Lee Torline, and Sheryl Arndt, individually and as representatives of a class of similarly situated persons, and on behalf of the Fidelity Retirement Savings Plan (collectively, the "Plaintiffs"), filed this suit against FMR LLC, the FMR LLC Funded Benefits Investment Committee, the FMR LLC Retirement Committee, Fidelity Management & Research Company, FMR Co., Inc., and Fidelity Investments Institutional Operations Company, Inc. (collectively, "Fidelity") on October 10, 2018. Class Action Compl. 1. On October 19, 2018, the Plaintiffs filed a demand for a jury trial. Demand Jury Trial, ECF No. 10. Thereafter, the Plaintiffs amended their complaint thrice, once as of right and twice with leave from the Court. Am. Compl., ECF No. 31; Second Am. Compl., ECF No. 37; Third Am. Compl., ECF No. 56. Five days after filing their second amended complaint, on January 15, 2019, the Plaintiffs again demanded a jury trial. Am. Demand Jury Trial, ECF No. 44. The Plaintiffs reasserted their jury trial demand on April 4, 2019, after filing their third amended complaint. Second Am. Demand Jury Trial ("Operative Demand"), ECF No. 70.

On April 17, 2019, Fidelity, for the first time, moved to strike the Plaintiffs' jury demand. Defs.' Mot. Strike Pls.' Demand Jury Trial, ECF No. 72; Defs.' Mem. Supp. Mot. Strike Pls.' Demand Jury Trial ("Defs.' Mem."), ECF No. 73. The Plaintiffs opposed the motion to strike on May 1, 2019. Br. Opp'n Mot. Strike Jury Demand ("Opp'n"), ECF No. 75. On May 2, 2019, the Plaintiffs filed their fourth amended complaint, with Fidelity's agreement. Fourth Am. Compl. ("Operative Compl."), ECF No. 77. The day before the hearing on May 7, 2019, Fidelity filed a reply, ECF No. 82.¹

The Operative Demand requests a trial by jury on counts one through four and count six of the Operative Complaint, which seek an award of losses for Fidelity's alleged breaches of fiduciary duty. Id. at 1. In the alternative, the Plaintiffs request an advisory jury. Id. at 2.

B. Factual Background

The Plaintiffs are former Fidelity employees who participated in the Fidelity Retirement Savings Plan (the "Plan"). Operative Compl. ¶¶ 18-20. They allege that Fidelity breached its fiduciary duties in managing the Plan. Id. ¶¶ 127-154. The Plaintiffs request, among other things, that Fidelity restore to the Plan the losses that the Plan suffered as a consequence of Fidelity's alleged breaches of fiduciary duty. Id. at 64. The Plaintiffs state that, because they are former employees, they immediately may withdraw a proportional share of the loss award from the Plan if and when the Court enters judgment in their favor. Opp'n 15.

II. LEGAL FRAMEWORK

If a party demands a jury trial on any issue under Rule 38 of the Federal Rules of Civil Procedure, then the Court puts any such issue to the jury unless the Court "on motion or on its own, finds that on some or all of those issues there is no federal right to a jury trial." Fed. R. Civ. P. 39(a). Even if no jury trial right exists in a case, the Court may still empanel an advisory jury. Fed. R. Civ. P. 39(c)(1).

Regardless of the existence of a jury right, the Court intends to empanel an advisory jury here. See Fed. R. Civ. P. 39(c) ; see also Marchan, 352 F. Supp. 3d at 947-49 (explaining that juries can calculate monetary relief even better than judges). The Court endeavors to explain below why it concludes that the Seventh Amendment does not require a jury to resolve the factual issues that the Plaintiffs raise in counts one through four and count six of the operative complaint.

The Seventh Amendment Jury Trial Clause guarantees that "[i]n Suits at common law, where the value in controversy shall exceed twenty dollars, the right of jury trial shall be preserved." "[A]t common law" refers to legal, as opposed to equitable, claims. Curtis v. Loether, 415 U.S. 189, 193, 94 S.Ct. 1005, 39 L.Ed.2d 260 (1974) (quoting Parsons v. Bedford, 28 U.S. (3 Pet.) 433, 446-47, 7 L.Ed. 732 (1830) ). Further, the Jury Trial Clause requires a jury to resolve discrete claims to which a jury trial historically attached even if the complaint also contains nonjury claims. Ross v. Bernhard, 396 U.S. 531, 538-40, 90 S.Ct. 733, 24 L.Ed.2d 729 (1970).

This Court weighs two factors to determine whether this suit involves legal or equitable issues. See Full Spectrum Software, Inc, v. Forte Automation Sys., Inc., 858 F.3d 666, 675 (1st Cir. 2017). First, this Court resolves "whether the current action is ‘analogous to common-law causes of action ordinarily decided in English law courts in the late 18th century.’ " Id. (quoting Braunstein v. McCabe, 571 F.3d 108, 118 (1st Cir. 2009) ). Second, and "more important," the Court decides whether the requested remedy is legal or equitable. Id. (quoting Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 42, 109 S.Ct. 2782, 106 L.Ed.2d 26 (1989) ).² If, on balance, these two factors indicate that the complaint presents only equitable issues, then the jury trial right does not attach. Cf. Braunstein, 571 F.3d at 122 (analyzing second issue even after ruling that the first disfavored a jury trial).

III. ANALYSIS

Considering the two factors above, this Court GRANTS Fidelity's motion to strike the Plaintiffs' jury demand. First, the chancery courts of old traditionally heard claims for breach of fiduciary duty, which militates against a jury trial right. Second, ERISA's drafters provided for the equitable remedy of surcharge, not the legal remedy of damages, for breach of fiduciary duty. The damages question is a close one, however, because the Court must reconcile apparently contradictory Supreme Court pronouncements and ERISA's express invocation of equitable remedies with the absence of an explicit grant of discretion to the presiding judge in awarding monetary relief. Ultimately, this Court concludes that these apparent contradictions are not contradictions at all because ERISA's drafters meant to incorporate the equity-based doctrines of trust law for actions that beneficiaries bring against fiduciaries. Consequently, the jury trial right does not attach to the Plaintiffs' claims.

A. Equity Courts Traditionally Heard Breach of Fiduciary Duty Claims

This Court construes the Plaintiffs' suit as most closely analogous to a trust beneficiary's cause of action against a trustee for breach of fiduciary duty. ERISA fiduciary duty claims draw directly from trust law and thus fall within "the bailiwick of the courts of equity." CIGNA Corp. v. Amara, 563 U.S. 421, 439-40, 131 S.Ct. 1866, 179 L.Ed.2d 843 (2011) (quoting 4 Austin Wakeman Scott et al., Scott and Ascher on Trusts § 24.1, at 1654 (5th ed. 2007)). Though this tradition admitted of at least one exception, the Plaintiffs fail to fit their claims into the exception that they identify. See Opp'n 7-9.

Congress defined the scope of ERISA fiduciaries' duties using the common law of trusts. Central States, Se. & Sw. Areas Pension Fund v. Central Transp., Inc., 472 U.S. 559, 570, 105 S.Ct. 2833, 86 L.Ed.2d 447 (1985). The Supreme Court has observed that "action[s] by a trust beneficiary against a trustee for breach of fiduciary duty ... were within the exclusive jurisdiction of courts of equity."...