Muri v. Nat'l Indem. Co.

MARC J. MURI, individually and on behalf of all others similarly situated, Plaintiff, v. NATIONAL INDEMNITY COMPANY, Defendants.

8:17-CV-178

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEBRASKA

June 18, 2019

MEMORANDUM AND ORDER

The plaintiff, Marc Muri, is suing his former employer, National Indemnity Company, for allegedly breaching the fiduciary duties owed to him, and all others similarly situated, under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq. National Indemnity has moved for summary judgment on Muri's claims. For the reasons discussed below, the Court will grant National Indemnity's motion and Muri's claims will be dismissed.

BACKGROUND

The Court's prior Memorandum and Order (filing 38) set forth the background of this case in detail. Muri was employed by National Indemnity, an insurance provider located in Omaha, Nebraska. Filing 1 at 7. During his employment, Muri participated in National Indemnity Company's Employee Retirement Savings Plan ("the Plan"). Filing 1 at 2. The Plan—which is a defined contribution plan—in essence, allows participating employees to contribute a portion of their salary, which National Indemnity then matches, towards individual retirement accounts. Filing 100 at 13. Participants do so by choosing from a variety of fund options, all of which offer different investment styles and risk profiles, in which to invest their contributions. Muri elected to invest in the Sequoia Fund. Filing 100 at 13.

Generally speaking, the Sequoia Fund is a non-diversified, long-term growth, mutual fund managed by Ruane, Cunniff & Goldfarb, Inc. Filing 100 at 37. The Sequoia Fund invests in "common stocks it believes are undervalued at the time of purchase and have the potential for growth." Filing 1 at 13. And it sells common stocks "when the company shows deteriorating fundamentals . . . or its value appears excessive relative to its expected future earnings." Filing 1 at 11.

But Muri alleges that the Sequoia Fund was, as of January 2015, no longer a prudent investment option. Filing 1 at 4. And Muri contends the Sequoia Fund violated its own "value policy" by over-concentrating its investments in one, high risk stock: Valeant Pharmaceuticals. Filing 1 at 3; see also filing 1 at 2. In essence, Valeant's business model is to acquire various competitors, and products, then drastically cut research and development costs in an effort to boost profits. Filing 1 at 16.

According to Muri, Valeant's acquisition strategy, along with its accounting practices, began raising "red flags" around the industry. See filing 1 at 16-17. Specifically, investors began questioning Valeant's "cash earnings per share" accounting method, which appeared to vastly overstate Valeant's net income. Filing 1 at 18. And suspicions also arose surrounding Valeant's stock price which, at its peak, had a trade value almost ninety-eight times higher than its previous year's earnings. Filing 1 at 17. As a result, Valeant became the subject of intense scrutiny by investors, analysts, and elected officials. See filing 1 at 22-26. Despite that skepticism, however, Sequoia Fundmanagers allegedly refused to diminish the Fund's concentration in Valeant stock, and instead, acquired more. See filing 1 at 24.

In October 2015, Valeant's stock price fell dramatically, and by November 2015, Valeant had lost more than $65 billion in market value. Filing 1 at 27. This, in turn, caused the Sequoia Fund to lose approximately twenty five percent of its value—vastly diminishing the retirement account of Muri, and other Plan participants, who invested in the Fund. See filing 1 at 27.

It is with that backdrop that this litigation ensued. Muri claims that from January 1, 2015, through the date of judgment in this action (the "Class Period"), National Indemnity violated the fiduciary duties it owed to Muri and other Plan participants by: (1) failing to prudently manage the Plan by offering "shortsighted" investment options, such as the Sequoia Fund; and (2) failing to avoid conflicts of interest in choosing its investment options, specifically those with close relationships to National Indemnity's parent company, Berkshire Hathaway. Filing 1 at 34-37. National Indemnity moves for summary judgment on both Muri's duty of prudence and duty of loyalty claims. See filing 79 at 1.

STANDARD OF REVIEW

Summary judgment is proper if the movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(a). The movant bears the initial responsibility of informing the Court of the basis for the motion, and must identify those portions of the record which the movant believes demonstrate the absence of a genuine issue of material fact. Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc). If the movant does so, the nonmovant must respond by submitting evidentiary materials that set out specific facts showing that there is a genuine issue for trial. Id.

On a motion for summary judgment, facts must be viewed in the light most favorable to the nonmoving party only if there is a genuine dispute as to those facts. Id. Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the evidence are jury functions, not those of a judge. Id. But the nonmovant must do more than simply show that there is some metaphysical doubt as to the material facts. Id. In order to show that disputed facts are material, the party opposing summary judgment must cite to the relevant substantive law in identifying facts that might affect the outcome of the suit. Quinn v. St. Louis County, 653 F.3d 745, 751 (8th Cir. 2011). The mere existence of a scintilla of evidence in support of the nonmovant's position will be insufficient; there must be evidence on which the jury could conceivably find for the nonmovant. Barber v. C1 Truck Driver Training, LLC, 656 F.3d 782, 791-92 (8th Cir. 2011). Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial. Torgerson, 643 F.3d at 1042.

DISCUSSION

To prevail on a claim of breach of fiduciary duty under ERISA, the plaintiff "must make a prima facie showing that [a] defendant acted as a fiduciary, breached [his] fiduciary duties, and thereby caused a loss to the Plan." Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009). As explained in the Court's prior Memorandum and Order, ERISA imposes upon fiduciaries twin duties of loyalty and prudence. Those duties generally require fiduciaries to act in the sole interest of plan participants and to carry out their duties with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar withsuch matters would use in the conduct of an enterprise of a like character and with like aims. Id. at 595.

According to National Indemnity, however, the record evidence does not contain any, much less sufficient, evidence from which a reasonable fact finder could find that National Indemnity acted imprudently or disloyally in its administration of the Plan. As such, National Indemnity urges dismissal of Muri's duty of prudence and duty of loyalty claims.

I. DUTY OF PRUDENCE

As briefly noted above, the duty of prudence requires fiduciaries to act solely in the interest of plan participants and beneficiaries and ERISA requires fiduciaries to carry out their duties with care, skill, prudence, and diligence under the circumstances. Id. But that duty requires fiduciaries to act with prudence, not prescience, and thus, the relevant inquiry focuses on the information available to the fiduciary at the time of the relevant investment decision. Pension Benefit Guar. Corp. ex rel. St. Vincent Catholic Med. Ctrs. Ret. Plan v. Morgan Stanley Inv. Mgmt., Inc., 712 F.3d 705, 716. (2d Cir. 2013).

Relatedly, a plan fiduciary also has a continuing duty to monitor and evaluate the fund options in the Plan and to remove imprudent ones. Tibble v. Edison Int'l, 135 S. Ct. 1823, 1828 (2015). That means the fiduciaries must "systematically consider all the investments of the [Plan] at regular intervals to ensure that they are appropriate." Id. But even if a fiduciary did not adequately engage in a review process before making a decision, that fiduciary is insulated from liability if a hypothetical prudent fiduciary would have made the same decision anyway. Roth v. Sawyer-Cleator Lumber Co., 16 F.3d 915, 917-18 (8th Cir. 1994) (citation omitted).

Generally speaking, Muri contends that because "[n]o reasonable fiduciary would have made the poor choices that [National Indemnity] madeand cost the Plan and its participants tens of millions of dollars in lost retirement savings[,]" National Indemnity has breached its duty of prudence. Filing 100 at 13. More specifically, Muri points out that Charles Wert—an institutional trustee for many major corporations including Boeing, AT&T, Ford Motor Company, and Parsons—opined that the Committee had "failed to follow an appropriate process under the circumstances for monitoring and removing the Sequoia Fund" and "failed to implement an investment policy and thus had no legitimate process to evaluate investments." Filing 77-1 at 1, 14; filing 100 at 51. And as a result, Muri claims, "a reasonable plan fiduciary, following a well-designed monitoring process, would have placed the Sequoia Fund on a watch list by the third quarter of 2014." Filing 77-1 at 14.

But even viewing those facts in the light most favorable to Muri, no reasonable fact finder could determine that National Indemnity failed to meet its duty of prudence. Indeed, nothing in Wert's opinion suggests that National Indemnity's Plan committee was not thinking about, or consistently reviewing, the prudence of the Sequoia Fund. See generally filing 77-1 at 1-40. Nor has Muri pointed the...