Riley v. Olin Corp.

1

MALIKA RILEY, et al., Plaintiff(s), v. OLIN CORPORATION, et al., Defendant(s).

No. 4:21-cv-01328-SRC

United States District Court, E.D. Missouri, Eastern Division

January 24, 2023

MEMORANDUM AND ORDER

STEPHEN R. CLARK CHIEF UNITED STATES DISTRICT JUDGE

Following the Court's dismissal of their case, Docs. 31, 32, Malika Riley and Takeeya Sharonte Reliford move for leave to amend their complaint, Doc. 33. Defendants oppose the motion asserting futility. Doc. 35. In their opposing brief Defendants attached exhibits that Riley and Reliford move to strike. Doc. 37. The Court, concluding that the amendments do not survive a futility challenge, denies Riley and Reliford's Motion for Leave to Amend and denies the Motion to Strike.

I. Background

For purposes of deciding the motion for leave to amend, the Court accepts as true the following facts that Riley and Reliford allege in their proposed amended complaint. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); Zutz v. Nelson, 601 F.3d 842, 850-51 (8th Cir. 2010) (applying Twombly pleading standard to determine whether proposed amended complaint stated a claim). Plaintiffs participated in a retirement plan through their employer, Olin Corporation, and named as defendants the following: Olin Corporation, Olin's board, and the plan's investment committee; the Court refers to them collectively as Defendants, and individually as Olin, the Board, and the Committee; and the Court refers to the retirement plan as the Plan.

Riley and Reliford filed their original complaint alleging Olin breached its fiduciary duty of prudence and failed to monitor the Committee. Doc. 1 at ¶¶ 112-25. Defendants then moved to dismiss the case, Doc. 19, and Riley and Reliford responded, informally requesting permission to amend their complaint, Doc. 23. In dismissing Riley and Reliford's claim without prejudice, the Court denied, on procedural grounds, their request to amend. Doc. 31 at p. 15. Riley and Reliford responded by filing a proper motion for leave to amend. Doc. 33.

To support their breach-of-fiduciary-duty claim, Riley and Reliford allege that Defendants failed to adequately monitor the Plan's recordkeeping expenses, Doc. 33-1 at ¶¶ 7691, failed to prudently select investment options because of excessive investment fees, id. at ¶¶ 92-109, and maintained underperforming funds in the Plan, id. at ¶¶ 110-19. First, regarding excessive recordkeeping expenses, Riley and Reliford add allegations of “Comparable Plans” that have more affordable recordkeeping fees, including three which use the same record keeper and receive “virtually identical services.” Id. at ¶ 87. Riley and Reliford, however, do not identify any of the specific services provided by any of the plans.

Next, Riley and Reliford seek to bolster their claim that Defendants failed to prudently select investment-management funds. Id. at ¶¶ 92-109. They continue to rely on the same data, ICI medians and averages, and the allegation that Defendants could have utilized the collectivetrust version of the funds. Id. But they clarify that “the collective investment trust version of the T. Rowe Price target date funds had the same underlying investments and asset allocations as their mutual-fund counterparts but had better annual returns and a lower net expense ratio.” Id. at ¶ 105.

Finally, concerning the underperforming funds, Riley and Reliford include the original underperforming fund, and allege that three additional funds were underperforming. Riley and Reliford add tables comparing the returns of the underperforming funds to their respective Morningstar-fund-category-benchmark index and other actively managed funds in the same category. Id. Riley and Reliford do not allege factual similarities among funds of the same categories but rely on Morningstar's similar categorization of the funds. Id.

To support their claim of futility, Defendants included prospectuses-analyzing funds that Riley and Reliford referred to when comparing different funds' return rates-as exhibits attached to its opposition. Doc. 35. Riley and Reliford argue that Defendants improperly attached exhibits to a pleading and that the Court should strike them. Doc. 37. Defendants assert that the Court can and should consider the prospectuses. Doc. 39.

II. Standards

A. Leave to Amend

Rule 15(a) of the Federal Rules of Civil Procedure, which governs motions for leave to amend pleadings, states that courts “should freely give leave [to amend] when justice so requires.” While this standard may change if a court intends an order be final, In re SuperValu, Inc., 925 F.3d 955, 961 (8th Cir. 2019), Rule 15 applies to nonfinal orders, such as here, a dismissal without prejudice, Mountain Home Flight Serv., Inc. v. Baxter County, 758 F.3d 1038, 1045-46 (8th Cir. 2014) (requiring express intent or clear implication to dismiss without ability to amend). Under Rule 15's liberal amendment policy, “denial of leave to amend pleadings is appropriate only in those limited circumstances in which undue delay, bad faith on the part of the moving party, futility of the amendment, or unfair prejudice to the non-moving party can be demonstrated.” Hillesheim v. Myron's Cards & Gifts, Inc., 897 F.3d 953, 955 (8th Cir. 2018) (quoting Roberson v. Hayti Police Dep't, 241 F.3d 992, 995 (8th Cir. 2001)); see also Popoalii v. Corr. Med. Servs., 512 F.3d 488, 497 (8th Cir. 2008) (“A court abuses its discretion when it denies a motion to amend a complaint unless there exists undue delay, bad faith, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the non-moving party, or futility of the amendment.”).

“An amendment is futile if the amended claim ‘could not withstand a motion to dismiss under Rule 12(b)(6).'” Hillesheim, 897 F.3d at 955 (quoting Silva v. Metro. Life Ins. Co., 762 F.3d 711, 719 (8th Cir. 2014)). In other words, “[a]lthough ordinarily the decision of whether to allow a plaintiff to amend the complaint is within the trial court's discretion, when a court denies leave to amend on the ground of futility, it means that the court reached a legal conclusion that the amended complaint could not withstand a Rule 12 motion ....” In re Senior Cottages of Am., LLC, 482 F.3d 997, 1001 (8th Cir. 2007) (citing Fed.R.Civ.P. 12).

The Court applies the Rule 12(b)(6) standard set forth in its earlier order. See Doc. 31 at pp. 4-5. Additionally, while a court considers only the facts alleged in the complaint, the Court may consider “matters of public record and materials that are ‘necessarily embraced by the pleadings.'” Meiners v. Well Fargo & Co., No. 16-3981, 2021 WL 2303968, at *2 (D. Minn. May 25, 2017) (citing Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir. 1999)), aff'd, Meiners v. Wells Fargo & Co., 898 F.3d 820 (8th Cir. 2018). Where a “complaint references returns data for [funds], the court properly considers the . . . prospectuses [of the funds].” Id.

III. Discussion

A. Leave to Amend

1. Breach-of-Fiduciary-Duty Claim

The Court applies the legal standard set forth in its earlier order. Doc. 31 at p. 6. In that order, the Court found that Riley and Reliford's claims regarding recordkeeping fees, investment-management fees, and an underperforming fund failed to state a breach-of-fiduciary-duty claim. Doc. 31. Riley and Reliford move to amend their original complaint to add additional facts to support this claim. Doc. 33. Defendants claim the amended complaint fails to correct the “fatal deficiencies.” Doc. 35 at p. 8. The Court finds that any amendment to the breach-of-fiduciary-duty claim would be futile. The Court addresses each breach-of-fiduciary-duty theory in turn.

a. Recordkeeping fees

The Court previously held that Riley and Reliford's original complaint failed to state a breach-of-fiduciary-duty claim for excessive recordkeeping fees because: 1) a revenue-sharing fee model does not imply imprudence; 2) courts reject the NEPC survey “as sound bases for comparison because it lacks in detail[,]” making it fail as a meaningful benchmark; 3) Riley and Reliford's reliance on “expert opinions proffered by plaintiffs in other cases, an unspecified declaration, and the terms of a settlement agreement reached in another unrelated case” did not provide a meaningful benchmark; and 4) the investment committee does not have to “conduct periodic requests for proposal and renegotiate.” Doc. 31 at pp. 8-10. In reference to a meaningful benchmark, the Court held that “the plaintiff must ‘plead that the administrative fees are excessive in relation to the specific services the recordkeeper provided to the specific plan at issue.'” Id. at p. 8 (quoting Perkins v. United Surgical Partners Int'l Inc., No. 3:21-cv-00973, 2022 WL 824839, at *6 (N.D. Tex. Mar. 18, 2022)); see also Matousek v. MidAmerican Energy Co., 51 F.4th 274, 280 (8th Cir. 2022) (analyzing the specific services provided when comparing an excessive-recordkeeping-fee claim, even at the motion to dismiss stage).

Riley and Reliford's attempts to cure their deficiencies regarding excessive-recordkeeping fees fail. First, they continue to rely on NEPC data that the Court found lacked detail. See Doc. 33-1 at ¶¶ 83-85; Doc. 31 at pp. 8-9. Next, they do not allege additional details about the services themselves, which the survey lacks. Riley and Reliford do add a new table they allege evaluates “comparable plans of similar sizes and assets,” including three plans that used the same record keeper and had “virtually identical services as the Plan.” Doc. 33-1 at ¶ 87. But the table also fails to include any facts about the specific services or specific plans beyond the assertion that the plans have “similar sizes and assets” and the conclusory language...