Savage v. Sutherland Global Servs., Inc.

521 F.Supp.3d 308

Ashley SAVAGE, David Leidlein, Ronald Cohen, and James Sherburne, individually and as representatives of similarly situated persons, and on behalf of the Plan, Plaintiffs,

v.SUTHERLAND GLOBAL SERVICES, INC., et al., Defendants.

6:19-CV-06840 EAW

United States District Court, W.D. New York.

Signed February 25, 2021

Adam Thomas Sanderson, Michael J. Lingle, Annette M. Gifford, Thomas & Solomon LLP, Rochester, NY, for Plaintiffs.

Kevin Joseph Mulvehill, Luke Bennett Kalamas, Alissa M. Fortuna-Valentine, Phillips Lytle LLP, Rochester, NY, for Defendants Sutherland Global Services, Inc., Shilpa Konda, Lori D'Ambrosio.

Erika N.D. Stanat, Jessica N. Clemente, Harter, Secrest & Emery LLP, Rochester, NY, for Defendant CVAGS, LLC.

Kevin Joseph Mulvehill, Alissa M. Fortuna-Valentine, Phillips Lytle LLP, Rochester, NY, for Defendants Diane Mohorter, Kathleen DeCann.

DECISION AND ORDER

ELIZABETH A. WOLFORD, United States District Judge

INTRODUCTION

Plaintiffs Ashley Savage, David Leidlein, Ronald Cohen, and James Sherburne (collectively, "Plaintiffs") bring this putative class action individually and on behalf of the Sutherland Global Services, Inc. 401(k) Plan (the "Plan"), and all other similarly situated participants and beneficiaries of the Plan, against Sutherland Global Services, Inc., CVGAS, LLC d/b/a Clearview Group, Shilpa Konda, Diane Mohorter, Lori D'Ambrosio, Kathleen Decann, and John Does 1-20 (collectively, "Defendants"). (Dkt. 1). Plaintiffs contend Defendants violated the Employment Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. , by breaching their fiduciary duties by failing to properly minimize the reasonable fees and expenses incurred by the Plan. (Id. ). Presently before the Court is a motion to dismiss filed by defendant CVAGS, LLC d/b/a Clearview Group ("Clearview"). (Dkt. 24). For the following reasons, Clearview's motion to dismiss is denied.

BACKGROUND AND PROCEDURAL HISTORY

The Court will briefly summarize Plaintiffs’ claims; however, familiarity with the relevant facts is assumed for purposes of this Decision and Order. According to the complaint, Plaintiffs are former employees of Sutherland Global Services, Inc. ("Sutherland") and participated in Sutherland's 401(k) Plan. (Dkt. 1 at ¶¶ 1, 7-10). Sutherland provides process transformation services, including human resources management, operational analytics, robotic process automation, and cloud services, and is the sponsor of the Plan pursuant to 29 U.S.C. § 1002(16)(B). (Id. at ¶¶ 13-14). Clearview is the "investment manager" of the Plan pursuant to 29 U.S.C. § 1002(38) and was delegated responsibilities in connection with the Plan, including the responsibility to select and monitor investment options to be included in the Plan. (Id. at ¶¶ 27-28).

During the proposed class period Plaintiffs invested in funds, including T. Rowe Price Target Date mutual funds. (Id. at ¶ 11). Plaintiffs allege that Defendants breached their fiduciary duties by failing to defray the Plan's fees and expenses. (Id. at ¶ 85). Specifically, Plaintiffs allege that Defendants selected and retained retail class shares of target-date mutual funds (including the T. Rowe Price funds) with 12b-1 fees for the Plan, when identical investor or institutional class shares of the same funds were available without a 12b-1 fee. (Id. at ¶¶ 85-117, 147).

PROCEDURAL HISTORY

Plaintiffs filed their complaint on November 13, 2019. (Dkt. 1). The complaint alleges three causes of action: (1) breach of fiduciary duty; (2) failure to monitor fiduciaries; and (3) other remedies for breach of fiduciary duty. (Id. at 21-31). The complaint also contains class action allegations. (Id. at 19-21). On April 2, 2020, defendants Sutherland, Lori D'Ambrosio, Kathleen DeCann, Shilpa Konda, and Diane Mohorter filed an answer to the complaint. (Dkt. 23). Clearview filed the instant motion the same day. (Dkt. 24). Clearview raises several arguments in support of its motion to dismiss, including: (1) Plaintiffs have failed to exhaust their administrative remedies; (2) Plaintiffs’ claims are untimely; and (3) Plaintiffs have failed to state claims for breach of fiduciary duty, failure to monitor, and for other remedies for breach of fiduciary duty. (Dkt. 24-15 at 11-31). Clearview also moves to strike Plaintiffs’ demand for a jury trial. (Id. at 31).

DISCUSSION

I. Legal Standard

A. Rule 12(b)(6)

"In considering a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), a district court may consider the facts alleged in the complaint, documents attached to the complaint as exhibits, and documents incorporated by reference in the complaint." DiFolco v. MSNBC Cable L.L.C. , 622 F.3d 104, 111 (2d Cir. 2010). A court should consider the motion by "accepting all factual allegations as true and drawing all reasonable inferences in favor of the plaintiff." Trs. of Upstate N.Y. Eng'rs Pension Fund v. Ivy Asset Mgmt. , 843 F.3d 561, 566 (2d Cir. 2016), cert. denied , ––– U.S. ––––, 137 S. Ct. 2279, 198 L.Ed.2d 703 (2017). To withstand dismissal, a claimant must set forth "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Turkmen v. Ashcroft , 589 F.3d 542, 546 (2d Cir. 2009) (quoting Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ).

B. Consideration of Materials Attached to Clearview's Motion

In connection with its motion to dismiss, Clearview has submitted more than 2,600 pages of exhibits which, according to a Declaration and Notice to Admit filed by its counsel, includes the Plan Document and Adoption Agreement, the Sutherland Global Services Summary Plan Description, Sutherland Global Services Form 5500 for years 2013 through 2018, an Investor Bulletin from the Securities and Exchange Commission ("SEC") titled "How Fees and Expenses Affect Your Investment Portfolio," dated February 2014, T. Rowe Price Funds, Inc. prospectuses for 2015 and 2020, and a U.S. Department of Labor Employee Benefits Security Administration publication titled, "Understanding Retirement Plan Fees and Expenses," dated December 2011. (Dkt. 24-1). Clearview contends that, in the ERISA context, courts consider plan documents incorporated by reference into the complaint and other federally-regulated filings or government authorities’ public statements, and that courts often take judicial notice of plan prospectuses, summary plan descriptions, Form 5500 filings, and other similar documents. (Dkt. 24-15 at 10-11). Clearview asks that the Court take judicial notice of these documents, pursuant to Federal Rule of Evidence 201. (Dkt. 24-1).

Plaintiffs do not dispute the authenticity of these documents, but argue that even if the Court considers them, they would only be considered for the fact that they contain certain statements, and not to prove the truth of such statements. (Dkt. 34 at 16). Plaintiffs further contend that the documents Clearview cites "only raise additional factual questions, further demonstrating the need for discovery and, thus, these documents should not be used to resolve Plaintiffs’ claims at the pleading stage." (Id. ).

Aside from the Form 5500s and the SEC investor bulletin, which were cited in the complaint, none these documents were attached to or specifically referenced in the complaint. Further, other than general assertions regarding admissibility, Clearview does not make any meaningful argument as to why the Court should consider the 2,600 pages it submits in connection with the motion to dismiss.

Pursuant to Rule 201, a court may take judicial notice of any fact that is "not subject to reasonable dispute because it: (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." See Fed. R. Evid. 201(b). While it is true that "[c]ourts regularly take notice of publicly available documents including regulatory filings ... these documents may only be considered for the fact that they contain a statement therein but not to prove the truth of the statement." Cunningham v. Cornell Univ. , No. 16-CV-6525(PKC), 2017 WL 4358769, at *3-4 (S.D.N.Y. Sept. 29, 2017). The SEC bulletin, Department of Labor publication, and T. Rowe Price prospectuses are publicly-available documents, and the SEC bulletin and Form 5500s were referenced in the complaint, and therefore the Court will take judicial notice of those documents. The complaint does not specifically reference the Plan Document and Adoption Agreement or the Plan Summary, and Clearview does not contend that these are publicly-available documents. Rather, in its reply brief, Clearview makes the conclusory statement that these documents are "integral." (Dkt. 36 at 9 n.6). The Court need not reach the issue because, as further explained below, even considering the documents, dismissal is not warranted at this stage of the litigation.

II. Administrative Exhaustion

Clearview's first argument is that Plaintiffs’ claims must be dismissed for failure to exhaust because they did not follow the claims procedures set forth in the Plan before filing suit. (Dkt. 24-15 at 11). Clearview points to language in the Plan requiring mandatory exhaustion of claims procedures, including:

[t]he exhaustion of the claims procedures is mandatory for resolving every claim and dispute arising under this Plan. As to such claims and disputes: (1) no claimant shall be permitted to commence any legal action to recover Plan benefits or to enforce or clarify rights under the Plan under Act § 502 or § 510 or under any other provision of law, whether or not statutory, until the claims procedures set forth in Subsections (a) and

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