Walden v. The Bank of N.Y. Mellon Corp.

MEMORANDUM OPINION ^[1]

Cynthia Reed Eddy, Chief United States Magistrate Judge.

This civil class action was initiated in this court on December 21, 2020, by Plaintiffs, Stephen and Leslie Walden (collectively, “the Waldens”), ^[2] individually and on behalf of those similarly situated, against Defendants Bank of New York Mellon Corporation (“BNY Corp.”)^[3]and BNY Mellon, N.A.^[4] In their First Amended Complaint, Plaintiffs assert five causes of action against both Defendants: Count I - breach of fiduciary duty; Count II - negligence; Count III -breach of contract; and Counts IV and V - violations of the Pennsylvania Unfair Trade Practices

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and Consumer Protection Law (“UTPCPL”), 73 P.S. §§ 201-1 - 201-9.2. See FAC (ECF No. 40). This court has subject matter jurisdiction over the controversy pursuant to 28 U.S.C. § 1332(d)(2)(A) (providing for original jurisdiction in situations where the amount in controversy exceeds $5 million and is a class action in which any member of the class of plaintiffs is a citizen of a different state from any defendant). Id. at ¶ 22.

Presently before the court is a motion by Defendants to dismiss the breach of fiduciary duty and negligence claims pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. (ECF No. 43). For the reasons that follow, Defendants' motion is granted.

I. BACKGROUND

Plaintiffs hired Defendants “to provide discretionary investment management services under a fiduciary standard.” FAC (ECF No. 40) at ¶ 25. “Plaintiffs and each of the other Class members signed client agreements with Defendants pursuant to which BNY Mellon became each of their discretionary investment managers.” Id. at ¶ 40. Specifically, in 2014, Plaintiffs “transferred several million dollars to BNY Mellon for it to invest in its discretion pursuant to the client agreement.” Id. at ¶ 41. “The client agreement consisted of multi-part agreements that included various sections and addendums, including, amongst others, a ‘BNY Wealth Management Agreement,' and an ‘Investment Management Agreement.'”^[5] Id. at ¶ 42 (hereinafter referred to collectively as the “Agreements”).^[6] The Agreements provided a number of contractual responsibilities of Defendants toward Plaintiffs, including limiting the ability of the wealth manager to make recommendations with respect to securities issued by BNY Mellon, its

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subsidiaries, or affiliates. Id. at ¶ 49(c). According to Plaintiffs, Defendants breached the Agreements due to their “improper and unauthorized practice of using client funds to purchase affiliated ‘BNY Mellon Securities'; the Bank's purchase of ‘BNY Mellon Securities' while operating under an undisclosed conflict of interest; and the Bank's use of a predetermined program that preferred underperforming, conflicted, affiliated funds that charged excess fees and underperformed other, non-conflicted investment options, rather than making individualized decisions on its clients' behalf.” Id. at ¶ 50.

Plaintiffs also assert that the Agreements were breached by Defendants receiving compensation not authorized by the Agreements. Plaintiffs paid a “flat fee that was determined by the amount of assets a client entrusted to the Bank.” Id. at ¶ 53. “The Agreement[s] [] permitted BNY Mellon to charge an Advisory Fee (as well as a few other fees) set forth in the agreement.” Id. at ¶ 56. According to Plaintiffs, “Defendants [] breached these covenants by receiving unauthorized compensation not authorized by these provisions, and by permitting their affiliates to earn fees other than those promised in or permitted by the fee schedule.” Id.

Thus, on December 21, 2020, Plaintiffs brought this class action complaint against Defendants asserting several causes of action, including breach of fiduciary duty, negligence, aiding and abetting breach of fiduciary duty, breach of contract, and UTPCPL violations. Compl. (ECF No. 1-1). On February 26, 2021, Defendants filed a motion to dismiss, declaration, and brief in support thereof pursuant to Fed. Rule Civ. Pro. 12(b)(6) for failure to state a claim. (ECF Nos. 16-18). Plaintiffs filed a response thereto, and Defendants filed a reply. (ECF Nos. 25-26).

On June 7, 2021, this Court filed a Memorandum Opinion granting in part and denying in part Defendants' motion to dismiss. Specifically, this Court granted Defendants' motion to dismiss with respect to Plaintiffs' claims for breach of fiduciary duty, negligence, and aiding and abetting

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breach of fiduciary duty, and permitted Plaintiffs to amend their complaint. This Court denied Defendants' motion to dismiss with respect to Plaintiffs' claims for breach of contract and violations of the UTPCPL.

Thus, on June 28, 2021, Plaintiffs filed the First Amended Complaint, where they indeed amended the breach of fiduciary duty and negligence causes of action.^[7] See FAC (ECF No. 40). On July 13, 2021, Defendants filed the partial motion to dismiss at issue here. (ECF No. 43). Specifically, Defendants move once again to dismiss the breach of fiduciary and negligence causes of action. (ECF No. 44). Plaintiffs have filed a response, and Defendants have filed a reply; thus, this matter is ripe for disposition. (ECF Nos. 46, 47).

II. STANDARD OF REVIEW

The applicable inquiry under Federal Rule of Civil Procedure 12(b)(6) is well-settled. Under Federal Rule of Civil Procedure 8, a complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Rule 12(b)(6) provides that a complaint may be dismissed for “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A complaint that merely alleges entitlement to relief, without alleging facts that show entitlement, must be dismissed. See Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009). This “‘does not impose a probability requirement at the pleading stage,' but instead ‘simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of' the

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necessary elements.” Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quoting Twombly, 550 U.S. at 556). Nevertheless, the court need not accept as true “unsupported conclusions and unwarranted inferences, ” Doug Grant, Inc. v. Great Bay Casino Corp., 232 F.3d 173, 183-84 (3d Cir. 2000), or the plaintiff's “bald assertions” or “legal conclusions.” Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997).

Although a complaint does not need to allege detailed factual allegations to survive a Rule 12(b)(6) motion, a complaint must provide more than labels and conclusions. Twombly, 550 U.S. at 555. A “formulaic recitation of the elements of a cause of action will not do.” Id. (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). “Factual allegations must be enough to raise a right to relief above the speculative level” and be “sufficient to state a claim for relief that is plausible on its face.” Twombly, 550 U.S. at 555. Facial plausibility exists “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556).

“The plausibility standard is not akin to a ‘probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully. [] Where a complaint pleads facts that are ‘merely consistent with' a defendant's liability, it ‘stops short of the line between possibility and plausibility of ‘entitlement to relief.'” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 556).

When considering a Rule 12(b)(6) motion, the court's role is limited to determining whether a plaintiff is entitled to offer evidence in support of his claims. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). The court does not consider whether a plaintiff will ultimately prevail. Id. A defendant bears the burden of establishing that a plaintiff's complaint fails to state a claim. Gould Elecs. v. United States, 220 F.3d 169, 178 (3d Cir. 2000).

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Finally, “when a motion to dismiss is granted, the court must decide whether to grant leave to amend. The Third Circuit has a liberal policy favoring amendments.” Ricoh USA, Inc. v. Bailon, 419 F.Supp.3d 871, 875 (E.D. Pa. 2019). “Leave to amend must generally be granted unless equitable considerations render it otherwise unjust. Among the factors that may justify denial of leave to amend are undue delay, bad faith, and futility.” Arthur v. Maersk, Inc., 434 F.3d 196, 204 (3d Cir. 2006) (internal citations omitted).

III. DISCUSSION

A. Breach of Fiduciary Duty Claim

Defendants contend that the breach of fiduciary duty claim (Count 1) should be dismissed once again pursuant to the gist-of-the-action doctrine.^[8] See Defs.' Br. (ECF No. 44) at 4-6. “The gist-of-the-action doctrine [] exists to maintain the conceptual distinction between tort and contract claims; the doctrine ‘precludes plaintiffs from re-casting ordinary breach of contract claims into tort claims.'” Cessna v. REA Energy Coop., Inc., 258 F.Supp.3d 566, 592 (W.D. Pa. 2017) (quoting eToll, Inc. v. Elias/Savion Advert., Inc., 811 A.2d 10, 14 (Pa. Super. 2002)). “A tort claim is barred by the gist of the action doctrine if it arises solely from a contract between the parties, if...