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Krueger v. Ameriprise Financial, Inc.

United States District Court, D. Minnesota

March 20, 2014

Roger Krueger, Jeffrey Olson, Deborah Tuckner, Susan Wones, and Margene Bauhs, individually and as representatives of a class of similarly situated persons, and on behalf of the Ameriprise Financial 401(k) Plan, Plaintiffs,
Ameriprise Financial, Inc., Ameriprise Financial, Inc. Employee Benefits Administration Committee, Michelle Rudlong, Ameriprise Financial, Inc. 401(k) Investment Committee, Compensation and Benefits Committee of the Board of Directors of Ameriprise Financial, Inc., Martin S. Solhaug, and Brent Sabin, Defendants.

Jerome J. Schlichter, Michael A. Wolff, Mark G. Boyko, Troy A. Doles, and Heather Lea, Schlichter Bogard & Denton, 100 South Fourth Street, Suite 900, St. Louis, MO 63102; and Thomas W. Pahl and Thomas A. Harder, Foley & Mansfield, PLLP, 250 Marquette Avenue, Suite 1200, Minneapolis, MN 55401, for Plaintiffs.

Stephen P. Lucke and Kirsten E. Schubert, Dorsey & Whitney LLP, 50 South 6th Street, Suite 1500, Minneapolis, MN 55402-1498; and Benjamin G. Bradshaw and Shannon M. Barrett, O'Melveny & Myers LLP, 1625 Eye Street N.W., Washington, DC 20006, for Defendants.




This matter is before the Court on Defendants Ameriprise Financial, Inc., Ameriprise

Financial, Inc. Employee Benefits Administration Committee, Michelle Rudlong, Ameriprise Financial, Inc. 401(k) Investment Committee, Compensation and Benefits Committee of the Board of Directors of Ameriprise Financial, Inc., Martin S. Solhaug, and Brent Sabin's (collectively "Defendants")[1] Motion for Summary Judgment on Statute of Limitations Grounds [Doc. No. 147]. Defendants submitted a supporting memorandum [Doc. No. 151] and two declarations [Doc. Nos. 149, 152]. Plaintiffs submitted an opposition memorandum [Doc. No. 164] and two declarations [Doc. Nos. 165, 166]. And, Defendants filed a reply brief [Doc. No. 170] and declaration [Doc. No. 171]. The matter was heard on August 20, 2013. For the reasons stated below, the Court grants in part, and denies in part, Defendants' motion.


A. The Plan

Defendant Ameriprise Financial, Inc. ("Ameriprise") is a financial services company. Ameriprise makes available to eligible employees and retirees of Ameriprise and its subsidiaries and affiliates the Ameriprise Financial 401(k) retirement benefit plan (the "Plan"), and Ameriprise matches a portion of the participants' contributions. (See Declaration of Brent Sabin dated July 2, 2013 [Doc. No. 152] ("Sabin Decl."), Ex. D (2005 Summary Plan Description ("2005 SPD")) at 1-2, 36.) The Plan is a defined contribution plan in which participants may direct their Plan balances among different investment options. (See id. at 1, 10-20.) The Plan became effective on October 1, 2005. (Sabin Decl., Ex. A (2005 Ameriprise Financial 401(k) Plan ("2005 Plan")) § 1.2.)

Two named fiduciary committees have primary responsibility for administering the Plan. Ameriprise's Employee Benefits Administration Committee ("EBAC") is the Plan administrator and is responsible for determining benefits eligibility and construing Plan documents. (See id. §§ 2.4, 10.3.) EBAC has administered the Plan since October 2005 and its members are appointed by Ameriprise's Compensation and Benefits Committee of the Board of Directors ("CBC"). (Id. § 10.1.) The CBC also has the authority to remove the EBAC's members. (Id.) In addition, the Ameriprise Financial, Inc. 401(k) Plan Investment Committee ("Investment Committee") administers the Plan by selecting and monitoring the investment options in the Plan lineup. (Id. § 10.4.) The Investment Committee also directs how investment options for the Plan are invested. (See id. § 6.3.)

B. The Funds

Ameriprise was once part of American Express Companies ("American Express"), and the Plan duplicated many of the investment options that had been available through the American Express 401(k) plan when Ameriprise spun off from American Express in October 2005. (See Sabin Decl., Ex. D (2005 SPD) at 1, 10, 13; see id., Ex. A (2005 Plan) §§ 1.1, 1.2.) When the Plan was first developed, it offered participants several investment options, including an Ameriprise stock fund, an income fund devoted primarily to government bonds, several mutual funds and collective funds managed by Ameriprise affiliates and others, and a self-directed brokerage window through which participants could invest in hundreds of other non-affiliated mutual funds. (Sabin Decl., Ex. D (2005 SPD) at 13-24.) As for Ameriprise-affiliated funds, the Plan offered RiverSource mutual and collective funds, which were managed by Ameriprise and the Ameriprise Trust Company ("ATC"), respectively, as well as the Income Fund, which was also managed by ATC (collectively, the "RiverSource Funds"). (See id. at 13-20, 24.) The RiverSource mutual funds included the RiverSource Balanced Fund, the RiverSource Diversified Bond Fund, the RiverSource Disciplined Equity Fund, the RiverSource Diversified Equity Income Fund, the RiverSource Global Balanced Fund, the RiverSource Mid Cap Growth Fund, the RiverSource Mid Cap Value Fund, the RiverSource New Dimensions Fund, the RiverSource Stock Fund, and the RiverSource Retirement Plus Series. (Sabin Decl. ¶ 22.) With the exception of Mr. Olson, each Plaintiff was invested in at least one RiverSource Fund prior to September 28, 2008. (See Declaration of Shannon Barrett dated July 3, 2013 [Doc. No. 149] ("Barrett Decl."), Exs. AA (Olson Dep.) 48:9-24, BB (Krueger Dep.) 77:16-78:3, HH (Wones Quarterly Statement) at 4, II (Tuckner Quarterly Statement) at 4, LL (Bauhs Quarterly Statement) at 4.)

Plan participants received-relevant to this case-two types of documents regarding the Plan's investment options. The first type was the Ameriprise Financial Summary Plan Description ("SPD"), which, among other things, describes the Plan's investment options. (See, e.g., Sabin Decl., Ex. D (2005 SPD) at 13-24.) According to the Vice President of Benefits at Ameriprise, these SPDs were either mailed or emailed to Plan participants and were available online. (Sabin Decl. ¶ 9.) In addition, Plaintiffs Olson, Tuckner, and Bauhs admitted to receiving SPDs. (See Barrett Decl., Exs. AA (Olson Dep.) 78:23-79:9, CC (Bauhs Dep.) 101:9-24, EE (Tuckner Dep.) 106:6-23.) At issue in this case are the 2005, 2007, and 2008 SPDs.

The second type of document received by Plan participants was a mutual fund prospectus, which provides detailed information about a specific fund. Participants in a fund were mailed a prospectus for that fund at the time their investment was made and on an annual basis.[2] (Sabin Decl. ¶ 20.) Each Plaintiff testified that he or she either received or reviewed prospectuses for their investments. (See Barrett Decl., Exs. AA (Olson Dep.) 79:16-23, BB (Krueger Dep.) 85:14-25, CC (Bauhs Dep.) 99:9-15, 130:11-131:1, DD (Wones Dep.) 73:2-21, EE (Tuckner Dep.) 85:18-25.)

C. Recordkeeping

The Plan's assets are held by trustees selected by the Investment Committee. (Sabin Decl., Ex. A (2005 Plan) §§ 12.1, 12.2.) ATC was the original trustee and record-keeper of the Plan. ( Id., Ex. B (Ameriprise Financial 401(k) Plan Trust Agreement) §§ 1.2(m), 6.2; Sabin Decl. ¶ 34.) Ameriprise sold ATC's record-keeping business to Wachovia Bank, N.A. ("Wachovia") in June 2006, and Wachovia became the Plan's trustee and record-keeper in April 2007. (Sabin Decl. ¶ 34.) In addition to the initial $66 million purchase price, Wachovia agreed to make a contingent payment equal to the amount of record-keeping revenues that Wachovia received over the next eighteen months [REDACTED/]

[REDACTED/] (Declaration of Kurt Struckhoff dated July 24, 2013 [Doc. No. 165] ("Struckhoff Decl."), Ex. 26 (Asset Purchase Agreement) at 3-5, 13.) That contingent payment amounted to $25 million. ( Id., Ex. 45 (Ameriprise Financial Annual Report 2007) at 2.) Attached to the asset purchase agreement was a schedule detailing the amount of customer revenues attributable to the trust/custodial relationships with each customer. ( Id., Ex. 26 § 3.01(G)(1)(B).) [REDACTED/] [REDACTED/] ( Id., Ex. 40 (Schedule 3.01.G.1.B.)

In March 2007, the Plan's participants were mailed a brochure entitled "Your Retirement Program is Transitioning to Wachovia." (Sabin Decl. ¶ 35 & Ex. U.) The brochure announced that, as of April 2007, Wachovia rather than ATC would be the Plan's record-keeper, but the brochure did not announce any details of the underlying transaction. ( Id., Ex. U.) The brochure was also posted online for Ameriprise employees. (Sabin Decl. ¶ 35.) Plaintiff Krueger testified that he knew of the sale in 2007, and Plaintiff Bauhs testified that she received a document informing her that things were transitioning to Wachovia. (See Barrett Decl., Exs. BB (Krueger Dep.) 60:7-14, Ex. CC (Bauhs Dep.) 107:10-19.)

D. Plaintiffs' Claims[3]

Plaintiffs Roger Krueger, Jeffrey Olson, Deborah Tuckner, Susan Wones, and Margene Bauhs (collectively "Plaintiffs") are current and former participants in the Plan. Each Plaintiff, with the exception of Mr. Olson, participated in the Plan from its inception in October 2005. (See Barrett Decl., Exs. BB (Krueger Dep.) 43:10-13, 71:22-72:6, CC (Bauhs Dep.) 101:22-24, DD (Wones Dep.) 20:17-24:3, EE (Tuckner Dep.) 35:16-36:9, 46:2-6.) Plaintiff Olson became a participant in 2007. (See id., Ex. AA (Olson Dep.) 46:5-11.)

Plaintiffs filed this lawsuit on September 28, 2011. In their Second Amended Complaint, Plaintiffs allege seven counts under the Employee Retirement Income Security Act ("ERISA") against Defendants. Count I asserts that Defendants' selection and retention of the RiverSource mutual funds and ATC-managed investments constituted breaches of Defendants' duties of loyalty and prudence under 29 U.S.C. § 1104(a)(1)(A) and (a)(1)(B). (Second Amended Complaint [Doc. No. 228] ("2d Am. Compl.") ¶¶ 107-17.) Count II alleges that Ameriprise and the CBC breached their duties of loyalty and prudence by failing to properly monitor and replace the fiduciaries over whom they had authority or control who caused losses to the Plan. (Id. ¶¶ 118-25.) Counts III and IV assert that Defendants engaged in prohibited transactions in violation of 29 U.S.C. §§ 1106(a) and (b), respectively. (Id. ¶¶ 126-40.) Count V alleges that Defendants breached their fiduciary duties of prudence and loyalty, and engaged in a prohibited transaction, by using ATC as the Plan's record-keeper in order to increase the ultimate sale price of the ATC record-keeping business to Wachovia. (Id. ¶¶ 141-51.) Count VI alleges co-fiduciary liability against Ameriprise, asserting that Ameriprise knowingly participated in these alleged breaches of fiduciary duties and prohibited transactions. (Id. ¶¶ 152-57.) Count VII alleges that Defendants breached their fiduciary duties of prudence and loyalty, and engaged in prohibited transactions, by making the Plan pay excessive fees to its record-keepers. (Id. ¶¶ 158-67.) Finally, Plaintiffs contend that Defendants fraudulently concealed their breaches of fiduciary duties related to the Plan's payment of excessive fees, as well as their prohibited transactions related to payments to Ameriprise for administrative services. (Id. ¶ 176.)


Summary judgment is proper if, drawing all reasonable inferences in favor of the non-moving party, there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Celotex Corp. v. Catrett , 477 U.S. 317, 322-23 (1986); Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 249-50 (1986). "Summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to secure the just, speedy, and inexpensive determination of every action.'" Celotex Corp. , 477 U.S. at 327 (quoting Fed.R.Civ.P. 1).

The party moving for summary judgment bears the burden of showing that the material facts in the case are undisputed. Id. at 323. However, "a party opposing a properly supported motion for summary judgment may not rest upon mere allegation or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial." Anderson , 477 U.S. at 256. "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted." Id. at 248.

As discussed above, Plaintiffs assert claims based on both 29 U.S.C. §§ 1104 and 1106 (the codification of ERISA §§ 404 and 406). The former provision imposes upon fiduciaries the duties of loyalty and prudence. See 29 U.S.C. § 1104(a). The latter provision forbids certain types of "prohibited transactions" that Congress deemed unlikely to inure to the benefit of a plan's participants, such as transactions between a plan and a "party in interest" and transactions between a plan and its fiduciaries. See id. § 1106.

Defendants argue that summary judgment is appropriate on Plaintiffs' claims[4] because ERISA's three-year statute of limitations bars relief. Under ERISA:

No action may be commenced under this subchapter with respect to a fiduciary's breach of any responsibility, duty, or obligation under this part, or with respect to a violation of this part, after the earlier of-
(2) three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation;
except that in the case of fraud or concealment, such action may be commenced not later than six years after the date of discovery of such breach or violation.

29 U.S.C. § 1113(2). In opposition, Plaintiffs argue that they did not have "actual knowledge" of the claimed breaches over three years prior to filing suit and that Ameriprise engaged in fraud and concealment such that the six-year statute of limitations is invoked.[5]

Plaintiffs filed this lawsuit on September 28, 2011. Therefore, in order for Defendants to prevail on their motion, they must demonstrate that Plaintiffs had actual knowledge of the alleged breaches and violations prior to September 28, 2008, and that the three-year statute of limitations was not tolled by fraud or concealment.

A. Actual Knowledge

The parties disagree as to the proper interpretation of the term "actual knowledge" in ERISA's three-year statute of limitations. However, the Eighth Circuit clearly addressed this issue in Brown v. American Life Holdings, Inc. , 190 F.3d 856 (8th Cir. 1999). In that case, the court stated that, "[b]ecause the statute requires actual knowledge of the breach or violation, ' a plaintiff must have actual knowledge of all material facts necessary to understand that some claim exists.'" Id. at 859 (quoting Gluck v. Unisys Corp. , 960 F.2d 1168, 1177 (3d Cir. 1992)). The court explained the rule as follows:

In most cases, "disclosure of a transaction that is not inherently a statutory breach of fiduciary duty... cannot communicate the existence of an underlying breach." Therefore, when a fiduciary's investment decision is challenged as a breach of an ERISA duty, the nature of the alleged breach is critical to the actual knowledge issue. For example, if the fiduciary made an illegal investment-in ERISA terminology, engaged in a prohibited transaction-knowledge of the transaction would be actual knowledge of the breach. But if the fiduciary made an imprudent investment, actual knowledge of the breach would usually require some knowledge of how the fiduciary selected the investment.

Id. (citations omitted).

The Eighth Circuit then applied this standard to the plaintiff's § 1104 claims for breaches of the fiduciary duties of loyalty, prudence, and diversification. Id . The plaintiff was a participant in an employee stock ownership plan ("ESOP") sponsored by his former employer. Id. at 858. In February 1998, the plaintiff first alleged that the ESOP's fiduciaries breached their duties by investing the ESOP's assets too conservatively and delaying the ESOP's rollover into a group savings plan. Id . The investment occurred on October 20, 1994, and the plaintiff admitted that he knew in October 1994 how the assets would be invested. Id. at 858-59. In addition, he stated that the fiduciaries should have rolled the ESOP into the group savings plan by December 31, 1994. Id. at 859. Based on this evidence, the Eighth Circuit found that the alleged failure to diversify was apparent from October 20, 1994 (i.e., the date of the transaction), and that the failure to timely roll the ESOP over was apparent by the end of December 1994 (i.e., the deadline by which the plaintiff claimed that the funds should have been transferred). Id. at 859-60. In affirming the district court's dismissal of the claims on statute of limitations grounds, the Eighth Circuit stated:

When an ERISA fiduciary makes investment decisions of the kind challenged in this case, there may be breaches of duty as to which a plaintiff will not have "actual knowledge" until he or she learns of the reasons for the fiduciary's decision, or the full nature of a complex transaction. But in this case, the only breach-of-fiduciary-duty theories that [the plaintiff] clearly articulated are time-barred, as the district court concluded.

Id. at 860.

Thus, according to the Eighth Circuit, when a prohibited transaction claim is alleged under § 1106, knowledge of the transaction constitutes actual knowledge of the violation and starts the running of the limitations period. However, when a breach of fiduciary duty is alleged under § 1104, the nature of the alleged breach dictates when the limitations period begins to run. If, for example, the alleged breach of fiduciary duty is simply that the fiduciary engaged in a prohibited transaction, then knowledge of the transaction begins the running of the limitations period. But, if the alleged breach of fiduciary duty is that the fiduciary made an imprudent decision, then actual knowledge likely does not occur until the plaintiff has some knowledge of the fiduciary's decision-making process.

In addition, when a plan participant is provided with plan documents or given instructions on how to access them, "their failure to read the documents will not shield them from having actual knowledge of the documents' terms." Brown v. Owens Corning Inv. Review Comm. , 622 F.3d 564, 571 (6th Cir. 2010) (citation omitted). As noted by a district court in this Circuit:

Even though ERISA was enacted to protect the rights of plan participants, any interpretation of the term "actual knowledge" that would allow a participant to refuse to accept and acknowledge information clearly set before him is untenable. A plaintiff can always disavow actual knowledge, and the ...

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