WALSH v. MAINE OXY-ACETYLENE SUPPLY COMPANY

UNITED STATES DISTRICT COURT

DISTRICT OF MAINE

MARTIN J. WALSH1, Secretary of )

Labor )

)

Plaintiff, )

) Docket No. 2:20-cv-00326-NT

v. )

)

MAINE OXY-ACETYLENE SUPPLY )

COMPANY, et al., )

)

Defendants. )

ORDER ON DEFENDANT CARL PAINE’S MOTION TO DISMISS

Before me is Defendant Carl Paine’s motion to dismiss the Complaint pursuant

to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim

upon which relief can be granted. (“Def.’s Mot.”) (ECF No. 35). For the reasons stated

below, the motion to dismiss is DENIED. Because I do not find it necessary to the

disposition of this motion, the Secretary’s request for oral argument is also DENIED.

BACKGROUND2

This case concerns a dispute surrounding an employee stock ownership plan

(“ESOP”) at Defendant Maine Oxy-Acetylene Supply Company (“Maine Oxy” or the

1 Pursuant to Federal Rule of Civil Procedure 25(d), Secretary of Labor Martin J. Walsh has

been substituted for former Secretary of Labor Eugene Scalia as the plaintiff in this action.

2 This factual background is drawn primarily from the allegations in the Complaint, which I

take as true at this stage. Justiniano v. Walker, 986 F.3d 11, 19 (1st Cir. 2021). I also draw on facts

from documents that are “expressly incorporated into,” “sufficiently referred to,” or “central to” the

Complaint. See Foley v. Wells Fargo Bank, N.A., 772 F.3d 63, 72, 74–75 (1st Cir. 2014).

“company”), a New England supplier of welding equipment and industrial and

specialty gases. Compl. ¶¶ 2, 7 (ECF No. 1). In 2004, Maine Oxy established the

ESOP to allow employees “to share in the growth and profits of Maine Oxy and to

enable them to save and invest in accordance with the” ESOP. Compl. ¶ 6; Maine Oxy

ESOP Document (“ESOP Document”) § 1.2 (ECF No. 35-1). In March 2012,

Defendant Carl Paine (the “Defendant”) was appointed as the ESOP trustee, and

at some point in 2012, he also became a member of the Maine Oxy Board of Directors

(“BOD”). Compl. ¶¶ 13, 19.

In September 2012, Defendants Daniel Guerin and Bryan Gentry (the latter

through a trust) purchased 25,500 shares of Maine Oxy—securing a fifty-one percent

ownership interest in the company—for $654.62 per share (the “Private Sale”).

Compl. ¶¶ 2, 18. Both were members of the company’s BOD, while Mr. Guerin was

also the President and Chief Executive Officer of the company. Compl. ¶¶ 9–10.

In early 2013, Maine Oxy was subject to its annual valuation conducted by

Atlantic Management Company (“Atlantic”). Compl. ¶¶ 21, 23. At the time of this

valuation, Atlantic was already aware of the Private Sale, but Mr. Guerin and Maine

Oxy had required Atlantic to sign a non-disclosure agreement prohibiting it from

disclosing the details. Compl. ¶¶ 2, 14–15, 17, 21–22.

Atlantic used two methodologies to value Maine Oxy, Compl. ¶ 23, the

particulars of which are not relevant here. What is relevant, however, is that the

Secretary of Labor (the “Secretary”)—the plaintiff in this action—alleges that

neither methodology was appropriate under the circumstances and that these two

methodologies produced vastly different results. Compl. ¶ 23. Atlantic did not seek to

reconcile these results and merely took the average of the results of the two

methodologies to determine the fair market value of Maine Oxy. Compl. ¶ 23.

On April 25, 2013, Atlantic sent a draft valuation report to Mr. Paine and to

the company’s Chief Financial Officer (“CFO”) in which it valued Maine Oxy’s ESOP

share price at $134.92 per share. Compl. ¶ 24. On May 1, 2013, Atlantic sent the final

valuation report (the “Valuation”) to the CFO (but not to Mr. Paine), which

contained the same share price as in the draft report. Compl. ¶ 24. The Valuation

mentions the Private Sale and describes how “[p]rior sales of” Maine Oxy “common

stock can be an excellent indicator of value if the transactions occurred relatively

close to the valuation date and the prices paid for the shares were the result of arm’s

length negotiations.” Valuation Analysis 14, 35 (ECF No. 35-2). But because the

Private Sale was not an arm’s length transaction, Atlantic concluded without

elaboration that the private sale from September of 2012 was not a relevant factor in

its analysis. Valuation Analysis 35.

On October 16, 2013, the BOD voted to terminate the ESOP effective

November 1. Compl. ¶ 28. Maine Oxy then bought back the outstanding ESOP shares

for $134.92 per share (the “buyback”), the price in the Valuation. Compl. ¶ 29.

On September 15, 2020, the Secretary sued to void this buyback, alleging that

the Defendants breached their fiduciary obligations in allowing the buyback to

proceed as it did. Mr. Paine is the only defendant who has moved to dismiss the

Complaint. The Secretary alleges that Mr. Paine violated his fiduciary duties as

ESOP trustee and thereby violated § 404(a)(1)(A), (B), and D (29 U.S.C.

§ 1104(a)(1)(A), (B), (D)) (the “First Cause of Action”) and § 406(a)(1)(A) and (D) (29

U.S.C. § 1106(a)(1)(A), (D)) (the “Second Cause of Action”) of the Employee

Retirement Income Security Act (“ERISA”). Compl. ¶¶ 40–43, 49–54.

LEGAL STANDARD

“To withstand a Rule 12(b)(6) motion, a complaint must ‘contain sufficient

factual matter to state a claim to relief that is plausible on its face.’ ” Ríos-Campbell

v. U.S. Dep’t of Com., 927 F.3d 21, 24 (1st Cir. 2019) (quoting Haley v. City of Boston,

657 F.3d 39, 46 (1st Cir. 2011)). That “short and plain statement” need only “give the

defendant fair notice of what the claim is and the grounds upon which it rests.” Bell

Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations and alterations

omitted); see Skinner v. Switzer, 562 U.S. 521, 530 (2011) (complaint need not contain

“an exposition of [plaintiff’s] legal argument,” nor must it “pin plaintiff’s claim for

relief to a precise legal theory”).

To determine whether a complaint states a claim, courts in the First Circuit

follow a two-step analysis. First, the court must “isolate and ignore statements in the

complaint that simply offer legal labels and conclusions or merely rehash cause-of-

action elements.” Justiniano v. Walker, 986 F.3d 11, 19 (1st Cir. 2021) (quoting Zell

v. Ricci, 957 F.3d 1, 7 (1st Cir. 2020)). Then, taking all well-pleaded facts as true and

drawing all reasonable inferences in the plaintiff’s favor, the court must determine

whether the complaint “plausibly narrate[s] a claim for relief.” Id. (quoting Zell, 957

F.3d at 7). “Plausible, of course, means something more than merely possible,” and

the plausibility of a complaint is based on the context of the particular case, judicial

experience, and common sense. Id. (quoting Zell, 957 F.3d at 7). Although a plaintiff

need not establish a prima facie case of his or her claim at the pleading stage, “the

elements of a prima facie case may be used as a prism to shed light upon the

plausibility of the claim.” Rodríguez-Reyes v. Molina-Rodríguez, 711 F.3d 49, 54 (1st

Cir. 2013).

On a motion to dismiss, courts “usually consider only the complaint, documents

attached to it, and documents expressly incorporated into it.” Foley v. Wells Fargo

Bank, N.A., 772 F.3d 63, 72 (1st Cir. 2014). But in some circumstances, a court may

consider additional evidence, including documents where the authenticity is not

disputed, “documents central to” the plaintiff’s claim, or “documents sufficiently

referred to in the complaint.” Id. at 74 (quoting Watterson v. Page, 987 F.2d 1, 3 (1st

Cir. 1993)). If a court considers “matters outside the pleadings,” the motion must be

treated as one for summary judgment, and “[a]ll parties must be given a reasonable

opportunity to present all the material that is pertinent to the motion.” Fed. R. Civ.

P. 12(d).

DISCUSSION

I. Documents Outside the Pleadings

The Defendant attaches to his motion five exhibits. The Secretary agrees that

three are properly considered at the motion to dismiss stage—the ESOP Document

(Ex. A), the Valuation (Ex. B), and a tolling agreement (Ex. E)—because they are

fairly encompassed by the Complaint. Sec’y of Labor’s Opp’n to Def. Carl Paine’s Mot.

to Dismiss (“Pl.’s Opp’n”) 3 & n.4 (ECF No. 40). But the Secretary contends that the

remaining two (Exhibits C and D) at least partially go beyond the bounds of the

Complaint and are not properly considered. Pl’s Opp’n 3–4. Exhibit C is an earlier

Atlantic valuation of Maine Oxy from 2011, and the Secretary contends that because

it is neither referenced in the Complaint nor is central to the Secretary’s claims, it

should be excluded. Pl.’s Opp’n 3.

As for Exhibit D, the Secretary contends that this exhibit is a collection of

pages/documents. Pl.’s Opp’n 3. And while the Secretary does not take issue with five

of these pages—an August 1, 2013, ESOP Distribution Policy Statement, and the

Revised Second and Third Amendments to the ESOP—he objects to my consideration

of three pages that purport to reflect the adoption of the amendments to the ESOP

by “unanimous written consent” of the BOD. Pl.’s Opp’n 3–4 & n.5. The last of these

three pages is distinct from the first two in that it contains a fax header that the first

two pages lack.3 Pl.’s Opp’n 4.

The Defendant contends that these disputed pages prove that he was not a

member of the BOD at the time the ESOP was dissolved. Def. Carl Paine’s Reply to

Sec’y of Labor’s Opp’n to Def. Carl Paine’s Mot. to Dismiss (“Def.’s Reply”) 7 (ECF

No. 43). The Secretary challenges the authenticity of these three pages of Exhibit D

and argues that they should be excluded. Pl.’s Opp’n 4. In reply, the Defendant offers

3 That last page is also marked as page five of the original fax, Sec’y of Labor’s Opp’n to Def.

Carl Paine’s Mot. to Dismiss 4 (ECF No. 40), but the Defendant does not appear to have submitted the

first four pages of that fax.

no justification for the admission of these pages and instead asks for the motion to

dismiss to be converted into a motion for summary judgment.4 Def.’s Reply 7.

Exhibit C and the disputed pages of Exhibit D do not fall within any of the

limited exceptions outlined in Foley and are not properly considered at the motion to

dismiss stage. The Secretary’s request to exclude Exhibit C and the disputed pages

of Exhibit D is therefore GRANTED. As is explained in greater detail below, I also

DENY the Defendant’s request for limited discovery and conversion to a motion for

summary judgment.

II. The First Cause of Action (ERISA § 404)

Section 404(a)(1)(A) requires that an ESOP fiduciary act “for the exclusive

purpose of . . . providing benefits to participants and their beneficiaries.” 29 U.S.C.

§ 1104(a)(1)(A)(i). Section 404(a)(1)(B) requires a fiduciary to act “with the care, skill,

prudence, and diligence under the circumstances then prevailing that a prudent man

acting in a like capacity and familiar with such matters would use in the conduct of

an enterprise of a like character and with like aims.” Id. § 1104(a)(1)(B). Section

404(a)(1)(D) requires a fiduciary to act “in accordance with the documents and

instruments governing the” ESOP, to the extent they are consistent with ERISA. Id.

§ 1104(a)(1)(D).

4 The Defendant also requests that he be permitted to engage in limited discovery. Def. Carl

Paine’s Reply to Sec’y of Labor’s Opp’n to Def. Carl Paine’s Mot. to Dismiss 7 (ECF No. 43). Because I

deny the request to convert the motion into a motion for summary judgment, I also reject this discovery

request.

The Secretary alleges six breaches of Mr. Paine’s fiduciary duties:

 Failing to perform a good faith investigation of Maine Oxy’s value, including

failing to review and question Atlantic’s methods and conclusions;

 Failing to address inconsistencies in the Valuation;

 Relying on the Valuation, even though he knew or should have known that it

was flawed and incomplete;

 Causing the ESOP to receive significantly less than fair market value in the

buyback;

 Failing to assess how the Private Sale might have affected the Valuation; and

 Failing to consider whether the Valuation reflected the fair market value of

the ESOP shares at the time of the buyback and, if appropriate, to negotiate

on behalf of the ESOP participants.

Compl. ¶ 41.

The Defendant argues that the First Cause of Action is legally flawed because:

(1) Mr. Paine’s “acceptance” of the Valuation in May 2013 is outside the six-year

statute of limitations and any breach associated with that acceptance is time barred,

and (2) “the remaining allegations regarding the use of the 2012 Valuation in

connection with the [buyback] are not based on fiduciary acts by Mr. Paine” and thus

cannot serve as the basis for a breach of fiduciary duty claim. Def.’s Mot. 8.

The Secretary disputes the Defendant’s premise that Mr. Paine’s involvement

with the Valuation was a singular event ending on May 1, 2013. Pl.’s Opp’n 12–18.

The gravamen of the Secretary’s opposition is that because Mr. Paine’s alleged

fiduciary breaches are properly characterized as breaches by omission, the statute of

limitations began to run on the last date on which he could have cured the alleged

breach, which, the Secretary contends, was when the buyback was complete. Pl.’s

Opp’n 17–18. That is, the Secretary argues that Mr. Paine was dutybound to

investigate the validity of the Valuation and that that obligation continued until his

duties as trustee ceased when the ESOP was dissolved. In reply, Mr. Paine contends

that this breach by omission theory is not supported by the Secretary’s allegations in

the Complaint. Def.’s Reply 1–5.

ERISA fiduciary breaches under § 404 have a six-year statute of limitations,

which runs from “the date of the last action which constituted a part of the breach or

violation,” or “in the case of an omission the latest date on which the fiduciary could

have cured the breach or violation.” 29 U.S.C. § 1113. Although the Complaint was

not filed until September 15, 2020, the parties entered into a tolling agreement, such

that the statute of limitations was tolled as of October 11, 2019. Tolling Agreement

(ECF No. 35-5). Thus, to be timely, the First Cause of Action needed to accrue by

October 11, 2013.

The Defendant argues that “the Secretary alleges that Mr. Paine breached his

fiduciary duty by improperly accepting” the Valuation, “which was finalized on May

1, 2013.” Def.’s Mot. 9 (citing Compl. ¶¶ 24, 41). This mischaracterizes the Complaint

and improperly seeks to reframe the First Cause of Action. The Defendant treats the

“acceptance” of the Valuation as a singular event, but there is no indication that it

was. Nothing in the Complaint indicates that Mr. Paine—or anyone at Maine Oxy—

was supposed to do—or actually did—anything to “accept” the Valuation. In fact,

although Mr. Paine references the May 1, 2013, date when Atlantic sent the

Valuation to the CFO, the Complaint alleges that this Valuation was not even sent

to Mr. Paine on that date. Compl. ¶ 24.

Although the Defendant claims that the Secretary has shifted his theory in

response to Mr. Paine’s motion to dismiss, the Complaint quite clearly alleges that

Mr. Paine had continuing duties as the trustee of the ESOP and that he breached his

duties by omission. Compl. ¶ 41(a) (failure to perform an investigation of Maine Oxy’s

value; failure to question Atlantic’s assumptions, conclusions, and methods; and

failure to adequately review and question Atlantic’s dismissal of the Private Sale);

¶ 41(b) (failure to address inconsistencies in the Valuation); ¶ 41(e) (failure to gain

an understanding of how the Private Sale might have affected the Valuation); ¶ 41(f)

(failure to consider whether Valuation reflected fair market value).

The Complaint also clearly alleges that Mr. Paine had reason to question the

Valuation and that he had a fiduciary duty to do so. Not only did that duty not end

on May 1 when the Valuation was completed, but it might not have even been

triggered until then. Mr. Paine almost certainly could not have challenged Atlantic’s

valuation before the draft was completed on April 25. It strains credulity to suggest

that Mr. Paine had a mere six-day window to challenge Atlantic’s valuation, forever

losing his ability to do so once the report was finalized and sent out on May 1.

The argument that there was a limited window for review is further undercut

by the ESOP document and the duties that it bestows on the ESOP trustee. Section

13.1 of the ESOP document says that the ESOP assets are “held in trust by the

Trustee,” and Mr. Paine’s duties as trustee would have extended until the Trust was

terminated, which would have been no sooner than November 1, 2013. Compl. ¶¶ 28–

30; ESOP Document § 13.1.5 That means that Mr. Paine’s fiduciary duties continued

until that date, which is within the tolled statute of limitations. And one of Mr.

Paine’s duties as trustee was the duty to ensure that the ESOP was accurately

valued. See ESOP Document § 13.3 (“The assets of the Trust Fund shall be valued at

their fair market value annually by the Trustee . . . .”); Donovan v. Bierwirth, 680

F.2d 263, 273–74 (2d Cir. 1982) (holding that trustees failed to fulfill fiduciary duty

by failing to do a more thorough job in ascertaining the facts surrounding the

financial condition of pension funds).

The Secretary alleges that there were multiple red flags in the Valuation that

should have triggered greater scrutiny by Mr. Paine in his role as trustee. Those

purported red flags would have continued to exist—and that scrutiny would have

remained necessary—beyond May, when the Valuation was finalized by Atlantic, and

through October 2013, when the Valuation was used to set the price of the shares for

the buyback.

5 The specific termination date of the trust is not clear. On October 16, 2013, the Maine Oxy-

Acetylene Supply Company (“Maine Oxy”) board of directors (“BOD”) voted to terminate the

employee stock ownership plan (“ESOP”) effective November 1. And the ESOP document says that

the trust “terminate[s] upon delivery to the Trustee of a notice . . . specifying the date as of which the

Plan, or the Plan and the Trust, shall terminate.” Maine Oxy ESOP Document § 14.3 (ECF No. 35-1).

That date would have been November 1. On the other hand, the ESOP Trust Agreement says that if

the ESOP is terminated, the trust does not terminate until all assets from the trust fund are

distributed. Maine Oxy ESOP Trust Agreement § 8.2 (ECF No. 40-1). The Complaint alleges that “all

ESOP assets were distributed by the end of December 2013.” Compl. ¶ 30 (ECF No. 1). At bottom,

these distinctions do not matter, since the trust need only have terminated after October 11 for the

Complaint’s First Cause of Action to be within the statute of limitations period.

Mr. Paine’s second argument as to why the First Cause of Action should be

dismissed fares no better. He contends that subsequent amendments to the ESOP,

which provided that the ESOP would be terminated and which established that the

Maine Oxy stock would be repurchased at fair market value as determined by the

Valuation, were decisions made by the ESOP settlor and that he had “no role” in these

decisions. Def.’s Mot. 9–12. While that may be true, it is not fatal to the First Cause

of Action, because the Complaint is alleging not that Mr. Paine breached his duty by

deciding to terminate the ESOP but that he breached his fiduciary duty of ensuring

that the Plan was valued at fair market value. Compl. ¶ 35 (“While the decision to

terminate the ESOP was a settlor function, Trustee Paine should have carried out

his fiduciary duties to ensure the Plan was properly terminated and the shares were

repurchased at fair market value.”).

The Secretary has alleged sufficient factual matter to state a claim for relief

that is plausible on its face that Mr. Paine violated his fiduciary duties under ERISA

§ 404, and therefore the Defendant’s motion to dismiss the First Cause of Action is

DENIED.

III. The Second Cause of Action (ERISA § 406)

The Secretary also alleges that Mr. Paine has violated ERISA § 406(a)(1)(A)

and (D) (29 U.S.C. § 1106(a)(1)(A), (D)), which prohibit (with limited exceptions) an

ESOP fiduciary from “caus[ing] the plan to engage in” certain transactions between

the plan and an interested party (a “prohibited transaction”).6 The Secretary

alleges that:

By causing the ESOP to sell Maine Oxy stock in connection with the

[buyback], Paine:

a. caused the ESOP to engage in transactions that it knew or

should have known constituted the direct or indirect sale or

exchange, or leasing, of any property between the plan and

parties in interest, in violation of ERISA § 406(a)(1)(A), 29 U.S.C.

§ 1106(a)(1)(A); and

(b) caused the ESOP to engage in transactions that it knew or

should have known constituted direct or indirect transfers of the

ESOP’s assets to, or use of the ESOP’s assets by or for the benefit

of, parties in interest, in violation of ERISA § 406(a)(1)(D), 29

U.S.C. § 1106(a)(1)(D).

Compl. ¶ 52.

Mr. Paine argues that the Second Cause of Action must be dismissed because

he did not “cause” the buyback. He contends that the buyback was caused only by the

BOD’s termination of the ESOP and that he had no role in that decision. Def.’s Mot.

6 The full text of § 1106(a)(1)(A) and (D) is as follows:

(a) Transactions between plan and party in interest

Except as provided in section 1108 of this title:

(1) A fiduciary with respect to a plan shall not cause the plan to engage in a transaction,

if he knows or should know that such transaction constitutes a direct or indirect—

(A) sale or exchange, or leasing, of any property between the plan and a party in

interest; . . . [or]

(D) transfer to, or use by or for the benefit of a party in interest, of any assets of the

plan . . . .

Section 1108(e) grants an exemption for some sales where “adequate consideration” is paid. 29 U.S.C.

§ 1108(e)(1).

12–13. In response, the Secretary points to his allegation that Mr. Paine was a

member of the BOD. Pl.’s Opp’n 24 (citing Compl. ¶ 8). Indeed, the Complaint, alleges

that Mr. Paine was a member of the BOD “[a]t all relevant times,” Compl. ¶ 8, and

the Valuation lists six members of the BOD, including Mr. Paine, Valuation Analysis

13.7 Mr. Paine tries to challenge these allegations by introducing additional evidence

into the record, but, as I explained above, this evidence is not appropriately

considered at the motion to dismiss stage, and I have excluded it.

At this stage of the proceedings, I must accept all of the facts alleged in the

Complaint as true, and I must draw all reasonable inferences in favor of the

Secretary. Accordingly, I accept as true that Mr. Paine was a member of the BOD at

the time the BOD voted to authorize the buyback, and I infer that, in his capacity as

a member of the BOD, Mr. Paine “caused,” in some manner, the buyback to happen.

This is sufficient to allege a violation of § 406.

The Defendant asks that I convert his motion to dismiss into a motion for

summary judgment and allow limited discovery on the issue of whether Mr. Paine

was actually on the BOD at the time the decisions were made to terminate the ESOP

and repurchase the stock. However, in his opposition, the Secretary offers a second

basis for how Mr. Paine allegedly “caused” the buyback. In addition to asserting that

Mr. Paine caused the prohibited transaction because of his role as a member of the

BOD, the Complaint alleges that Mr. Paine caused the prohibited transaction in his

7 The 2012 valuation report says that Maine Oxy had five members of its BOD but then goes on

to list six. Valuation Analysis 13 (ECF No. 35-2). I assume the reference to “five” members is a

typographical error.

capacity as trustee because the buyback occurred at a price that was less than

“adequate consideration” and that Mr. Paine “fail[ed] to conduct a prudent and good

faith investigation of the 2012 Valuation.” Pl.’s Opp’n 20–21, 23–24; Compl. ¶ 54. The

Secretary contends that “[i]t was the failure to sell the shares for adequate

consideration that caused the Plan to enter into a prohibited transaction, not the

decision to terminate the Plan.” Pl.’s Opp’n 25.

Mr. Paine appears to be arguing that he was not a cause in fact (i.e., a “but for”

cause) of the prohibited transaction, while the Secretary responds with an argument

as to why he contends Mr. Paine proximately caused the prohibited transaction. I

recognize that Mr. Paine disputes the allegation that he was on the BOD at the time

the buyback was authorized and that this dispute could likely be resolved with

limited discovery. I deny this request because it seems to me that the Secretary’s

theory that Mr. Paine is liable as trustee under § 406 would benefit from further

development, and the Secretary has made sufficient allegations to be entitled to

progress to the next stage of this litigation.

While it is not completely clear to me at this point whether or how Mr. Paine’s

alleged failure to investigate the Valuation “caused” the ESOP to engage in a

prohibited transaction—particularly in terms of “but for” causation—I can conceive

of a situation where a failure by a fiduciary to assure an adequate valuation could set

in motion the sale of shares by plan participants to interested parties at less than fair

market value. Whether that would be sufficient to constitute causation under § 406

has not been adequately briefed by the parties, see Pizzella v. Vinoskey, 409 F. Supp.

3d 473, 520–21 (W.D. Va. 2019) (discussing proximate causation standard under

§§ 404 and 406); Lysengen ex rel. Morton Bldgs., Inc. Leverage Emp. Stock Ownership

Plan v. Argent Tr. Co., 498 F. Supp. 3d 1011, 1021 (C.D. Ill. 2020) (allowing § 406

claim against ESOP trustee to survive motion to dismiss where plaintiff sufficiently

alleged that ESOP participants paid more than fair market value); cf. Harris Tr. &

Sav. Bank v. Salomon Smith Barney, Inc., 530 U.S. 238, 245 (2000) (“[Section] 406(a)

imposes a duty only on the fiduciary that causes the plan to engage in the

transaction.”).

Because the Secretary’s theory about Mr. Paine’s liability under § 406 in his

capacity as trustee would benefit from further factual development and more fulsome

briefing, I deny the Defendant’s request to convert his motion to one for summary

judgment. The Defendant’s motion to dismiss the Second Cause of Action is DENIED.

CONCLUSION

For the reasons stated above, the Court DENIES the Defendant’s motion to

dismiss.

SO ORDERED.

/s/ Nancy Torresen

United States District Judge

Dated this 21st day of June, 2021.