Reetz v. Lowe's Companies, Inc.

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF NORTH CAROLINA

STATESVILLE DIVISION

CIVIL ACTION NO. 5:18-CV-00075-KDB-DCK

BENJAMIN REETZ, )

)

Plaintiff, )

)

v. )

)

LOWE'S COMPANIES, INC., ) ORDER

JOHN AND JANE DOES, )

ADMINISTRATIVE COMMITTEE OF )

LOWE'S COMPANIES, INC., AND )

AON HEWITT INVESTMENT )

CONSULTING, INC., )

)

Defendants. )

)

THIS MATTER IS BEFORE THE COURT on Defendants Lowe’s Companies, Inc.’s

(“Lowe’s”) and Administrative Committee of Lowe’s Companies, Inc.’s (“Lowe’s Committee”)

(together the “Lowe’s Defendants”) Motion to Dismiss the Complaint (Doc. No. 38), the

Honorable Magistrate Judge David C. Keesler’s Memorandum and Recommendation (“M&R”)

(Doc. No. 54), recommending that the Motion be denied, and the Lowe’s Defendants’ Objection

to the M&R (Doc. No. 55). The Court has carefully reviewed and considered de novo the M&R,

Plaintiff Benjamin Reetz’s Complaint, Lowe’s Defendants’ Motion, the parties’ briefs and all

other relevant portions of the record. For the reasons expressed herein, the Court ADOPTS the

recommendations contained in the M&R as discussed below and GRANTS IN PART and

DENIES IN PART Lowe’s motion.

I. BACKGROUND

This is a putative class action in which Plaintiff alleges that the Lowe’s Defendants, John

and Jane Does 1-20 (the unnamed members of the Lowe’s Committee during the alleged class

period), and Aon Hewitt Investment Consulting, Inc. (“Aon Hewitt”) (collectively,

“Defendants”) breached their fiduciary duties under the Employment Retirement Income

Security Act (“ERISA”) by removing certain investment options from Lowe’s 401(k) retirement

plan (the “Plan”) and replacing them with an option to invest in a growth fund established and

managed by Aon Hewitt (“Hewitt Growth Fund”). Specifically, the Complaint alleges two

causes of action: (1) Breach of Duties of Loyalty and Prudence under 29 U.S.C § 1104 (“Breach

of Fiduciary Duty”) against all Defendants and (2) Failure to Monitor Fiduciaries against

Lowe’s. (Complaint, Doc. No. 1, at ¶¶ 72-93.) The class sought to be certified is defined to

include “[a]ll participants and beneficiaries of the Lowe’s 401(k) Plan whose account balances

were invested in the Hewitt Growth Fund at any time on or after October 1, 2015 … .” (Id. at ¶

64.)

Lowe’s employees are permitted to contribute a portion of their salary into the Plan on a

tax-favored basis. As of December 2016 (the most recent year information was publicly

available at the time of the Complaint in April 2018), the Plan had more than 250,000

participants and held approximately $5.3 billion in retirement assets, consisting of approximately

$2.65 billion in Lowe’s stock and approximately $2.61 billion in investment funds. (Id. at ¶ 24.)

The Plan is governed by a written document, which is attached as Exhibit A to the Motion to

Dismiss (the “Plan Document”). The Plan Document provides that an Administrative

Committee made up of fiduciaries appointed by Lowe’s has the “authority to control and manage

the operation and administration of the [P]lan.” At a hearing before the Magistrate Judge related

to the Motion, Lowe’s admitted that all members of the Administrative Committee are employed

by Lowe’s.

Plaintiff’s claims are premised on allegations that Aon Hewitt, the appointed investment

consultant for the Plan, convinced Lowe’s to remove eight of the Plan’s existing investment

options and transfer the funds that had been invested therein into the Hewitt Growth Fund. (Id.

at ¶¶ 38-61.) The Hewitt Growth Fund is a “fund of funds” investment product first introduced

to the market by Aon Hewitt 2013. Lowe’s transferred over $1 billion of Plan assets into the

Hewitt Growth Fund in 2015, which amounted to nearly half of the Plan’s assets other than

Lowe’s stock. (Id. at ¶ 40.) The Complaint alleges that a “prudent fiduciary acting in the best

interest of Plan participants would not have undertaken this restructuring and transferred the

Plan’s assets.” (Id. at ¶ 41.)

Plaintiff also alleges that the failure to replace the Hewitt Growth Fund in light of its

alleged “continued underperformance and unpopularity” constitutes a separate and continuing

breach of fiduciary obligations under ERISA. (Id. at ¶ 58.) Plaintiff contends that since the

initial transfer, the Hewitt Growth Fund has performed “so poorly that the Plan already has

suffered $100 million in investment losses” when its gains are compared to the returns earned by

the eight replaced investment options. Specifically, Plaintiff alleges that the Hewitt Growth

Fund has earned an 11.99% return, while the eight replaced investment options earned a

“collective weighted return of 16.15%.” (Id. at ¶¶ 56–57.)

II. LEGAL STANDARD

Under Federal Rule of Civil Procedure 8(a)(2), 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).

However, “Rule 8(a)(2) still requires a ‘showing,’ rather than a blanket assertion, of entitlement

to relief.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, n.3 (2007).

The purpose of a motion to dismiss under Rule 12(b)(6) is to test the legal sufficiency of

the complaint, not to resolve conflicts of fact or to decide the merits of the action. Edwards v.

City of Goldsboro, 178 F.3d 231, 243–44 (4th Cir. 1999). In considering a motion to dismiss,

the court assumes the truth of all facts alleged in the complaint and the existence of any fact that

can be proved, consistent with the complaint's allegations. Erickson v. Pardus, 551 U.S. 89, 94

(2007). “The issue is not whether a plaintiff will ultimately prevail but whether the claimant is

entitled to offer evidence to support the claims.” Revene v. Charles County Comm'rs, 882 F.2d

870, 872 (4th Cir. 1989) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

However, the “‘[f]actual allegations must be enough to raise a right to relief above the

speculative level’ and have ‘enough facts to state a claim to relief that is plausible on its face.’”

Wahi v. Charleston Area Med. Ctr., Inc., 562 F.3d 599, 616 n.26 (4th Cir. 2009) (quoting

Twombly, 550 U.S. at 555); Ashcroft v. Iqbal, 556 U.S. 662 (2009) (“While legal conclusions can

provide the framework of a complaint, they must be supported by factual allegations.”). “[A]

plaintiff's obligation to provide the grounds of his entitle[ment] to relief requires more than

labels and conclusions, and a formulaic recitation of a cause of action's elements will not do.”

Twombly, 550 U.S. at 555 (citations omitted). Moreover, a court “need not accept the legal

conclusions drawn from the facts” nor “accept as true unwarranted inferences, unreasonable

conclusions, or arguments.” Eastern Shore Mkts., Inc. v. J.D. Assocs. Ltd. Pshp., 213 F.3d 175,

180 (4th Cir. 2000).

The Federal Magistrates Act of 1979, as amended, provides that “a district court shall

make a de novo determination of those portions of the report or specific proposed findings

or recommendations to which objection is made.” 28 U.S.C. § 636(b)(1); Camby v. Davis, 718

F.2d 198, 200 (4th Cir. 1983). However, de novo review is not required by the statute “when a

party makes general or conclusory objections that do not direct the court to a specific error in the

magistrate judge's proposed findings and recommendations.” Orpiano v. Johnson, 687 F.2d 44,

47 (4th Cir. 1982). Moreover, the statute does not on its face require any review at all of issues

that are not the subject of an objection. Thomas v. Arn, 474 U.S. 140, 149 (1985); Camby v.

Davis, 718 F.2d at 200.

III. DISCUSSION

The Lowe’s Defendants have asserted the following objections to the M&R:

(i) Applying a “relaxed pleading standard” derived from an Eighth Circuit opinion

that has not been adopted by the Fourth Circuit (and failing to account for a later

Eighth Circuit opinion informing the same issue);

(ii) Finding that Lowe’s had any fiduciary duty for selecting or monitoring

investment choices;

(iii) Finding that Reetz stated a claim for breach of loyalty, despite not pleading that

Lowe’s intended to benefit Aon Hewitt or itself when choosing the Hewitt

Growth Fund;

(iv) Finding that Reetz stated a claim for breach of duty of prudence, despite not

pleading a deficient process for selecting and monitoring investment choices;

(v) Finding that Reetz stated a claim for breach of duty to monitor fiduciaries, despite

the Plan Document providing that the Committee, not Lowe’s, has sole authority

to appoint Aon Hewitt;

(vi) Finding that Reetz stated a claim for co-fiduciary liability against Lowe’s, despite

merely reciting the elements as stated in the statute.

Each objection is discussed in turn.

A. Appropriate Pleading Standard for ERISA Claims

Rule 8 applies to pleadings for all ERISA actions. To state a viable claim under ERISA,

the complaint must contain sufficient factual allegations as compared to mere legal conclusions.

See Custer v. Sweeney, 89 F.3d 1156, 1163 (4th Cir. 1996) (affirming dismissal of ERISA

complaint that “lacked any specific factual allegations” to support the assertion that the

defendant was a de facto fiduciary of the plan).

In applying the Rule 8 standard to ERISA cases, plaintiffs adequately state a claim for

breach of fiduciary duty under ERISA statutes when the complaint, taken as a whole, “pleads

facts indirectly showing unlawful behavior, so long as the facts pled give the defendant fair

notice of what the claim is and the grounds upon which it rests . . . and allow the court to draw

the reasonable inference that the plaintiff is entitled to relief.” Braden v. Wal-Mart Stores, Inc.,

588 F.3d 585, 598 (8th Cir. 2009) (citations omitted). In Braden, the Eighth Circuit reversed the

district court’s grant of a motion to dismiss breach of fiduciary duty claims, finding that the court

improperly faulted the complaint for making “no allegations regarding the fiduciaries'

conduct.” Id. The Eighth Circuit also noted the remedial purpose of ERISA, explaining that

while a plaintiff must offer sufficient factual allegations to show that he or she is

not merely engaged in a fishing expedition or strike suit, we must also take account

of their limited access to crucial information. . . . These considerations counsel

careful and holistic evaluation of an ERISA complaint's factual allegations before

concluding that they do not support a plausible inference that the plaintiff is entitled

to relief.

Id. at 595.

In its Objection, the Lowe’s Defendants contend that the Magistrate improperly applied

Braden to create a lower pleading standard for ERISA cases.1 (Doc. No. 55, at 6.) However,

Braden does not create a lower pleading standard for ERISA cases. See, e.g., Ashcroft v.

Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (explaining that a complaint

1 Lowe’s also argues that the Magistrate failed to account for Meiners v. Wells Fargo & Co., 898

F.3d 820, 823 (8th Cir. 2018), in which the Eighth Circuit affirmed dismissal of an ERISA action

on a 12(b)(6) motion. In Meiners, a case premised on alleged underperformance of funds, the

Eighth Circuit affirmed dismissal of a claim for breach of duty of prudence based on the

complaint’s “omission of any meaningful benchmark.” In Meiners, the complaint, “[t]aken as a

whole, [ ] merely support[ed] an inference that Wells Fargo continued to invest in affiliated

target date funds when its rate of return was lower than Vanguard, which had a different

investment strategy, and that was more expensive than Vanguard and Fidelity funds.” Id. at 824.

Here, Lowe’s does not make such an argument.

states a plausible claim for relief if its “factual content . . . allows the court to draw the

reasonable inference that the defendant is liable for the misconduct alleged”). Rather, Braden

simply stands for the proposition that courts should draw all reasonable inferences from the

totality of the allegations, and not dismiss ERISA claims because the complaint fails to allege all

the specifics of the conduct that leads to the breach of fiduciary duty. In any event,

notwithstanding the Magistrate Judge’s citation of Braden, the Court has undertaken a careful

and holistic evaluation of the Complaint as a whole in accordance with Iqbal and Twombly.

B. Lowe’s Status as a Fiduciary.

The Lowe’s Defendants argue that Lowe’s was not a fiduciary in the context of the

conduct Plaintiff claims to be wrongful. To state a claim for breach of fiduciary duty under

ERISA, the threshold question is whether the plaintiff has sufficiently alleged that the defendant

was a “fiduciary.” Moon v. BWX Techs., Inc., 577 F. App'x 224, 229 (4th Cir. 2014) (citing

Coleman v. Nationwide Life Ins. Co., 969 F.2d 54, 60–61 (4th Cir. 1992) (“Before one can

conclude that a fiduciary duty has been violated, it must be established that the party charged

with the breach meets the statutory definition of ‘fiduciary.’”)). Under ERISA, a person is a

fiduciary to a plan to the extent that he “(1) ‘exercises any discretionary authority or

discretionary control respecting management of such plan or its assets,’ (2) ‘renders investment

advice for a fee or other compensation,’ or (3) ‘has any discretionary authority or discretionary

responsibility in the administration of such plan.’” Pender v. Bank of Am. Corp., 788 F.3d 354,

362 (4th Cir. 2015) (citing ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A)).

Summarizing the statutory definition of “fiduciary,” the Fourth Circuit has observed that

an ERISA fiduciary is “any individual who de facto performs specified discretionary functions

with respect to the management, assets, or administration of a plan.” Custer v. Sweeney, 89 F.3d

1156, 1161 (4th Cir. 1996). However, “[s]imply because an employer is an ERISA plan sponsor

does not automatically convert the employer into a plan fiduciary.” Moon, 577 F. App’x at

229 (citing Beck v. PACE Int'l Union, 551 U.S. 96, 101 (2007)). A plan sponsor does not act as

a fiduciary simply “by performing settlor-type functions such as establishing a plan and

designing its benefits.” Sonoco Prod. Co. v. Physicians Health Plan, Inc., 338 F.3d 366, 373

(4th Cir. 2003) (quoting Coyne & Delany Co. v. Selman, 98 F.3d 1457, 1465 (4th Cir. 1996)).

Thus, the Court must “examine the conduct at issue when determining whether an

individual is an ERISA fiduciary.” Wilmington Shipping Co. v. New England Life Ins. Co., 496

F.3d 326, 343 (4th Cir. 2007) (internal quotation marks omitted). Because the inquiry ultimately

focuses on functional control rather than the rigid application of technical formalities, “an

individual or entity can still be found liable as a ‘de facto’ fiduciary if it lacks formal power to

control or manage a plan yet exercises informally the requisite ‘discretionary control’ over plan

management and administration.” Wright v. Or. Metallurgical Corp., 360 F.3d 1090, 1101–02

(9th Cir. 2004).

In the Complaint, Plaintiff alleges that Lowe’s “exercises discretionary authority or

discretionary control with respect to administration of the Plan and management and disposition

of Plan assets.” (Complaint (Doc. No. 1), at ¶ 18.) He further alleges that Lowe’s “retains

ultimate decision-making authority with respect to the Plan, and appoints and has the authority to

remove members of the Administrative Committee through its board of directors.” (Id.) On this

basis, he contends he has adequately alleged that Lowe’s is a fiduciary with regard to selection

and monitoring of Plan investments.

Lowe’s argues that it is not a fiduciary with respect to the selection or monitoring of the

Hewitt Growth Fund based on the fact that Lowe’s “is not a named fiduciary,” and the Plan

Document affirmatively “confers the Administrative Committee with fiduciary responsibility for

making investment decisions for the Plan.” (Doc. No. 55, at 9.)

Lowe’s does not provide any citation to analogous case law in support of its argument.

In contrast, Plaintiff cites an opinion from this district finding that it was premature to dismiss

ERISA claims against a defendant identified in the pleadings as a plan administrator, despite a

dispute about the fiduciary status of the defendant vis-à-vis the benefit plan. See Worsley v.

Aetna Life Ins. Co., No. 3:07CV500RJC, 2009 WL 1794430, at *5 (W.D.N.C. June 23, 2009).

This decision is in line with other cases within the district considering ERISA claims. See

Parker v. Kraft Foods Global, Inc., No. 3:07-cv-87, 2008 U.S. Dist. LEXIS 87751, 2008 WL

4447005 at* 16 (W.D.N.C. Sept. 26, 2008) (considering whether to dismiss ERISA claim against

defendant and holding that “[w]hether Plaintiff will be able to show, either from the

administrative record or from other admissible evidence that [requisite] control actually existed

is an issue to be addressed at a different stage of this proceeding.”).

Because the Fourth Circuit has expressly stated that a fiduciary may either be formally

designated or exist by nature of de facto performance, Custer, 89 F.3d at 1161, the Plan

Document is not dispositive of Lowe’s status as a Plan fiduciary. Further, the Court agrees with

prior decisions in this district that whether Plaintiff will be able to show the requisite degree of

control over the Plan is a question to be addressed at later stages of this action. Therefore, the

Court will not dismiss Count I on the grounds that Plaintiff failed to adequately plead that

Lowe’s is a de facto fiduciary of the Plan.

C. Adequacy of Plaintiff’s Allegations Regarding Breach of Duty of Loyalty

ERISA fiduciaries must “scrupulously adhere to a duty of loyalty, and make any

decisions in a fiduciary capacity with an eye single to the interests of the participants and

beneficiaries.” DiFelice v. U.S. Airways, Inc., 497 F.3d 410, 418–19 (4th Cir. 2007) (quotation

omitted). To state a claim for breach of loyalty, “a plaintiff must allege facts that permit a

plausible inference that the defendant ‘engag[ed] in transactions involving self-dealing or

otherwise involve or create a conflict between the trustee's fiduciary duties and personal

interests.’” Sacerdote v. New York Univ., No. 16-CV-6284 (KBF), 2017 WL 3701482, at *5

(S.D.N.Y. Aug. 25, 2017), reconsideration denied, No. 16-CV-6284 (KBF), 2017 WL 4736740

(S.D.N.Y. Oct. 19, 2017) (alteration in original) (quoting Restatement (Third) of Trusts § 78

(2007)).

The Complaint, read as a whole, establishes that Lowe’s replaced eight investment

options with the Hewitt Growth Fund in 2015. The Hewitt Growth Fund was a new fund that

had less than two years of performance history, and Lowe’s had an established working

relationship with Aon Hewitt, which included Aon Hewitt providing advice on executive

compensation (which permits an inference that Lowe’s executives may have wanted to curry

favor with Aon Hewitt). At the time of its selection, the Hewitt Growth Fund allegedly had

reported a return of -0.67% and was underperforming its stated benchmarks. The Complaint

further alleges that Lowe’s “should have recognized that Hewitt had a conflict of interest in

recommending [the Hewitt Growth Fund] for the Plan.” While the Complaint does not

specifically allege that Aon Hewitt recommended the Hewitt Growth Fund to Lowe’s, it states

that such an inference is reasonable.

The Court agrees with Plaintiffs that this claim should be allowed to proceed at this early

stage of the litigation. Assuming the factual allegations to be true along with all permissible

inferences, the Complaint states a plausible case that the Lowe’s Defendants breached their duty

of loyalty; that is, they acted other than in the sole best interests of the Plan participants in

selecting and retaining the Hewitt Growth Fund.

D. Adequacy of Plaintiff’s Allegations Regarding Breach of Duty of Prudence

The duty of prudence requires ERISA fiduciaries 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.” 29 U.S.C. § 1104(a)(1)(B). In considering a breach of duty of

prudence claim, the court focuses on the decision-making process and how a prudent decision

maker would act in light of the information available to the fiduciary at the time he or she makes

a decision. DiFelice v. U.S. Airways, Inc., 497 F.3d 410, 418, 420 (4th Cir. 2007). For this

reason, “an investment's diminution in value [after it was chosen] is neither necessary, nor

sufficient, to demonstrate a violation of a fiduciary's ERISA duties.” Id.

Lowe’s argues that the Complaint fails to plead a claim for breach of duty of prudence

because it does not contain allegations “that the process for selecting or monitoring the Hewitt

Growth Fund’s performance was deficient.” (Doc. No. 55, at 14.) It does not cite any cases in

support of its position.

As clarified supra, the Court finds the principles articulated in Braden persuasive.

Plaintiff is not required to directly allege all the facts demonstrating how the process for

selecting or monitoring the Hewitt Growth Fund was deficient to state a claim for breach of duty

of prudence. However, Plaintiff must allege sufficient facts that give rise to a plausible inference

that the process for selecting or monitoring the Hewitt Growth Fund was deficient.

Taking the entire Complaint into consideration and drawing all reasonable inferences in

favor of Plaintiff, the Court finds that the allegations give rise to a plausible inference that the

process for selecting or monitoring the Hewitt Growth Fund was deficient. While Lowe’s is

correct that “no authority requires the fiduciary to pick the best performing fund,” Meiners, 898

F.3d at 823, that is not the allegation made here. Further, the Complaint does not allege only that

the Hewitt Growth Fund had a limited track record. Rather, the Complaint combines those

allegations with allegations that the Hewitt Growth Fund had a negative rate of return at the time

it was selected, and that it replaced eight popular, established, more diverse and profitable

investment options. Plaintiff also alleges that the Hewitt Growth Fund utilized a “novel”

investment strategy that was “difficult for [Aon] Hewitt to execute,” and that Lowe’s could not

use a consistent benchmark. Taking all of these allegations into consideration, along with the

claim that the Plan transferred nearly half of its retirement plan assets (excluding Lowe’s stock),

amounting to more than $1 billion, into the Hewitt Growth Fund, the Court finds Plaintiff has

stated sufficient facts to give rise to a plausible inference that the process for selecting the Hewitt

Growth Fund was deficient.

Accordingly, the Court finds that Count I of the Complaint should be allowed to proceed

and adopts the M&R recommendation that Lowe’s motion to dismiss Count I should be denied

as to Plaintiffs’ claims for both breach of the duty of loyalty and breach of the duty of prudence.

E. Adequacy of Plaintiff’s Allegations Regarding Breach of Duty to Monitor

Fiduciaries.

Count II of the Complaint alleges that Lowe’s breached its duty to monitor “appointed”

plan fiduciaries. Plaintiff bases this claim on allegations that Lowe’s appointed the members of

the Administrative Committee and also appointed Aon Hewitt “either directly or through the

Administrative Committee.” (Complaint, Doc. No. 1, at ¶¶ 87–88.)

In its briefing, Lowe’s concedes that it is a fiduciary of the Plan to the extent that it

selects and monitors the Administrative Committee. (Doc. No. 39, at 27.) Lowe’s argues,

however, that the Magistrate erred by concluding that Lowe’s “was responsible for any and all

breaches of fiduciary duty by the Committee.” (Doc. No. 55, at 18.) Lowe’s further argues that

the allegations in the Complaint do not state a claim for breach of duty to monitor because the

Complaint does not allege any facts pointing to “specific flaws in Lowe’s appointment or

monitoring” or “any specific conduct by the [Administrative] Committee that should have led to

action by Lowe’s. (Id. at 18–19.)

The Court disagrees. Assuming without deciding that Lowe’s correctly states the “duty

[to monitor] does not extend to monitoring the prudence of individual investments,” the Court

finds the duty to monitor would, at a minimum, extend to situations where the Administrative

Committee directs or approves the transfer of nearly half of the Plan’s assets other than company

stock, totaling more than $1 billion, into a single investment fund operated by the Plan’s

fiduciary investment advisor. The scale of the decision made results in a plausible inference that

Plaintiff has plausibly stated a claim that Lowe’s failed to monitor the Administrative Committee

“in such a manner as may be reasonably expected to ensure that [its] performance has been in

compliance with the terms of the plan and statutory standards, and satisfies the needs of the

plan.” Coyne & Delany Co. v. Selman, 98 F.3d 1457, 1466 (4th Cir. 1996) (quoting 29 C.F.R. §

2509.75–8 at FR–17). Cf. Atwood v. Burlington Indus. Equity, Inc., No. 2:92CV00716, 1994

WL 698314, at *6 (M.D.N.C. Aug. 3, 1994) (“The Plan and Trust instruments confer upon

Burlington the right to remove both Committee members and the Trustee with or without cause.

(Plan Doc. § 14.4; Trust Agrmt. § 12.1.) This authority carries with it an ongoing “duty to

monitor” those persons whom Burlington may remove.”)

However, the Court agrees with Lowe’s argument that the M&R is incorrect in finding

that Plaintiff has stated a claim against Lowe’s for failure to monitor Aon Hewitt. (Doc. No. 55,

at 17.) The Plan Document provides that the Administrative Committee, not Lowe’s, has sole

authority to appoint Aon Hewitt. While Lowe’s admittedly has the obligation to monitor the

fiduciaries it appoints directly, it stretches the bounds of the duty to monitor too far to hold

Lowe’s responsible for monitoring every fiduciary employed by the Plan, including those

fiduciaries which the Plan explicitly envisions being appointed by the Administrative

Committee. Accordingly, Count II is dismissed to the extent that it is based on a claim that

Lowe’s had a duty to monitor Aon Hewitt.

Accordingly, the Court will adopt the M&R recommendation that Count II be allowed to

proceed, except to the extent Count II is premised on allegations that Lowe’s failed to monitor

Aon Hewitt. Therefore, Lowe’s motion to dismiss Count II will be denied to the extent it alleges

that Lowe’s failed to monitor the Administrative Committee, but granted to the extent Count II

asserts claims against Lowe’s for the failure to monitor Aon Hewitt.

F. Adequacy of Plaintiff’s Allegations that Lowe’s is a “Co-Fiduciary” Under 29

U.S.C. § 1105(a)

Finally, Lowe’s objects to the Magistrate Judge’s recommendation that its motion to

dismiss Plaintiff’s claim for co-fiduciary liability be denied. As an initial matter, there is no

separate claim for co-fiduciary liability in the Complaint. As part of Count I, the Complaint

alleges that “[e]ach Defendant . . . is also subject to co-fiduciary liability under 29 U.S.C. §

1105(a)(1)-(3) because it enabled other fiduciaries to breach their fiduciary duties, failed to

comply with 29 U.S.C. § 1104(a)(1) in the administration of its duties, and/or failed to remedy

other fiduciaries’ breaches of their duties, despite having knowledge of such breaches.”

(Complaint, Doc. No. 1, at ¶ 84.) ERISA imposes joint and several liability only under certain

circumstances:

(1) if [the fiduciary] participates knowingly in, or knowingly undertakes to conceal,

an act or omission of [another] fiduciary, knowing such act or omission is a breach;

(2) if, by [the fiduciary's] failure to comply with section 1104(a)(1) of this title in

the administration of his specific responsibilities which give rise to his status as a

fiduciary, he has enabled [another] fiduciary to commit a breach; or

(3) if [the fiduciary] has knowledge of a breach by [another] fiduciary, unless he

makes reasonable efforts under the circumstances to remedy the breach.

29 U.S.C. § 1105(a).

To establish a prima facie claim of liability under (1) and (3), plaintiffs must allege facts

tending to show that the fiduciary knew that the other party was a fiduciary, that the co-fiduciary

participated in the act constituting the breach, and that the act actually constituted a breach;

under (2), plaintiffs must show that the co-fiduciary's breach resulted from the fiduciary's breach

of one of his duties. See Brink v. DaLesio, 496 F. Supp. 1350, 1383 (D. Md. 1980), rev'd on

other grounds, 667 F.2d 420 (4th Cir. 1981).

Lowe’s objects to the finding in the M&R that the Complaint states a plausible claim for

co-fiduciary liability under § 1105(a), arguing that the allegations “simply parrot the elements of

the statute, indiscriminately lump the Defendant’s together, and fail to allege how each

Defendant knew of the other Defendants’ supposed breaches.2” (Doc. No. 55, at 19.) In support

2 Lowe’s also argues that the Complaint’s failure to differentiate between defendants is fatal to

its claim for co-fiduciary liability, as such pleadings violate the Rule 8(a) notice standard. It

cites several cases in support of this position. However, each of these cases considered

complaints that made grouped allegations as to all of the ERISA claims, not only a claim for co-

fiduciary liability. See, e.g. Pietrangelo v. NUI Corp., No. CIV. 04-3223 (GEB), 2005 WL

1703200, at *10 (D.N.J. July 20, 2005) (dismissing ERISA complaint because it “lumps all of

the defendants together and accuses every defendant of breaching all of the asserted fiduciary

duties”).

of its position, Lowe’s cites Atwood v. Burlington Indus. Equity, Inc., No. 2:92CV00716, 1994

WL 698314, at *15 (M.D.N.C. Aug. 3, 1994), which dismissed a claim for co-fiduciary liability

under the same statute. In Atwood, the court noted “[p]laintiffs merely track the language of §

1105 in alleging their claim” and that “the court can find no facts among the counts surviving the

motions to dismiss that would support, either directly or by inference, all of the elements of their

prima facie case that Plaintiffs must establish.” Jd.

Here, however, the Complaint alleges that Lowe’s failed to monitor the Administrative

Committee. As the duty to monitor fiduciaries is derived from § 29 U.S.C. § 1104(a)(1), Leigh v.

Engle, 727 F.2d 113, 135 (7th Cir. 1984), Plaintiff has plausibly stated a claim that Lowe’s is

liable as a co-fiduciary under 29 U.S.C. § 1105(a)(2) to the extent that any failure by Lowe’s to

monitor enabled the Administrative Committee to commit a breach of its fiduciary duties. For

this reason, the Court declines to strike the allegations related to co-fiduciary liability from the

Complaint.

IV. CONCLUSION

IT IS, THEREFORE, ORDERED that:

1. The Magistrate Judge’s M&R, (Doc. No. 54), is ADOPTED as set forth in this

Order; and

2. The Lowe’s Defendants’ Motion to Dismiss, (Doc. No. 38), is DENIED, except as

to claims against Defendant Lowe’s Companies, Inc. asserted in Count II of the

Complaint for failure to monitor Aon Heweitt, and as to that claim the motion is

GRANTED; and

3. Plaintiffs claims against Defendant Lowe’s Companies, Inc. asserted in Count II of

the Complaint for failure to monitor Aon Heweitt are DISMISSED.

Signed: September 5, 2019

Kenneth D. Bell Cy,

United States District Judge i f