Berry v. Bailey

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ALABAMA

NORTHEASTERN DIVISION

HEATH BERRY, et al.,

Plaintiffs,

v. Case No. 5:24-cv-522-CLM

WILLIAM BAILEY, et al.,

Defendants.

MEMORANDUM OPINION

Plaintiffs are former employees of Radiance Technologies, a

Huntsville, Alabama-based defense contracting firm. Plaintiffs claim they

are “shareholders” of Radiance through their participation in the

company’s Employee Stock Ownership Plan (“ESOP”) and that some

possess certain rights as holders of stock appreciation rights (“SARs”).

Using their status as ESOP participants and SARS holders, Plaintiffs

allege that Radiance’s CEO, Radiance’s Board of Directors (collectively,

the “Radiance Defendants”), two Argent entities, and an Argent employee

(collectively, the “Argent Defendants”), breached their fiduciary duties

under Alabama state law and the Employee Retirement Income Security

Act (“ERISA”) by engaging in self-dealing, scuddling the potential sale of

Radiance, and failing to provide them information about the potential

sale.

Defendants ask the court to dismiss the claims against them for,

among other reasons, lack of standing, procedural deficiencies, and failure

to state a claim under Rule 12(b)(6). Additionally, Plaintiffs filed a motion

to strike certain exhibits included in Defendants’ motions to dismiss (doc.

49), and the Radiance Defendants filed a motion to stay discovery,

pending the outcome of the motions to dismiss (doc. 67). For the reasons

stated within, the court GRANTS Defendants’ motions to dismiss,

DENIES IN PART and DENIES AS MOOT IN PART Plaintiffs’

motion to strike, and DENIES AS MOOT the Radiance Defendants’

motion to stay.

BACKGROUND

As explained below, this case turns on what rights and remedies

Plaintiffs have under the ESOP, its accompanying Trust Agreement, and

their SARs. So the court starts by explaining what those instruments are

and how they work before proceeding to Plaintiffs’ factual allegations.

A. The ESOP, Trust Agreement, and SARs

An ESOP is an ERISA-regulated retirement plan. While ESOPs can

vary in their structure depending on an employer’s preferences, their

general purpose is to motivate a company’s workers by giving them an

ownership interest in the company.

Radiance’s ESOP invests in Radiance capital stock for the benefit of

participating employees, like Plaintiffs. Radiance and a third party,

Argent Trust, manage the ESOP in different roles. Radiance is the

“administrator” that funds and oversees the ESOP, while Argent Trust is

the “trustee” that holds the cash and capital stock investments in trust

for the participating employees. The ESOP provides each participating

employee a “company stock account” to which the “allocable shares of

Company Stock” are credited annually. (See Doc. 42-1, p. 76, 153). Argent

Trust votes “all Company Stock held by it as part of the Plan assets,” but

the participating employees can typically direct Argent Trust on how to

vote the shares allocated to their company stock accounts. (See Doc. 42-1,

p. 178).

Under the ESOP, participating employees have distribution rights

that are triggered by certain events. If an employee “redeem[s]” his stock

rights, the redemption proceeds occur at the fair market value on the

redemption date, and the proceeds go into the employee’s Radiance 401(k)

plan. (Doc. 42-1, p. 109-10). So long as Radiance continues to be structured

as an S-corporation, distributions from company stock accounts come to

employees in only two forms: (1) cash or (2) stock, which the employee

must immediately sell to Radiance at fair market value.

As administrator, Radiance plays a vital role in overseeing the

ESOP. Radiance has “the power and discretion to construe the terms of

the [ESOP] and to determine all questions arising in connection with the

administration, interpretation, and application of the Plan.” (Doc. 42-1, p.

89-90). Radiance also “may undertake such correction of [ESOP] errors as

[it] deems necessary, including . . . to correct a fiduciary breach under

[ERISA].” (Doc. 42-1, p. 141). ESOP participants with questions about the

ESOP and their benefits are directed by the ESOP to contact Radiance.

Radiance’s ESOP also provides participating employees an

administrative mechanism to bring “claims for benefits.” (Doc. 42-1, p. 91).

According to § 2.8 of the ESOP, “[c]laims for benefits under the Plan may

be filed in writing with the Administrator.” (Id.) When a claim is

submitted, Radiance is required to furnish the claimant a notice of

disposition within 90 days. Claimants are allowed to appeal any denial of

benefits to Radiance, and the company must provide the claimant with a

hearing if requested, where the claimant may be represented by an

attorney if they so choose.

As the ESOP’s trustee, Argent Trust’s duties and powers are spelled

out—and limited—in the ESOP’s accompanying “Trust Agreement.” At

bottom, the Trust Agreement’s purpose is to ensure that Argent Trust

operates the trust “for the exclusive benefit of [ESOP] Participants and

their Beneficiaries.” (Doc. 43-2, p. 5). The Trust Agreement was signed by

Argent Trust’s employee, Stephen Martin, “in his capacity as an

authorized officer of Argent Trust Company.” (Doc. 43-2, p. 22).

Aside from the ESOP and its accompanying Trust Agreement,

Plaintiffs allege that some of them—though they don’t specify who—are

present or former owners of Radiance SARs. In Plaintiffs’ words, “SARs

are contractual rights, under which holders receive cash payouts in the

event of certain eventualities, including certain valuation thresholds or

buyouts of Radiance.” (Doc. 33, p. 7). If Radiance is sold, then the SARs

holders receive SARs “buyouts” from Radiance. The buyouts would receive

the same treatment as debt and be paid first. The remaining sales price

of Radiance would be paid to the ESOP, and then ultimately the

employees who participated in the ESOP.

B. Plaintiffs’ Factual Allegations

Plaintiffs’ claims stem from alleged self-dealing by Radiance’s CEO,

William Bailey. In early 2023, Bailey began to “shop” Radiance to

potential buyers after he caused turmoil within the company. Bailey

eventually received offers to purchase Radiance from two companies.

These offers were favorable to Bailey, as they would have allowed him to

stay on as CEO.

Once the Board of Directors became aware of the offers, Radiance

retained an investment bank to conduct a valuation and open a potential

sale to a wider market. In the end, Radiance received around 14 offers,

which the company whittled down to the five “best” offers. Each of these

offers “were in a range of two times (2X) the ESOP’s last appraised value

for Radiance.” (Doc. 33, p. 9). Despite their participation in the ESOP,

Plaintiffs were unaware of the offers, as Bailey and the Board of Directors

did not disclose details to the ESOP participants.

Bailey did not want any of the five potential buyers to purchase

Radiance because they would have likely not allowed him to stay on as

CEO and he would have been unable to booster his son’s defense-

contracting business (which he had allegedly been doing for years as

Radiance’s CEO). By mid-2023, the five potential buyers were receiving

“briefings” about Radiance’s programs, contracts, and other business

dealings. Radiance’s then President, Tim Tinsley, was the main point of

contact for the potential buyers during this due diligence period.

Bailey fired Tinsley in the middle of the due diligence. After

Tinsley’s ouster, the Board of Directors convened a meeting where Bailey

provided the Board Members with “false and or misleading financial

information” about Radiance. (Doc. 33, p. 11). This included information

about Radiance programs and products that Bailey claimed would lead to

a higher valuation than the one being used to shop the company. But in

reality, these “product(s) and programs did not even exist,” and even if

they had been viable, it would be years before they made Radiance a

profit. (Doc. 33, p. 11-12).

The Board of Directors took Bailey at his word and voted to table

the potential sale of Radiance. Plaintiffs claim that the Board of Directors

failed to verify Bailey’s representations. Plaintiffs also allege that the

Board of Directors “did not present the potential sale to the Shareholders

because, if the Shareholders had been provided the right to vote, they

would have undoubtedly approved the sale.” (Doc. 33, p. 13).

After it was announced that Radiance would not be sold, a so-called

“brain-drain” began at the company. Numerous senior executives,

operations personnel, and engineers resigned from Radiance. According

to Plaintiffs, the resignations occurred because “Radiance’s employees and

senior leadership lost faith in Bailey’s ability to lead Radiance, and it had

become clear to all that the [Board of Directors] was simply Bailey’s

puppet and would not exercise any independent oversight of him.” (Doc.

33, p. 14-15). Concerns over the resignations were voiced to Board

Members, but they did not act. Around the same time, Plaintiff Berry and

others began questioning Board Members and Argent Trust’s employee,

Stephen Martin, about why the sale did not go through. The Board

Members and Martin explained that the decision was based solely on

Bailey’s representations regarding Radiance’s value.

According to Plaintiffs, neither the Board of Directors nor the

Argent Defendants were aware of Bailey’s misrepresentations and self-

dealing because they did not conduct any due diligence. Failing to conduct

due diligence was apparently in the Board’s interest because the Board

Members were compensated for their positions, and some even owed their

positions to Bailey. Likewise, it was in the Argent Defendants’ interest

because, if Radiance was not sold, they would continue to maintain the

ESOP and earn the fees it generated.

C. Plaintiffs’ Claims

Plaintiffs allege that Defendants breached their fiduciary duties

under Alabama state law and ERISA by engaging in self-dealing,

scuddling the potential sale of Radiance, and failing to provide Plaintiffs

with information about the potential sale. In their second amended

complaint, Plaintiffs plead eight claims in total, which are outlined below:

• Count I: Direct Breach of Fiduciary Duty Against

Bailey;

• Count II: Direct Breach of Fiduciary Duty Against the

Radiance Board Members;

• Count III: Derivative Breach of Fiduciary Duty Against

Bailey;

• Count IV: Derivative Breach of Fiduciary Duty Against

the Radiance Board Members;

• Count V: Direct Breach of Fiduciary Duty Against the

Argent Defendants;

• Count VI: Derivative Breach of Fiduciary Duty Against

the Argent Defendants;

• Count VII: ERISA Breach of Fiduciary Duty Against All

Defendants; and

• Count VIII: ERISA Action to Enjoin All Defendants and

Allow ESOP Participants to Exercise Plan Rights.

Plaintiffs also seek class certification for (1) all ESOP participants

who own or owned Radiance shares from January 1, 2023, to the date of

final judgment and (2) all individuals who have or had SARs “in or related

to” Radiance, whether vested or unvested, from January 1, 2023, to the

date of final judgment. (Doc. 33, p. 22).

The Radiance Defendants and Argent Defendants have moved to

dismiss Plaintiffs’ claims. Both sets of Defendants ask the court to dismiss

the claims against them for, among other reasons, Plaintiffs lack of

standing, procedural deficiencies, and failure to state a claim under Rule

12(b)(6).

LEGAL STANDARD

To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must plead

enough facts to state a claim that is “plausible on its face.” Ashcroft v.

Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). A claim is plausible on

its face when a plaintiff “pleads factual content that allows the court to

draw the reasonable inference that the defendant is liable for the

misconduct alleged.” Id. When considering the motion, the court accepts

all factual allegations of the complaint as true and construes them in the

light most favorable to the plaintiff. Pielage v. McConnell, 516 F.3d 1282,

1284 (11th Cir. 2008) (citation omitted).

This tenet, of course, is “inapplicable to legal conclusions.” Iqbal,

556 U.S. at 678. “While legal conclusions can provide the framework of a

complaint, they must be supported by factual allegations.” Id. at 679.

Courts should limit their “consideration to the well-pleaded factual

allegations, documents central to or referenced in the complaint, and

matters judicially noticed.” La Grasta v. First Union Sec., Inc., 358 F.3d

840, 845 (11th Cir. 2004).

DISCUSSION

As explained above, Defendants ask this court to dismiss Plaintiffs’

claims for several reasons. Three of those arguments are controlling and

require that Plaintiffs’ claims be dismissed. First, Plaintiffs lack standing

to bring direct breach of fiduciary duty claims against the Radiance

Defendants (Counts I and II). Second, Plaintiffs’ remaining state law

breach of fiduciary duty claims against all Defendants are preempted by

ERISA (Counts III-VI). And third, Plaintiffs failed to exhaust their

administrative remedies as ERISA requires, so their ERISA claims must

be dismissed. (Counts VII and VIII).

A. Plaintiffs’ Standing to Bring Breach of Fiduciary Duty

Claims Against the Radiance Defendants (Counts I-IV)

The Radiance Defendants argue that Plaintiffs’ state law direct and

derivative breach of fiduciary duty claims fail because Plaintiffs lack

standing. Standing “is an essential and unchanging part of the case-or-

controversy requirement of Article III,” so the court addresses the issue of

standing first. See Diamaio v. Democratic Nat’l Comm., 520 F.3d 1299,

1301 (11th Cir. 2008) (quoting Lujan v. Defenders of Wildlife, 504 U.S.

555, 560 (1992)).

1. Direct Claims (Counts I-II): According to the Radiance

Defendants, Plaintiffs lack standing to bring direct claims because

Plaintiffs are not Radiance “stockholders” owed fiduciary duties under

Alabama law. (Doc. 42, p. 17-18). In response, Plaintiffs contend that strict

stockholder status is not required to bring direct breach of fiduciary duty

claims against corporate officers and directors.

The Radiance Defendants are right. Under Alabama law, corporate

officers and directors—like Bailey and the Radiance Board Members—

owe fiduciary duties to the corporation and its stockholders. See Ala. Code

§§ 10-2A-8.30, 10A-2A-8.42 (stating that corporate directors and officers

must act in the best interests of “the corporation”). Plaintiffs do not

technically hold “stock” in Radiance. Rather, Argent Trust, as the trustee

of the ESOP, “holds the stock on [Plaintiffs’] behalf in a tax-qualified

trust.” (Doc. 42-1, p. 151). Moreover, Plaintiffs’ SARs only provide

“contractual rights,” and do not confer stockholder status needed for a

breach of fiduciary duty claim. See Sanderson v. H.I.G. P-XI Holding, Inc.,

2001 WL 406280, at *3 (E.D. La. Apr. 19, 2001) (holding that, because

SARs holders are “creditors” and do not share the same tax liability as a

shareholder, they lack standing to bring a breach of fiduciary duty claim).

Even if Plaintiffs were correct that strict “stockholder status” is not

required to bring a direct claim, they still lack standing. To have standing

for a direct claim, a stockholder must allege “that certain wrongs have

been committed by the corporation as a direct fraud upon him, and such

wrongs do not affect other stockholders[.]” Ex parte 4tdd.com, Inc., 306 So.

3d 8, 18 (Ala. 2020) (emphasis added). Plaintiffs’ alleged harm affects all

“stockholders” equally. If Plaintiffs’ allegations are true, then Bailey and

the Board Members denied every Radiance stockholder the opportunity to

receive information about and vote on the potential sale of Radiance. In

fact, Plaintiffs admit in their second amended complaint that the

Radiance Defendants breached fiduciary duties owed to “Plaintiffs and

the other shareholders.” (Doc. 33, p. 24). So even if Plaintiffs were

considered “stockholders,” their harm is not individualized to provide

them standing for a direct claim.

2. Derivative Claims (Counts III-IV): The Radiance Defendants

recycle their argument about Plaintiffs lacking stockholder status to

defeat Plaintiffs’ derivative claims as well. But for these claims, Alabama

law has more to say.

Unlike direct actions, the Alabama Code specifically explains who

may bring a derivative action. Section 10A-2A-7.41 provides that “[a]

stockholder may commence or maintain a derivative action in the right of

a corporation to enforce a right of the corporation complying with this

division.” For a derivative action, a “stockholder” is “a record stockholder,

a beneficial stockholder, and an unrestricted voting trust beneficial

owner.” Ala. Code § 10A-2A-7.40(3). Building on that definition, § 10A-2A-

1.40(2) clarifies a “beneficial stockholder” is “a person who owns the

beneficial interest in stock, which is either a record stockholder or a

person on whose behalf shares of stock are registered in the name of an

intermediary or nominee.” Reading these provisions together, it’s clear

that a “beneficial stockholder,” as defined, has standing to bring a

derivative claim.

Plaintiffs are “beneficial stockholders” under the statute because

their Radiance “stock” is held in trust by an intermediary (here, Argent

Trust) for their benefit. (See Doc. 42-1, p. 2) (stating that “[t]he ESOP

trustee holds the [Radiance] stock on [Plaintiffs’] behalf in a tax-qualified

trust”). Plaintiffs fit the statute’s plain definition of a “beneficial

stockholder,” so that is where the court’s analysis ends. See United States

v. Fisher, 289 F.3d 1329, 1338 (11th Cir. 2002) (“If the statute’s meaning

is plain and unambiguous, there is no need for further inquiry.”).

—

In sum, Plaintiffs lack standing to bring direct breach of fiduciary

duty claims against the Radiance Defendants, so the court dismisses

Counts I and II. But because Plaintiffs are “beneficial stockholders”

through their participation in the ESOP, they have standing to bring their

derivative breach of fiduciary duty claims in Counts III and IV.

B. ERISA Preemption (Counts III-VI)

The Radiance Defendants and Argent Defendants separately argue

that Plaintiffs’ remaining state-law claims are due to be dismissed

because they are preempted by ERISA. For this argument, the court starts

by explaining how ERISA preemption works before applying it to

Defendants’ arguments.

1. ERISA preemption: ERISA includes a preemption provision that

makes regulation of employee benefit plans “exclusively a federal

concern.” Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523 (1981).

The Eleventh Circuit recognizes two types of ERISA preemption: (1)

complete preemption and (2) defensive preemption. Conn. State Dental

Ass’n v. Anthem Health Plans, Inc., 591 F.3d 1337, 1343-44 (11th Cir.

2009). Complete preemption, which derives from ERISA’s express

preemption provision in § 514(a), “is a judicially recognized exception to

the well-pleaded complaint rule” and provides federal courts subject-

matter jurisdiction over what would otherwise be state-law claims. Id. at

1344. Courts analyzing complete preemption in the Eleventh Circuit

apply the Supreme Court’s Davila test and ask two questions: (1) whether

the plaintiff could have brought its claim(s) as an ERISA “beneficiary”

under § 502(a) and (2) whether no other legal duty supports plaintiff’s

claim(s). Id. at 1345 (citing Aetna Health Inc. v. Davila, 542 U.S. 200, 210

(2004)). If the answer to both questions is yes, then a plaintiff’s state-law

claims are completely preempted by ERISA and must be dismissed.

Defensive preemption, on the other hand, sweeps more broadly than

complete preemption and “supersedes any and all State laws insofar as

they . . . relate to any [ERISA] plan.” Id. at 1344 (quoting 29 U.S.C. §

1144(a) (emphasis added)). A state-law claim “relate[s] to” an ERISA plan

if it has “a connection with or reference to” that plan. Pilot Life Ins. v.

Dedeaux, 481 U.S. 41, 47 (1987). And as noted by the Eleventh Circuit,

defensive preemption is far-reaching, “applying well beyond those

subjects covered by ERISA itself.” Jones v. LMR Int’l, Inc., 457 F.3d 1174,

1179 (11th Cir. 2006).

2. The Radiance Defendants: With these principles in mind, the

Radiance Defendants argue that Plaintiffs’ state-law claims are both

completely preempted and defensively preempted. Regarding complete

preemption, the Radiance Defendants contend that the Davila test is

satisfied because (1) Plaintiffs, as ESOP participants, have the right to

bring claims under § 502(a) to remedy breaches of fiduciary duties

harming the ESOP and (2) there is no separate legal duty supporting

Plaintiffs’ state-law claims.

The court agrees. Not only could Plaintiffs have brought their state-

law claims under § 502(a); they did when they added ERISA claims to

their Second Amended Complaint as Counts VII and VIII. (Compare Doc.

1-2 with Doc. 33). Nor is there any independent legal duty supporting

Plaintiffs’ state-law claims. The Eleventh Circuit has held that “if some of

a party’s [state-law] claims ‘implicate legal duties dependent on the

interpretation of an ERISA plan,’ the claims are completely preempted.”

Ehlen Floor Covering, Inc. v. Lamb, 660 F.3d 1283, 1288 (11th Cir. 2011)

(quoting Borrero v. United Healthcare of N.Y., 610 F.3d 1296, 1304 (11th

Cir. 2010)). Plaintiffs’ state-law claims implicate the Radiance

Defendants’ duties under the ESOP because, without the ESOP, there

would be no fiduciary duties owed to Plaintiffs as “beneficial stockholders”

in Radiance. Thus, the Davila test is satisfied, and ERISA’s complete

preemption bars Plaintiffs’ remaining state-law claims against the

Radiance Defendants.

On top of that, defensive preemption applies too. In the Eleventh

Circuit, defensive preemption bars a state-law claim if that claim applies

to a defendant because of the existence of an ERISA plan. See, e.g., Sanson

v. Gen. Motors Corp., 966 F.3d 618, 621 (11th Cir. 1992) (holding that

ERISA defensively preempted a state-law fraud claim because the fraud

statute “would not apply” to the case without the existence of an ERISA

plan). As explained above, Plaintiffs only have standing to bring

derivative breach of fiduciary duty claims against the Radiance

Defendants as “beneficial stockholders” because they are ESOP

participants with their Radiance stock held in trust by Argent Trust. So

defensive preemption also bars Plaintiffs’ derivative claims against the

Radiance Defendants. Counts III and IV must be dismissed.

3. The Argent Defendants: The Argent Defendants likewise contend

that Plaintiffs’ state-law breach of fiduciary duty claims against them are

defensively preempted by ERISA. They are correct.

ESOP trustees, like the Argent Defendants, owe fiduciary duties to

ESOP participants for one reason: they are participating in the ESOP. See

29 U.S.C. § 1104(a)(1)(A)(i); see also Halperin v. Richards, 7 F.4th 534,

551 (7th Cir. 2021) (stating that ESOP trustees “are subject to exclusive

federal duties to act solely in the interest of beneficiaries”). In fact, the

ESOP’s accompanying Trust Agreement expressly limits Argent Trust’s

duties to those “set forth in [the] Trust Agreement.” (Doc. 43-2, p. 6). So

contrary to Plaintiffs’ allegations, the Argent Defendants do not owe them

“Alabama state law fiduciary duties” independent of the ESOP. (See Doc.

33, p. 30-31). Plaintiffs’ state-law claims are predicated on the Argent

Defendants breaching fiduciary duties owed to them under the ESOP and

the accompanying Trust Agreement.

Because the Argent Defendants’ fiduciary duties arise from the

ESOP—an ERISA-regulated plan—Plaintiffs’ state-law claims

necessarily “relate to” the ESOP and are defensively preempted. See

Phillips v. Amoco Oil Co., 799 F.2d 1464, 1470 (11th Cir. 1986) (holding

that a plaintiff’s state-law fraud claim was defensively preempted by

ERISA because the claim “depend[ed] on” an interpretation of the

fiduciary duties imposed by ERISA). Counts V and VI must also be

dismissed.

C. Failure to Exhaust Administrative Remedies (Counts VII

and VIII)

To sum the above, Plaintiffs lack standing to bring Counts I and II,

and ERISA preempts Counts III-VI. That leaves Plaintiffs with their

ERISA claims against all Defendants in Counts VII and VIII. Defendants

argue these claims should be dismissed because Plaintiffs failed to

exhaust the ESOP’s administrative remedies as ERISA requires. See

Counts v. Amer. Gen’l Life & Acc. Ins., 111 F.3d 105, 108 (11th Cir. 1997)

(“The law is clear in this circuit that plaintiffs in ERISA actions must

exhaust available administrative remedies before suing in federal court.”).

Plaintiffs respond with three arguments. First, Plaintiffs contend

the ESOP’s administrative claims procedure is “non-mandatory,” so they

weren’t required to use it before suing. Second, Plaintiffs argue that, even

if the claims procedure was mandatory, it only applies to “claims for

benefits,” which Plaintiffs do not make. And third, Plaintiffs say that any

attempt at using the claims procedure would have been futile because

Radiance, as the ESOP administrator, would be the entity reviewing their

claims.

1. Eleventh Circuit Precedent

The Radiance Defendants point to two Eleventh Circuit cases they

claim undermine all three arguments. According to the Radiance

Defendants, the cases below show that Plaintiffs’ claims were “claims for

benefits” and an ESOP’s administrative claims procedures must be

exhausted even if (a) it uses permissive language, and (b) it is overseen by

individuals alleged to have breached their fiduciary duties.

• Bickley: The Radiance Defendants first cite Bickley v. Caremark

RX, Inc., 461 F.3d 1325 (11th Cir. 2006), a case where the circuit court

reviewed a district court’s decision to dismiss ERISA claims for breach of

fiduciary duties based on Plaintiff Bickley’s failure to exhaust

administrative remedies. In that case, Bickley argued that an

administrative remedy was unavailable for his breach of fiduciary duty

claims because “the administrative scheme set out in the [ERISA] plan

was limited solely to a claim for benefits.” Id. at 1329. Further, he

contended that the ERISA plan “explicitly provided that a participant who

alleges violations of fiduciary duty may file suit in federal court,” so he

wasn’t required to exhaust administrative remedies. Id.

The circuit court disagreed with Bickley’s arguments and affirmed

dismissal. Id. at 1330. With regards to Bickley’s assertion that the ERISA

plan permitted him to sue right away, the court concluded that the ERISA

plan’s language stating that plan participants “may file suit in federal

court” “merely recites plan participants’ general rights under ERISA and

does not excuse a participant from satisfying the exhaustion

requirement.” Id. at 1329 (citing Springer v. Wal-Mart Assocs. Grp. Health

Plan, 908 F.2d 897, 900 (11th Cir. 1990)). Next the court held that, even

though the plan’s administrative remedy scheme related only to “claims

for benefits,” Bickley still had to use it. Id. The court reached this

conclusion by analyzing other portions of the plan, which provided that “if

[plan participants] have questions about [their] Plan, [they] should

contact the Plan Administrator” as it “has the exclusive responsibility and

complete discretionary authority to control the operation and

administration of the Plan, with all power necessary to . . . resolve all

interpretative, equitable, and other questions that shall arise in the

operation and administration of this Plan.” Id. Taking these provisions

together, the court determined that Bickley had an administrative

remedy, as the ERISA plan administrator could have received, reviewed,

and responded to his breach of fiduciary duty claims. Id. at 1329-30.

• Lanfear: The Radiance Defendants cite Lanfear v. Home Depot,

Inc., 536 F.3d 1217 (11th Cir. 2008) to further support their argument

that Plaintiffs cannot ignore ERISA’s exhaustion requirement. In that

case, Plaintiff Lanfear brought breach of fiduciary duty claims for

damages against his former employer, Home Depot, alleging that the

company “violated its fiduciary duty” as the administrator of his ERISA

plan by investing in Home Depot stock “even though corporate officials

were backdating stock options and making fraudulent transactions.” Id.

at 1220. The district court dismissed Lanfear’s claims, in part, because he

failed to exhaust available administrative remedies before suing. Id. at

1220-21. On appeal, Lanfear argued that (1) he was not required to

exhaust the ERISA plan’s administrative remedies because the plan’s

administrative scheme only applied to “claims for benefits” and (2) any

attempt at using the administrative scheme would have been futile

because Home Depot was the plan administrator and would have rejected

any claim brought under the administrative procedure. See id. at 1223.

The circuit court rejected Lanfear’s arguments. Id. at 1225. The

court first evaluated its prior decision in Bickley and determined that

Lanfear had to use the available administrative procedure even though it

spoke only to “claims for benefits.” Id. The court noted that, like the plan

in Bickley, Home Depot’s ERISA plan provided the administrator wide-

ranging authority to review claims and answer questions relating to the

plan, so Home Depot could have evaluated the breach of fiduciary duty

claims. Id. But the court went even further and held that Lanfear’s claim

was a “claim for benefits.” Id. at 1223-24. According to the court, “[a]

complaint for the decrease in value of a defined contribution account due

to breach of fiduciary duty is not for damages” but instead “is limited to

the difference between the benefits actually received and the benefits that

would have been received if the plan management had fulfilled its

statutory obligations.” Id. at 1223. Put another way, the court held that

when an ERISA plaintiff makes a claim for damages based on a breach of

fiduciary duty, the plaintiff is making a “claim for benefits.” See id.

The court then rejected Lanfear’s futility argument. Id. at 1224-25.

In reaching its conclusion, the court reiterated precedent that “the futility

exception is about meaningful access to administrative proceedings, not a

potential conflict of interest of the decisionmakers.” Id. at 1225 (citing

Springer v. Wal-Mart Associates’ Grp. Health Plan, 908 F.2d 897 (11th

Cir. 1990)). So Lanfear had to exhaust administrative remedies before

bringing his case to court. Id.

—

2. Application of Circuit Precedent

Bickley and Lanfear are on point and require the dismissal of

Plaintiffs’ ERISA claims against both sets of Defendants.

Plaintiffs’ argument that the ESOP’s administrative claims

procedure is “non-mandatory” does not pass muster under Bickley. True,

the ESOP states that “claims for benefits may be filed in writing with

[Radiance].” (Doc. 42-1, p. 91) (emphasis added). At first blush, using the

permissive word “may” seems to imply that participants need not exhaust

the claims procedure before suing. But like the permissive language in the

Bickley ERISA plan, the Radiance ESOP’s use of “may” “merely recites

plan participants’ general rights under ERISA and does not excuse a

participant from satisfying the exhaustion requirement.” See 461 F.3d at

1329.

Plaintiffs’ next argument, that the ESOP’s claims procedure only

applies to “claims for benefits” and not claims for damages, also fails. Read

in the light of Bickley and Lanfear, the Radiance ESOP makes clear that

its administrative claims procedure applies to Plaintiffs’ claims. Like the

plan language in Bickley and Lanfear, the Radiance ESOP provides the

plan administrator wide-ranging authority to “construe the terms of the

[ESOP] and to determine all questions arising in connection with the

administration, interpretation, and application of the [ESOP].” (Doc. 42-

1, p. 89). More importantly, the ESOP gives Radiance, as the plan

administrator, the authority to undertake “correction of Plan errors as the

Administrator deems necessary, including . . . to correct a fiduciary breach

under [ERISA].” (Id. at 141). So even though the ESOP’s claims procedure

applies to “claims for benefits,” Plaintiffs were still required to use it for

their breach of fiduciary duty claims. In fact, under Lanfear, Plaintiffs’

ERISA breach of fiduciary duty claims are “claims for benefits” because

the damages they claim are “the difference between the benefits actually

received” under the ESOP and “the benefits that would have been

received” if Radiance were sold. See 536 F.3d at 1223. Either way, circuit

precedent dictates that Plaintiffs had to first present their claims under

the ESOP’s claims procedure.

Finally, the circuit court examined and rejected Plaintiffs’ futility

argument in Lanfear. As discussed, Lanfear states that “the futility

exception is about meaningful access to administrative proceedings, not a

potential conflict of interest of the decisionmakers.” Id. at 1225. So while

it may be true that Radiance would likely have rejected Plaintiffs’ claims,

Plaintiffs still had to present them before filing suit. The court cannot

excuse Plaintiffs’ failure to exhaust their administrative remedies under

the ESOP. Counts VII and VIII must be dismissed.

D. Remaining Motions

Given the above, the court denies in part and denies as moot in part

Plaintiffs’ motion to strike (doc. 49) because the court did not consider the

challenged materials, other than the ESOP Plan Summary, to reach its

decision. Plaintiffs said on page 1 of their motion that they did not seek to

strike the Radiance ESOP and Trust Agreement. And to be sure, the court

properly considered the ESOP Plan Summary because it supported

Defendants’ factual attack on Plaintiffs’ standing to bring state-law

breach of fiduciary duty claims and thus the court’s subject matter

jurisdiction. See Garcia v. Copenhaver, Bell & Assocs., M.D.’s P.A., 104

F.3d 1256, 1261 (11th Cir. 1997).

The court also denies the Radiance Defendants’ motion to stay

discovery and other obligations (doc. 67) as moot because the court will

dismiss all of Plaintiffs’ claims and close the case.

CONCLUSION

For these reasons, the court WILL GRANT Defendants’ motions to

dismiss the second amended complaint (docs. 42, 43). The court DENIES

IN PART AND DENIES AS MOOT IN PART Plaintiffs’ motion to

strike (doc. 49) and DENIES AS MOOT the Radiance Defendants’ motion

to stay (doc. 67). The court will therefore enter a separate order that

dismisses all claims without prejudice and closes this case.

DONE and ORDERED on September 18, 2025.

Lee age Hay fat

COREY‘L. MAZE

UNITED STATES DISTRICT JUDGE

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