# Berry v. Bailey

> District Court, N.D. Alabama · September 18, 2025

URL: https://www.frixlaw.com/law-library/cases/11140505

## Case

- **Court:** District Court, N.D. Alabama
- **Decided:** September 18, 2025
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/11140505

## How later opinions describe it (automated extraction)

- 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
- stating that ESOP trustees “are subject to exclusive federal duties to act solely in the interest of beneficiaries”

## Opinion text

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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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/11140505. Public record. Not legal advice.