Daniel Draney v. Westco Chemicals, Inc.

Case 2:19-cv-01405-ODW-AGR Document 107 Filed 02/23/23 Page 1 of 20 Page ID #:1842

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United States District Court

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Central District of California

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11 DANIEL DRANEY et al., Case № 2:19-cv-01405-ODW (AGRx)

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Plaintiffs,

ORDER GRANTING MOTION FOR

13 v.

SUMMARY JUDGMENT [87],

14 DENYING AS MOOT MOTION TO

WESTCO CHEMICALS, INC. et al.,

15 CERTIFY CLASS [95], AND

DISMISSING FIRST AMENDED

16 Defendants.

COMPLAINT

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18 I. INTRODUCTION

19 Plaintiffs Daniel Draney and Lorenzo Ibarra bring suit pursuant to the Employee

20 Retirement Income Security Act of 1974 (“ERISA”) against their employer, Defendant

21 Westco Chemicals, Inc., and its principals, Ezekiel Zwillinger and Steven Zwillinger,

22 for mismanaging an employee defined-contribution pension plan. Defendants now

23 move for summary judgment on the grounds that ERISA’s three-year statute of

24 limitations bars Draney’s and Ibarra’s claims. (Mot. Summ. J. (“Motion”) or (“Mot.”),

25 ECF No. 87.) The Court carefully considered the papers filed in connection with the

26 Motion and deemed the matter appropriate for decision without oral argument. Fed. R.

27 Civ. P. 78; C.D. Cal. L.R. 7-15. For the reasons that follow, the Court GRANTS the

28 Motion.

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1 II. FACTUAL BACKGROUND

2 As employees of Westco, Draney and Ibarra participated in Westco’s

3 401(k) Plan, a defined-contribution, individual account pension plan subject to ERISA.

4 (Defs.’ Statement of Uncontroverted Facts (“SUF”) 2, 4, 20, 21, ECF No. 87-8; First

5 Am. Compl. (“FAC”) ¶¶ 1–2, ECF No. 23.) Throughout most of the 2010s, the

6 Zwillingers invested Plan funds exclusively in low-interest-bearing certificates of

7 deposit (“CDs”), without diversifying the Plan’s investment portfolio. (SUF 5, 7–8, 11;

8 FAC ¶ 25.) Plaintiffs allege that Westco employees missed out on over $1 million of

9 collective fund growth as a result. (FAC ¶ 25.)

10 Draney first became a Plan participant in 2010. (SUF 4.) Before he elected to

11 participate in the Plan, he was aware that the plan was invested solely in CDs and cash.

12 (SUF 5; see Pls.’ Statement of Genuine Disputes (“SGD”) 16, ECF No. 89-1.) At first,

13 he chose not to invest in the Plan because, in his words, its “earnings were too low,”

14 (SUF 14), but he eventually became a Plan participant as part of his overall tax and

15 savings strategy, (SUF 15).

16 In 2010 and 2011, Draney had conversations with almost every employee in the

17 company about the Plan’s investment strategy, and according to Draney, most Westco

18 employees were dissatisfied with the Plan’s investment in CDs. (SUF 17–18.) There

19 was a “running joke” among Westco employees regarding the Plan’s investment in CDs,

20 and “virtually everyone” at the company was aware of it. (SUF 19.) Until 2018, when

21 the Zwillingers changed the Plan’s investment strategy, Draney maintained an

22 understanding that the Plan remained invested solely in CDs. (SUF 7–9.)

23 Ibarra became a Plan participant by no later than 2009. (SUF 21.) In 2008 and

24 2011, Ibarra received participant statements showing the Plan’s assets were invested in

25 cash or CDs. (SUF 22.) Ibarra saw at least one of these statements. (SUF 23.)

26 III. PROCEDURAL BACKGROUND

27 On February 25, 2019, Plaintiffs filed their initial Complaint, asserting individual

28 and class claims arising from two Westco retirement plans: the aforementioned

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1 401(k) Plan and a separate Defined Benefit Pension Plan. (FAC ¶¶ 2–3.) Plaintiffs

2 brought claims against Defendants for (1) breach of duty of prudence, 29 U.S.C.

3 § 1104(a)(1)(B); (2) breach of duty of loyalty, 29 U.S.C. § 1104(a)(1)(A); and

4 (3) failing to administer the 401(k) Plan in accordance with its terms, 29 U.S.C. § 1103.

5 In ruling on Defendants’ Federal Rule of Civil Procedure (“Rule”) 12(b)(1) Motion to

6 Dismiss, the Court found that the FAC lacked allegations showing that the beneficiaries

7 of the Defined Benefit Pension Plan suffered any injury-in-fact. (Order Granting Mot.

8 Dismiss 7, ECF No. 29.) Accordingly, the Court dismissed Claims One and Two to the

9 extent they were premised on mismanagement of the Defined Benefit Pension Plan.

10 (Id.) For the remainder of this Order, the term “Plan” refers to the 401(k) Plan only.

11 Thereafter, Plaintiffs moved to certify the class, and Defendants moved for

12 summary judgment. Both motions were briefed when, on May 7, 2021, the parties

13 informed the Court they agreed to settle the case. (Notice Settlement, ECF No. 57.) On

14 May 28, 2021, Plaintiffs moved for preliminary approval of a $500,000 settlement and

15 conditional certification of a non-opt-out class of Westco employees under

16 Rule 23(b)(1). (Mot. Prelim. Approve Settlement (“First Settlement Mot.”) 12, ECF

17 No. 60.) On September 29, 2021, the Court denied that motion, detailing its concerns

18 about whether the non-opt-out nature of the settlement made it unfair to certain class

19 members. (Order Den. First Settlement Mot. 2, ECF No. 62.)

20 On March 8, 2022, Plaintiffs moved a second time for approval of the settlement.

21 (Am. Mot. Prelim. Approve Settlement (“Am. Settlement Mot.”), ECF No. 66.)

22 Ultimately, the Court again denied the Motion, reasoning that the mandatory,

23 non-opt-out nature of the proposed class was inappropriate because (1) Plaintiffs sought

24 individualized monetary compensation and (2) potential conflicts existed between class

25 members whose claims were time-barred and those whose claims were not. (Order Den.

26 Am. Settlement Mot., ECF No. 84.) The parties could not reach agreement on a

27 settlement involving an opt-out class, (see Pl.’s Notice re: Settlement, ECF No. 82;

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1 Defs.’ Resp., ECF No. 83), and accordingly, the Court restored the case to active status

2 and re-set a trial date, (Order Restoring Case Active Status, ECF No. 86).

3 Now, Defendants move for summary judgment on the grounds that the ERISA

4 three-year statute of limitations bars the claims of individual Plaintiffs Draney and

5 Ibarra. The Motion is fully briefed. (Opp’n, ECF No. 89; Reply, ECF No. 92.)

6 IV. LEGAL STANDARD

7 A court “shall grant summary judgment if the movant shows that there is no

8 genuine dispute as to any material fact and the movant is entitled to judgment as a matter

9 of law.” Fed. R. Civ. P. 56(a). A disputed fact is “material” where the resolution of

10 that fact “might affect the outcome of the suit under the governing law,” and the dispute

11 is “genuine” where “the evidence is such that a reasonable jury could return a verdict

12 for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

13 The burden of establishing the absence of a genuine issue of material fact lies with the

14 moving party, and the moving party may meet this burden with arguments or evidence

15 or both. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

16 Once the moving party satisfies its burden, the nonmoving party cannot simply

17 rest on the pleadings or argue that any disagreement or “metaphysical doubt” about a

18 material issue of fact precludes summary judgment. Matsushita Elec. Indus. Co. v.

19 Zenith Radio Corp., 475 U.S. 574, 586 (1986); Cal. Architectural Bldg. Prods., Inc. v.

20 Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987). The non-moving

21 party must show that there are “genuine factual issues that . . . may reasonably be

22 resolved in favor of either party.” Franciscan Ceramics, 818 F.2d at 1468 (quoting

23 Anderson, 477 U.S. at 250) (emphasis omitted). Provided the moving party has

24 satisfied its burden, the court should grant summary judgment against a party who fails

25 to present evidence establishing an essential element of its claim or defense when that

26 party will ultimately bear the burden of proof on that claim or defense at trial. See

27 Celotex, 477 U.S. at 322.

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1 In ruling on summary judgment motions, courts draw all reasonable inferences

2 in the light most favorable to the nonmoving party, refraining from making credibility

3 determinations or weighing conflicting evidence. Scott v. Harris, 550 U.S. 372, 378

4 (2007); Hous. Rts. Ctr. v. Sterling, 404 F. Supp. 2d 1179, 1183 (C.D. Cal. 2004).

5 V. DISCUSSION

6 As a preliminary matter, Plaintiffs stipulate to judgment in Defendants’ favor on

7 Plaintiffs’ third claim for failure to administer the Plan in accordance with its terms.

8 (Opp’n 12.) The Court therefore grants summary judgment as to this claim. The

9 remaining issue is whether the two remaining claims—for breach of duty of prudence

10 and breach of duty of loyalty—are barred by 29 U.S.C. § 1113, ERISA’s statute of

11 limitations.

12 A. Duty of Prudence

13 Plaintiffs’ first claim is for breach of the duty of prudence that ERISA plan

14 fiduciaries owe under 29 U.S.C. § 1104(a)(1)(B). (FAC ¶¶ 57–67.) “Retirement plans

15 governed by ERISA must have at least one named fiduciary, who must manage the plan

16 prudently . . . .” Intel Corp. Inv. Pol’y Comm. v. Sulyma, 140 S. Ct. 768, 773 (2020)

17 (“Sulyma II”) (citation omitted). In discharging this duty, plan fiduciaries must act

18 “with the care, skill, prudence, and diligence under the circumstances then prevailing

19 that a prudent [person] acting in a like capacity and familiar with such matters would

20 use in the conduct of an enterprise of a like character and with like aims.” 29 U.S.C.

21 § 1104(a)(1)(B).

22 The ERISA statute of limitations provides that an action under ERISA, including

23 one for breach of the duty of prudence, is time-barred after the earlier of:

24 (1) six years after (A) the date of the last action which constituted a part of

25 the breach or violation, or (B) in the case of an omission the latest date on

which the fiduciary could have cured the breach or violation, or

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(2) three years after the earliest date on which the plaintiff had actual

27 knowledge of the breach or violation[.]

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1 29 U.SC. § 1113. This same provision of ERISA sets forth an exception that applies

2 “in the case of fraud or concealment,” but neither party argues that this exception applies

3 here. (Mot. 11–12; see Opp’n 1–3.)

4 To determine a claim’s accrual date under 29 U.S.C. § 1113(2), courts first

5 “isolate and define the underlying violation upon which the plaintiff’s claim is

6 founded.” Guenther v. Lockheed Martin Corp., 972 F.3d 1043, 1052 (9th Cir. 2020)

7 (quoting Sulyma v. Intel Corp. Inv. Pol’y Comm., 909 F.3d 1069, 1072–73 (9th Cir.

8 2018) (“Sulyma I”), aff’d, Sulyma II). Second, courts determine “‘when the plaintiff

9 had “actual knowledge” of the alleged breach or violation,’ and whether suit was filed

10 within three years of the date that knowledge was obtained.” Id. (quoting Sulyma I,

11 909 F.3d at 1073); 9 U.S.C. § 1113(2).

12 1. Isolation and Definition of Underlying Violation

13 Regarding step one of this two-step analysis, Defendants argue that the Court

14 should isolate and define the underlying violation as Defendants’ decision to invest Plan

15 funds entirely and solely in CDs. (Mot. 10 (“Plaintiffs’ primary allegation relating to

16 Defendants’ purported breach of fiduciary duty is that Defendants invested nearly all of

17 the Plan’s assets in CDs, thereby causing the Plan to have ‘a smaller dollar amount of

18 assets than it would have had the [P]lan assets been invested differently.’” (quoting

19 Decl. Joseph Faucher ISO Mot. (“Faucher Decl.”) Ex. A (“Draney Dep.”) 44:16–21,

20 ECF No. 87-3)).)

21 Plaintiffs disagree and argue the Court should isolate and define the underlying

22 violations differently, as either (1) each individual purchase or sale of a CD, or (2) the

23 various breaches of Defendants’ duty to monitor that occurred on an ongoing basis

24 throughout the 2010s as Defendants maintained their allegedly insufficient investment

25 strategy. (Opp’n 4–7, 12.) As to this latter category, Plaintiffs argue that Defendants’

26 breaches of the duty to monitor include (1) failing to hire a professional investment

27 advisor; (2) failing to possess the requisite expertise to manage a pension plan;

28 (3) failing to hire a professional recordkeeper; (4) failing to possess the requisite

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1 expertise to keep records for the Plan; (5) failing to design and implement a process to

2 ensure the Plan complied with ERISA; and (6) failing to monitor and replace poorly

3 performing investments. (Opp’n 4–7; FAC ¶ 61.)

4 Plaintiffs’ argument is not well taken. Even if one or more of these events

5 qualifies as an underlying violation that could theoretically trigger the start of a new

6 limitations period, the triggering of any such period would not operate to revive a claim

7 that already expired under § 1113(2) due to actual knowledge of a breach and the

8 passage of three years. “Section 1113(2) is a statute of limitations, which ‘encourage[s]

9 plaintiffs to pursue diligent prosecution of known claims.’” Sulyma II, 140 S. Ct. at 774

10 (quoting Cal. Pub. Emps.’ Ret. Sys. v. ANZ Sec., Inc., 137 S. Ct. 2042, 2049 (2017));

11 Tibble v. Edison Int’l, 843 F.3d 1187, 1196 (9th Cir. 2016) (“Tibble II”) (noting

12 § 1113(2) operates to keep a plaintiff with actual knowledge of a breach “from sitting

13 on her rights and allowing the series of related breaches to continue”). In particular,

14 “[w]hen an ERISA breach is ongoing such that it may be characterized as multiple

15 violations, ‘the earliest date on which a plaintiff became aware of any breach starts the

16 limitation period of section 1113 running.’” Sulyma I, 909 F.3d at 1078 (quoting

17 Phillips v. Alaska Hotel & Rest. Emps. Pension Fund, 944 F.2d 509, 520 (1991))

18 (emphasis added) (cleaned up). Consistent with these principles, plaintiffs may not rely

19 on a “continuing breach” theory to overcome ERISA’s three-year statute of limitations

20 where the alleged breaches are all of the same character and the plaintiff knew of early

21 breaches more than three years before bringing suit. Phillips, 944 F.2d at 520 (“While

22 the trustees’ conduct may be viewed as a series of breaches, all were of the same

23 character: a failure to amend vesting rules. Once a plaintiff knew of one breach, an

24 awareness of later breaches would impart nothing materially new.”), as amended

25 (Dec. 6, 1991), cert. denied, 504 U.S. 911 (1992).

26 Applying this principle here, the individual purchases and sales of CDs that

27 happened throughout most of the 2010s were all of the same character, such that

28 Draney’s or Ibarra’s knowledge of additional purchases and sales of CDs would have

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1 imparted to them “nothing materially new” about Defendant’s underlying lack of

2 prudence. Id. The same is true of Defendants’ various alleged breaches of the duty to

3 monitor. These breaches were all of the same character because they are derivative of

4 and arise out of the original breach, which was Defendants’ decision, unchanged

5 throughout most of the 2010s, to maintain a CDs-only investment strategy. Thus, for

6 example, if a Plan participant knew in 2010 that the Plan was invested entirely in CDs,

7 and then in 2016 that participant gained some sort of newfound knowledge that

8 Defendants were at that point failing to “monitor or replace poorly performing

9 investments,” it would not be the case that a new limitations clock would begin in 2016.

10 The participant’s newfound knowledge would have imparted nothing new, because that

11 participant already knew, back in 2010, that the Plan was CDs-only, and the participant

12 could have acted to compel the plan administrator to replace the investments at that

13 time.

14 Moreover, this is not the type of duty-to-monitor case where a material change in

15 circumstances caused the accrual of a new and different cause of action with an

16 independently running limitations or repose period. As a contrasting example, in Baird

17 v. BlackRock Institutional Trust Co., 403 F. Supp. 3d 765 (N.D. Cal. 2019), the

18 plaintiffs alleged that their plan’s fund underperformed by 20% over time compared to

19 objective benchmark indices. 403 F. Supp. 3d at 772, 780. The court first noted that

20 these allegations, without more, would not necessarily establish that the fund was “an

21 imprudent choice at the outset.” Id. (quoting Meiners v. Wells Fargo & Co., 898 F.3d

22 820, 823 (8th Cir. 2018)). Even so, the court explained, fiduciaries nevertheless have a

23 duty to “monitor investments and remove imprudent ones.” Id. (quoting Terraza v.

24 Safeway Inc., 241 F. Supp. 3d 1057, 1076 (N.D. Cal. 2017)). The court found that the

25 plaintiffs stated a claim for breach of the duty to monitor because it was plausible that

26 the underperformance of the fund over time constituted new information that was not

27 available to the plan administrators when they first chose to make the funds available

28 to plan participants. See id. (“Plaintiffs allege more than just underperformance and a

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1 fee differential.”). By alleging that the plan administrators ignored or failed to act upon

2 this new information, the plaintiffs in Baird stated a timely claim for the plan

3 administrators’ breach of the duty to monitor. Id.; see also Tibble v. Edison Int’l,

4 575 U.S. 523, 529 (2015) (“Tibble I”) (“[T]he trustee cannot assume that if investments

5 are legal and proper for retention at the beginning of the trust, or when purchased, they

6 will remain so indefinitely.” (quoting A. Hess, G. Bogert, & G. Bogert, Law of Trusts

7 and Trustees § 684, pp. 145–146 (3d ed. 2009)).

8 Here, on the other hand, no party suggests that anything new happened (in the

9 market or elsewhere) in the mid-2010s that might have made a CDs-only investment

10 strategy an imprudent strategy where it was not before. To the extent Defendants had

11 an obligation to review the Plan’s portfolio and diversify its investments, that obligation

12 existed from the Plan’s very genesis, and certainly by 2010 or 2011. Nothing new

13 happened in the interim, and any continuing breaches were “of the same kind and

14 nature.” Phillips, 944 F.2d at 521.

15 At root, Plaintiffs are arguing for a new rule that would require courts to ignore

16 the fact that a three-year § 1113(2) limitations period has run merely because the

17 plaintiff points to a breach of a derivative duty to monitor that may have happened more

18 recently. But such a rule does not comport with case law; Phillips is very clear on this

19 point. Id. (“[I]f the breaches are of the same kind and nature and the plaintiff had actual

20 knowledge of one of them more than three years before commencing

21 suit, § 1113[](2) bars the action.”). And Phillips is still good law, even after Sulyma I

22 and Sulyma II. See Sulyma I, 909 F.3d at 1074 (discussing Phillips and distinguishing

23 it on the basis that actual knowledge of the breach was not at issue); Sulyma II, 140 S.

24 Ct. at 779 (affirming Sulyma I).

25 The parties engage with the Tibble series of cases on this point, including the

26 cases the Court has labeled herein as Tibble I and Tibble II. For purposes of this Order,

27 it suffices to say that Tibble I and Tibble II contribute nothing to today’s discussion for

28 the simple reason that actual knowledge was not at issue. Thus, Tibble I and Tibble II

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1 dealt only with 29 U.S.C. § 1113(1) and not § 1113(2). Tibble I, 575 U.S. at 525

2 (framing issue for decision as “whether a fiduciary’s allegedly imprudent retention of

3 an investment is an ‘action’ or ‘omission’ that triggers the running of the 6-year

4 limitations period (quoting 29 U.S.C. § 1113(1)); Tibble II, 843 F.3d at 1196 n.3 (“The

5 district court held that . . . § 1113(2) [was] inapplicable. . . . We affirmed . . . . The

6 Supreme Court also applied § 1113(1).”).

7 The Supreme Court has described § 1113(1) as a “statute of repose,” Sulyma II,

8 140 S. Ct. at 774, reflecting the legislature’s intent “that a defendant should be free from

9 liability after the legislatively determined period of time,” ANZ Sec., 137 S. Ct. at 2049,

10 regardless of when a plaintiff may have learned of pertinent information. Because the

11 plaintiffs in the Tibble cases did not have knowledge of the underlying transactions or

12 decisions, the § 1113(2) three-year statute of limitations was not at issue, and the Tibble

13 tribunals never had occasion to consider the interplay between the earlier running of a

14 three-year limitations period and the later running of a derivative limitations or repose

15 period. The same is true of Terraza, cited by Plaintiffs; in that case, the defendants did

16 not argue that the plaintiff had actual knowledge, and the plaintiff “affirmatively

17 allege[d] that she did not have such knowledge until shortly before th[e] lawsuit was

18 filed.” 241 F. Supp. 3d at 1069. Here, by contrast, the three-year statute of

19 limitations—§ 1113(2)—is at issue with respect to both Draney and Ibarra, because, as

20 will be explained in the next section, the evidence shows it is undisputed that both

21 Draney and Ibarra had the requisite actual knowledge at a point in the past.

22 To summarize, the Court has isolated and defined the underlying violation as the

23 investment of the Plan solely in CDs, and has rejected the argument that later similar

24 transactions and related or derivative breaches of the duty to monitor qualify as

25 underlying violations triggering new limitations periods that supersede or invalidate an

26 earlier expiration under § 1113(2). Thus, if, more than three years before commencing

27 suit, Draney and Ibarra had actual knowledge that the Plan was invested solely in CDs,

28 then § 1113(2) “bars the action,” Phillips, 944 F.2d at 521, even if they point to later,

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1 related, derivative breaches that may have taken place. See Tibble II, 843 F.3d at 1196

2 (“When a plaintiff has actual knowledge of a breach, § 1113(2) operates to keep her

3 from sitting on her rights and allowing the series of related breaches to continue.”).

4 2. Plaintiffs’ Actual Knowledge

5 The Court now considers whether each named Plaintiff had knowledge of the

6 defined underlying violation—the investment of the Plan in CDs—more than three

7 years before the Complaint was filed. Guenther, 972 F.3d at 1052.

8 a. Draney

9 The Court first considers whether Draney knew, more than three years before

10 bringing suit, that the Plan was invested solely in cash and CDs. 29 U.S.C. § 1113(2).

11 Draney does not dispute that by 2011 at he latest he was aware of how the Plan was

12 invested—that is, that he was aware that the Plan was invested solely in cash and CDs.

13 (See, e.g., SUF 16.) The § 1113(2) three-year statute of limitations thus ran by 2014 at

14 the latest, well before he brought suit in 2019. Compare In re Northrop Grumman

15 Corp. ERISA Litig., No. 2:06-cv-06213-MMM (JCx), 2015 WL 10433713, at *23 (C.D.

16 Cal. Nov. 24, 2015) (“In re Northrop”) (concluding plaintiff’s continuing violation

17 theory “founders on the plain language” of ERISA’s three-year statute of limitations

18 (quoting Phillips, 944 F.2d at 520), where discrete deductions of excessive fees from

19 participant investments were “of the same character”), with Marshall v. Northrop

20 Grumman Corp., No. 2:16-cv-06794-AB (JCx), 2017 WL 2930839, at *11 (C.D. Cal.

21 Jan. 30, 2017) (recognizing, on motion to dismiss, a duty-to-monitor claim, and finding

22 claim timely, where changes in circumstances caused corresponding change in

23 prudence of investments).

24 Draney knew in 2010 or 2011 that the Plan was invested solely in cash and CDs,

25 and any breaches of the duty of prudence that happened after that time, including any

26 alleged failure to monitor, were merely breaches of the same kind and nature. Thus, a

27 three-year statute of limitations began to run in 2010 or 2011, and the period was not

28 altered or reset by any future breaches. Draney’s duty of prudence claim, filed in 2019,

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1 is time-barred. The Court correspondingly grants Defendants’ Motion as to Draney’s

2 duty of prudence claim (Claim One) and dismisses Draney’s claim with prejudice.

3 b. Ibarra

4 The Court next considers whether Ibarra knew, more than three years before

5 bringing suit, that the Plan was invested solely in cash and CDs. 29 U.S.C. § 1113(2).1

6 Unlike with Draney, the issue of when Ibarra gained “actual knowledge” is in dispute,

7 at least nominally. (See Opp’n 10.) To determine whether this dispute precludes

8 summary judgment, the Court must consider (1) whether there is a factual dispute over

9 what Ibarra knew, and, given that there is not, (2) whether Ibarra’s undisputed

10 knowledge constitutes “actual knowledge” under § 1113(2).

11 i. No genuine factual dispute about what Ibarra knew

12 What the parties do not dispute is that (1) “[a]round 2011, Mr. Ibarra had seen at

13 least one participant statement showing the Plan’s assets were invested in cash or CDs,”

14 and (2) Ibarra is able to read “some” English. (SUF 23, 24.) The Participant Statement

15 is only five pages long, and the last page clearly shows the CDs-only investment

16 strategy:

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1 Defendants argue in a footnote that Landwehr v. DuPree, 72 F.3d 726, 732 (9th Cir. 1995), stands

25 for the proposition that an entire case is time-barred if any named plaintiff had actual knowledge of

the alleged breach more than three years before the complaint’s filing. (Mot. 6–7 n.1.) This rather

26 remarkable suggestion finds no support in Landwehr or any other case law of which the Court is aware.

See Browe v. CTC Corp., 15 F.4th 175, 191–92 (2d Cir. 2021) (discussing Landwehr and specifying

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that “[a]n individual participant’s failure to act in a timely way on her knowledge of a fiduciary breach

28 may prevent her from bringing suit but does not forever foreclose others from vindicating the rights

of all who are affected by the breach”).

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2 Westco Chemicals, Inc.

3 Retirement Plan

FYE 9-30-11

Ending Assets

5

Cash & Cash Funds:

Wells Fargo -2.19%

Certificates of Deposit:

Ally Bank CD 8-18-14 1.78%

9 Ally Bank CD 5-26-15 3.37%

American Exp Centurion Bk 4-2-12 2.93%

10 Bank of America 5-21-12 1.46%

Bank of Holland 6-12-12 2.92%

11 BMW Bank North America CD 9-23-14 2.91%

Colombus CD 2-22-12 5.84%

12 Colombus CD 4-9-12 5.85%

First Commercial 10-14-11 2.91%

B First National Bank CD 11-18-13 7.31%

First Trust Int. Rate Hedge Series 20 Cash 0.76%

14 GE Money Bank CD 11-7-11 1.46%

GE Money Bank 10-15-14 5.85%

Goldman Sachs Bank USA CD 6-10-13 5.90%

15 Goldman Sachs Bank USA CD 10-5-15 2.91%

Harris Nat'l Assn CD 4-15-19 4.67%

16 Heritage Bank Comm CD 1-31-14 1.78%

Hinsdale Bk CD 7-22-13 5.87%

17 Key Source Caml Bk 1-9-14 2.95%

Lake Forest 7-15-13 7.34%

18 Lakeside Bank 9-17-15 3.18%

Metlife Bank Nat'l Assn CD 10-21-13 2.28%

19 Metlife Bank Nat'l Assn CD 11-4-13 2.49%

Mizrahi Tafahot Bk CD 3-25-15 1.02%

20 Plainscap Bk CD 6-11-12 2.78%

Tennessee Comm Bk CD 4-17-15 3.46%

21 Tennessee Comm Bk, CD 6-30-15 0.87%

World Fin'l 4-15-12 5.84%

22 World Fin'l 9-21-15 2.91%

23

24 Participant Loans: 0.58%

25

26 || (Faucher Decl. 4 5 Ex. D (“Ibarra Participant Statement’’) 5, ECF No. 87-6.)

27 Defendants meet their initial burden on summary judgment by pointing out the

28 || undisputed fact that, by 2011, Mr. Ibarra had seen at least one participant statement

13

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1 showing the Plan’s assets were invested solely in cash or CDs. This provides sufficient

2 evidence from which a jury could conclude that Ibarra was aware of how the Plan was

3 invested.

4 In response, Plaintiffs submit a declaration from Ibarra in which Ibarra states that,

5 while he did receive two participant statements, one in 2009 and one in 2011, he “do[es]

6 not recall reading the documents when [he] received them.” (Decl. Lorenzo Ibarra ISO

7 Opp’n (“Ibarra Decl.”) ¶ 3, ECF No. 89-3.) He further declares that these disclosures

8 “did not suggest to [him] there was anything wrong with or anything to be concerned

9 about regarding the Plan.” (Id. ¶ 5.)

10 Ibarra’s declaration fails to place in genuine dispute Defendants’ showing that

11 Ibarra knew in 2011 how the Plan was invested. While Ibarra does not recall reading

12 the Statements, he clearly did read at least one of them, as indicated by paragraph five

13 of his declaration and the undisputed fact that by 2011 he “had seen at least one

14 participant statement showing the Plan’s assets were invested in cash or CDs.”

15 (SUF 23.) Moreover, there is no evidence suggesting Ibarra was not able to read and

16 comprehend the Statements. Instead, the evidence before the Court tends to indicate

17 only the contrary. Ibarra declares he is able to read “some English,” (Ibarra Decl. ¶ 4),

18 and when shown a copy of the Participant Statement during this deposition, he

19 confirmed he was able to read it. (Faucher Decl. ¶ 4 Ex. C (“Ibarra Dep.”) 12:25–13:1,

20 ECF No. 87-5 (“Q: Can you read this English document?” A: “Yes.”).)

21 To the extent Ibarra’s lack of memory contradicts the rest of the record, Plaintiffs

22 nevertheless fail to demonstrate a genuine dispute of fact. Self-serving testimony that

23 contradicts prior or concurrent testimony does not create a genuine factual dispute. See

24 Van Asdale v. Int’l Game Tech., 577 F.3d 989, 998 (9th Cir. 2009) (“The general rule

25 in the Ninth Circuit is that a party cannot create an issue of fact by an affidavit

26 contradicting his prior deposition testimony.” (quoting Kennedy v. Allied Mut. Ins. Co.,

27 952 F.2d 262, 266 (9th Cir. 1991))); see also Kennedy v. Applause, Inc., 90 F.3d 1477,

28 1481 (9th Cir. 1996) (“[T]his deposition testimony flatly contradicts both her prior

14

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1 sworn statements and the medical evidence. As such, we conclude her deposition

2 testimony does not present ‘a sufficient disagreement to require submission to a jury.’”

3 (footnote omitted) (quoting Anderson, 477 U.S. at 251–52)). Thus, to the extent

4 Ibarra’s inability to recall reading the Participant Statement contradicts either (1) his

5 testimony that the Participant Statement did not suggest to him that there was anything

6 wrong with the Plan, (Ibarra Decl. ¶ 5), or (2) his concession that he “had seen” a

7 Participant Statement “showing the Plan’s assets were invested in cash or CDs,” (SUF

8 23), the contradiction does not create a genuine factual dispute. Van Asdale, 577 F.3d

9 at 998; see Sulyma II, 140 S. Ct. at 779 (instructing that if a plaintiff’s denial of

10 knowledge is “blatantly contradicted by the record,” “a court should not adopt that

11 version of the facts for purposes of ruling on a motion for summary judgment” (quoting

12 Scott v. Harris, 550 U.S. 372, 380 (2007)).

13 ii. As a matter of law, what Ibarra knew constitutes “actual

14 knowledge”

15 The Court next considers whether the undisputed fact of Ibarra’s knowledge is

16 sufficient to allow the Court to conclude that, as a matter of law, Ibarra had “actual

17 knowledge” such that § 1113(2) was triggered. In Sulyma I, the Ninth Circuit

18 considered at length the “actual knowledge” requirement of the ERISA three-year

19 statute of limitations and noted that “actual knowledge” “mean[s] something between

20 bare knowledge of the underlying transaction, which would trigger the limitations

21 period before a plaintiff was aware he or she had reason to sue, and actual legal

22 knowledge, which only a lawyer would normally possess.” 909 F.3d at 1075 (emphasis

23 added). Pursuant to Sulyma I, in a duty of prudence case, “the plaintiff must be aware

24 [1] that the defendant has acted and [2] that those acts were imprudent.” Id. Here, as

25 discussed, the evidence shows that Ibarra read the 2011 Participant Statement, including

26 its last page, which is a clear list of the portfolio’s investments. This evidence

27 establishes the first prong—that Ibarra knew that Defendants “ha[d] acted.” Sulyma I,

28 909 F.3d at 1075.

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1 The remaining issue, therefore, is whether Ibarra had knowledge that the Plan’s

2 investment strategy was imprudent. Sulyma I, 909 F.3d at 1075. On one hand, “[t]he

3 disclosure of a transaction that is not inherently a statutory breach of fiduciary duty . . .

4 cannot communicate the existence of an underlying breach.” Fink v. Nat’l Sav. & Tr.

5 Co., 772 F.2d 951, 957 (D.C. Cir. 1985); Sulyma I, 909 F.3d at 1075 (confirming the

6 continued viability of this observation from Fink). On the other hand, the triggering of

7 the three-year limitations period does not require that a plaintiff understand “that the

8 facts establish a cognizable legal claim under ERISA.” In re Northrop, 2015 WL

9 10433713, at *19 (quoting Wright v. Heyne, 349 F.3d 321, 330 (6th Cir. 2003);

10 Sulyma I, 909 F.3d at 1075. The question here is whether Ibarra knew that the Plan’s

11 investment strategy was imprudent, keeping in mind that this standard is something less

12 than understanding that he had a legal claim under ERISA.

13 The answer to this question is ‘yes.’ Plaintiffs themselves allege that a retirement

14 investment portfolio consisting entirely of CDs is per se imprudent:

15

The [Department of Labor] has stated in the preamble to regulations issued

16 under the fiduciary rules of ERISA Section 404 that capital preservation

funds, like certificates of deposit, were not appropriate long-term default

17

investments because they would not produce returns that were equivalent

18 to funds with greater exposure to equities and were less likely, therefore,

to produce returns that would be needed to provide adequate income at

19

retirement.

20

21 (FAC ¶ 62.) The conclusions of both parties’ experts support this allegation; the

22 experts agree that, between 2013 and 2018, the Plan suffered over $600,000 in losses

23 as a result of the CDs-only investment strategy. (Opp’n 7; Decl. Michael C. McKay

24 ISO Mot. Prelim. Settlement Approval ¶ 9, ECF No. 60-4 (“Plaintiffs’ expert

25 witness . . . opined that the class monetary damages were between $778,308 and

26 $710,441 . . . . Defendants’ expert . . . opined that class monetary damages were

27 between $698,089 and $616,944 . . . .”).) Additionally, the undisputed evidence

28 indicates that “most if not all” of Westco’s employees were dissatisfied with the Plan’s

16

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1 investment in CDs and that it was a “running joke” in the company. (SUF 18–19.)

2 Moreover, one need not wait to see how CDs will perform; the yield on a CD is known

3 from the start, and the passage of time is not required to understand that a CD is a low-

4 risk, low-return investment vehicle. Cf. Marine Bank v. Weaver, 455 U.S. 551, 559

5 (1982) (“[T]he holders of bank certificates of deposit are abundantly protected under

6 the federal banking laws.”). Under these facts, Defendants’ CDs-only investment

7 strategy was “inherently a statutory breach of fiduciary duty” from the outset. Fink,

8 772 F.2d at 957. Thus, under the facts of this case, no reasonable juror could find that

9 Ibarra’s knowledge of the fact of the CDs-only investment strategy did not equate to

10 knowledge that the investment strategy was imprudent.

11 Ibarra’s declaration, (Ibarra Decl. ¶¶ 3–6), does not alter this conclusion. Ibarra

12 knew the Plan was invested in only CDs, and it was and is commonly known, both at

13 Westco and in general, that such an investment strategy would not yield acceptable

14 returns for Plan participants. Thus, Ibarra knew that the Plan’s strategy was imprudent,

15 and he cannot avoid this finding on the basis of “willful blindness” to what was obvious

16 and clear to him. See Sulyma II, 140 S. Ct. at 779 (noting that evidence of “willful

17 blindness” may properly support a finding of “actual knowledge”).

18 When, Ibarra received and saw a Participant Statement, which happened no later

19 than 2011, he had actual knowledge of Defendants’ imprudent investments under

20 29 U.S.C. § 1113(2). Thus, the three-year limitations period began to run at that time,

21 and expired at the latest in 2015. As Ibarra did not bring his duty of prudence claim

22 until 2019, his claim is time-barred. Moreover, for the reasons discussed in the previous

23 section in relation to Draney, Plaintiffs’ allegations and arguments regarding continuing

24 violations and the duty to monitor do not alter this conclusion. The Court therefore

25 grants Defendants’ Motion as to Ibarra’s duty of prudence claim (Claim One) and

26 dismisses Ibarra’s claim with prejudice.

27

28

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1 B. Duty of Loyalty

2 Plaintiffs’ second claim is for breach of the duty of loyalty that ERISA plan

3 fiduciaries owe under 29 U.S.C. § 1104(a)(1)(B). (FAC ¶¶ 68–73.) “ERISA requires

4 that plan fiduciaries . . . act ‘solely in the interest of the participants and beneficiaries,’

5 and ‘for the exclusive purpose of . . . providing benefits to participants and their

6 beneficiaries.’” Anderson v. Intel Corp. Inv. Pol’y Comm., 579 F. Supp. 3d 1133, 1155

7 (N.D. Cal. 2022) (second alteration in original) (quoting 29 U.S.C. § 1104(a)(1)(A)),

8 appeal docketed, No. 22-16268 (9th Cir. Aug. 22, 2022); White v. Chevron Corp.,

9 No. 16-cv-0793-PJH, 2016 WL 4502808, at *4 (N.D. Cal. Aug. 29, 2016) (noting plan

10 fiduciaries must act “with an eye single to the interests of the participants and

11 [beneficiaries]” (quoting Donovan v. Bierwirth, 680 F.2d 263, 271 (2d Cir. 1982))).

12 Plaintiffs’ duty of loyalty claim is based on the same underlying wrong as the

13 duty of prudence claim: maintaining the Plan’s investments entirely in CDs. Plaintiffs

14 allege that such action was disloyal because Defendants placed their own interests

15 above those of the Plan’s participants. (See FAC ¶ 70C (accusing Defendants of

16 “[s]electing only certificates of deposit for the 401(k) Plan because Ezekiel and Steven

17 Zwillinger personally want to invest only in certificates of deposit in part because they

18 have other retirement resources and are not concerned about returns on the Plans’

19 assets”).)

20 Defendants meet their burden on summary judgment by arguing that the duty of

21 loyalty claim, like the duty of prudence claim, is barred by ERISA’s three-year statute

22 of limitations, and by pointing to the evidence they submitted in connection with the

23 duty of prudence claim. (Mot. 8.) Thus, to save the duty of loyalty claim from the same

24 fate as the duty of prudence claim, Plaintiffs need to distinguish the former from the

25 latter in some material way. But Plaintiffs point to no breaches of the duty of loyalty

26 that could be viewed as separate and apart from the alleged breaches of the duty of

27 prudence. (See generally Opp’n.) Thus, Plaintiffs fail to distinguish the two claims,

28 and accordingly, any breaches of the duty of loyalty fall outside the limitations period

18

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1 to the same extent as the breaches of the duty of prudence. Accordingly, the duty of

2 loyalty claim is likewise time-barred by ERISA’s three-year statute of limitations. Cf.

3 Tobias v. NVIDIA Corp., No. 20-CV-06081-LHK, 2021 WL 4148706, at *16

4 (N.D. Cal. Sept. 13, 2021) (dismissing claim for breach of the duty of loyalty where

5 claim “hing[ed] entirely on breach of the duty of prudence allegations”). The Court

6 therefore grants Defendants’ Motion as to Draney’s and Ibarra’s duty of loyalty claim

7 (Claim Two) and dismisses that claim with prejudice.

8 C. Denial of Class Certification and Dismissal

9 Plaintiffs filed a Motion to Certify Class, which is fully briefed and under

10 submission. (Mot. Certify Class, ECF No. 95; ECF No. 109 (taking matter under

11 submission).) In the Motion to Certify Class, Draney and Ibarra propose themselves as

12 Lead Plaintiffs. (Id.) However, as discussed above, Draney’s and Ibarra’s claims are

13 time-barred, such that dismissal of their individual claims with prejudice is appropriate.

14 “When a defendant has obtained summary judgment against putative class

15 plaintiffs, a motion for class certification becomes moot.” Sperling v. Stein Mart, Inc.,

16 291 F. Supp. 3d 1076, 1087 (C.D. Cal. 2018); see Wu v. Sunrider Corp., No. 2:17-cv-

17 04825-DSF (SSx), 2018 WL 2717863, at *1 (C.D. Cal. May 29, 2018) (denying class

18 certification motion as moot after granting summary judgment on all of the named

19 plaintiff’s claims); cf. Emp’rs-Teamsters Local Nos. 175 & 505 Pension Tr. Fund v.

20 Anchor Cap. Advisors, 498 F.3d 920, 924 (9th Cir. 2007) (“[A] suit brought as a class

21 action must as a general rule be dismissed for mootness when the personal claims of all

22 named plaintiffs are satisfied and no class has been properly certified.”). Accordingly,

23 the Court denies Plaintiffs’ Motion to Certify Class as moot and dismisses the remainder

24 of the action, including by dismissing the class claims without prejudice.

25 ///

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5 VI. CONCLUSION

6 For the foregoing reasons, the Court GRANTS Defendants’ Motion for

7 || Summary Judgment. (ECF No. 87.) The Court DISMISSES the First Amended

8 | Complaint (1) WITH PREJUDICE as to Draney’s and Ibarra’s individual claims and

9 || (2) WITHOUT PREJUDICE as to the class claims. Plaintiffs’ Motion to Certify Class

10 | is DENIED AS MOOT. (ECF No. 95.)

11 All dates and deadlines in this matter are VACATED and taken off calendar.

12 || The Court will issue Judgment.

13

14 IT IS SO ORDERED.

15

16 February 23, 2023 NN .

17

18 led

19 OTIS D. WRIGHT, I

90 UNITED STATES DISTRICT JUDGE

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