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Bell v. Pension Committee of Ath Holding Company, LLC

United States District Court, S.D. Indiana, Indianapolis Division

January 30, 2019

MARY BELL, JANICE GRIDER, CINDY PROKISH, JOHN HOFFMAN, and PAMELA LEINONEN individually and as representatives of a class of similarly situated persons of the Anthem 401k Plan formerly the WellPoint 401k Retirement Savings Plan, Plaintiffs,
v.
PENSION COMMITTEE OF ATH HOLDING COMPANY, LLC, ATH HOLDING COMPANY, LLC, and BOARD OF DIRECTORS OF ATH HOLDING COMPANY, LLC, Defendants. VANGUARD GROUP, INC., Interested Party.

          ENTRY ON MOTION FOR SUMMARY JUDGMENT

          TANYA WALTON PRATT, JUDGE UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA

         This matter is before the Court on a Motion for Summary Judgment filed pursuant to Federal Rule of Civil Procedure 56 by Defendants Pension Committee of ATH Holding Company, LLC (“the Pension Committee”), ATH Holding Company, LLC (“ATH”), and Board of Directors of ATH Holding Company, LLC (“the Board”) (collectively, “Defendants”). (Filing No. 218.) The Second Amended Complaint filed by Plaintiffs Mary Bell (“Bell”), Janice Grider, Cindy Prokish, John Hoffman (“Hoffman”), and Pamela Leinonen (collectively, “Plaintiffs”), asserts class action claims for Counts I-IV, breach of duties; Count V, failure to monitor fiduciaries; and Count VI, refusal to supply requested information. (Filing No. 87.) The Defendants contend that they are entitled to judgment as a matter of law on all claims. For the following reasons, the Court denies Defendants' Motion for Summary Judgment.

         I. BACKGROUND

         The following facts are not necessarily objectively true, but as required by Federal Rule of Civil Procedure 56, the facts are presented in the light most favorable to Plaintiffs as the non-moving party. See Zerante v. DeLuca, 555 F.3d 582, 584 (7th Cir. 2009); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

         The Defendants are fiduciaries of the Anthem 401(k) Plan (“the Plan”).[1] The Plan is a defined contribution plan within the meaning of the Employee Retirement Income Security Act of 1974 (“ERISA”). See 29 U.S.C. § 1002(34). The Plan is sponsored by ATH and, as of December 31, 2014, is one of the largest 401(k) plans in the United States, with over $5.1 billion in total assets. It provides retirement income for employees of ATH and any direct or indirect subsidiary of the company that has been offered the Plan. The retirement benefits are limited to the value of an employee's account, which depends upon employee and employer contributions, as well as investment options' fees and expenses. Plaintiffs are current and former participants of the Plan. The Pension Committee is appointed by the Board and serves as the Plan's administrator which entails responsibility for the control, management, and administration of the Plan's investment options.

         Defendants select and determine the available investment options offered in the Plan. (Filing No. 87 at 7.) These decisions are made at the Plan level; therefore, the available options and the associated expenses are the same for all Plan participants. The Plan offers three tiers of investment options: Tier 1, the Target Date Funds; Tier 2, the Core Funds; and Tier 3, the Vanguard Brokerage Option. (Filing No. 123 at 10.) The Plan's investment options vary based on risk and return profiles. Vanguard Group, Inc. (“Vanguard”) is the Plan's recordkeeper, and the Plan pays Vanguard investment management fees which are deducted from participants' accounts on a pro rata basis, based on each fund's “expense ratio”-a percentage of a fund's assets charged for “expenses that reduce the rate of return of the investment option.” (Filing No. 38-3 at 6.) Until 2013, Defendants compensated Vanguard for its administrative services (primarily recordkeeping) through revenue sharing payments from the Plan's mutual funds, paid through a portion of the Plan's mutual funds expense ratios. (Filing No. 87 at 30.) Effective July 22, 2013, Defendants charged a flat annual recordkeeping fee of $42.00 to each participant's account with a balance of over $1, 000.00. (Filing No. 38-4 at 6.)

         On March 23, 2017, this Court denied in part and granted in part Defendants' Motion to Dismiss. (Filing No. 80 at 2.) The Court dismissed Plaintiffs' claim regarding the Vanguard Prime Money Market Fund (the “Money Market Fund”) without prejudice. Plaintiffs then filed the operative Second Amended Complaint, which provides additional facts supporting the Money Market Fund claim. (SeeFiling No. 87 at 82-85.) Plaintiffs allege that Defendants breached their fiduciary duties by causing Plaintiffs' retirement plan to pay excessive investment and management fees to Vanguard, and also invested in an imprudent money market fund, resulting in tens of millions of dollars of Plan losses. In their Second Amended Complaint, Plaintiffs made the following claims against Defendants: (1) Defendants provided investment options charging unreasonable management fees compared to available superior institutional investment products (Count I); (2) Defendants failed to monitor and control the excessive administrative expenses paid to Vanguard (Count II); (3) Defendants provided the Money Market Fund as the Plan's sole capital preservation option even though it did not provide any meaningful retirement benefits (Count III); (4) Defendants failed to prudently and regularly monitor the Money Market Fund (Count IV); (5) Defendant ATH breached its fiduciary duty by failing to monitor the Pension Committee, the entity to which it delegated its fiduciary duty (Count V); and (6) Defendant Pension Committee violated ERISA document production requirements by failing to timely provide Plaintiffs with requested material (Count VI). (Filing No. 87 at 78-92.)

         Plaintiffs initially sought certification of the following classes:

Administrative Fee and Investment Management Fee Class
All participants and beneficiaries of the Anthem 401(k) Plan (formerly the WellPoint 401(k) Retirement Savings Plan) from December 29, 2009 through the date of judgment, excluding the Defendants.
Money Market Fund Class
All participants and beneficiaries of the Anthem 401(k) Plan (formerly the WellPoint 401(k) Retirement Savings Plan) who, from December 29, 2009 through the date of judgment, excluding the Defendants, invested in the Vanguard Money Market Fund.

Id. at 5. The Court certified the Money Market Fund Class but denied Plaintiffs' motion to certify the Administrative Fee and Investment Management Fee Class because that class failed to satisfy Federal Rule of Civil Procedure 23(a)'s typicality requirement. (Filing No. 215.)

         On January 24, 2019, the Court granted the Plaintiffs' Motion to Modify the Class Certification Order, certifying the Administrative Fee and Investment Management Fee Class with the following subclasses:

Flat Fee Subclass
All participants and beneficiaries of the Anthem 401(k) Plan (formerly the WellPoint 401(k) Retirement Savings Plan) who had an account balance greater than $1, 000.00 at any time from July 22, 2013 through the date of judgment, excluding the Defendants.
Revenue Sharing Subclass
All participants and beneficiaries of the Anthem 401(k) Plan (formerly the WellPoint 401(k) Retirement Savings Plan) who had a reduction in the value of their account balance at a rate of more than $35.00 per year due to revenue sharing payments to The Vanguard Group at any time from December 29, 2009 through July 21, 2013, excluding the Defendants.

(Filing No. 347.) On September 26, 2018, Defendants moved for summary judgment on all claims. (Filing No. 218.) More facts will follow below as necessary.

         II. LEGAL STANDARD

         The purpose of summary judgment is to “pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial.” Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587106 S.Ct. 1348 (1986). Federal Rule of Civil Procedure 56 provides that summary judgment is appropriate if “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Hemsworth v. Quotesmith.com, Inc., 476 F.3d 487, 489-90 (7th Cir. 2007). In ruling on a motion for summary judgment, the court reviews “the record in the light most favorable to the non-moving party and draw[s] all reasonable inferences in that party's favor.” Zerante, 555 F.3d at 584 (citation omitted). “However, inferences that are supported by only speculation or conjecture will not defeat a summary judgment motion.” Dorsey v. Morgan Stanley, 507 F.3d 624, 627 (7th Cir. 2007) (citation and quotation marks omitted). Additionally, “[a] party who bears the burden of proof on a particular issue may not rest on its pleadings, but must affirmatively demonstrate, by specific factual allegations, that there is a genuine issue ...


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