The opinion of the court was delivered by: Stengel, J.
Wachovia Bank has filed a motion to dismiss this ERISA and securities case. After hearing oral argument and upon consideration of the motion and plaintiffs' response, I will dismiss this case with prejudice.
The facts in this case are straightforward. The plaintiffs, Olivet Boys' & Girls' Club of Reading and Berks County ("Club") and Olivet Boys' & Girls' Club of Reading and Berks County Money Purchase Pension Plan ("Plan") claimed that defendant Wachovia Bank breached its fiduciary duty under ERISA, as well as under the common law, misrepresented information and violated the Securities Exchange Act's section 10(b).
In September 2007, Wachovia sent a form letter to the Club and others who had invested in the Evergreen Limited Duration Fund ("Limited Duration Fund") explaining that the fund would be merging into the Evergreen Ultra Short Opportunities Fund ("Ultra Short Fund") and requesting that the Club consent to the exchange of the Plan's shares of the former fund for those of the new Ultra Short Fund. All of the Plan's assets were invested in the Limited Duration Fund.
Plaintiffs claim that in the form letter, Wachovia misrepresented that the two Funds' investment objectives and principal investment strategies were "substantially similar." Complaint at ¶¶ 13, 24, 27, 39; Ex. B. Further, the plaintiffs allege that a "simple review" of the funds' investment strategies "makes it clear" that they are not similar. Id. at ¶ 41. Nevertheless, plaintiffs consented to the exchange of their shares on October 1, 2007. As a result of Wachovia's alleged misrepresentation, plaintiffs claim they lost $200,000.
A. ERISA Claims Will Be Dismissed
There are four necessary elements of a breach of fiduciary duty claim under ERISA section 1109(a): (1) defendant's status as ERISA fiduciary acting as a fiduciary; (2) a misrepresentation by defendant; (3) the materiality of the misrepresentation; and (4) detrimental reliance by plaintiff on the misrepresentation. Stanford v. Foamex L.P., No. 07-4225, 2008 WL 3874823 at 31 - 32 (E.D. Pa. 2008) (citing Burstein v. Retirement Account Plan for Employees of Allegheny Health Education and Resources Foundation, 334 F.3d 365, 384 (3d Cir. 2003)). In this case, the first and fourth element pose particular problems for the plaintiffs.
1. Wachovia is Not an ERISA Fiduciary
Wachovia cannot be a fiduciary under ERISA because it did not render investment advice. Even plaintiffs describe Wachovia's actions with respect to the new fund as marketing. Complaint ¶13 and 23. It appears that the Third Circuit has not addressed the issue of whether marketing constitutes ERISA's individualized investment advice under § 1002(21)(A)(ii), but at least one other district court has addressed the issue. In Black v. Bresee's Oneonta Dep't Store, Inc. Sec. Plan, 919 F. Supp. 597, 606 (N.D.N.Y. 1996), the Northern District of New York held that mere marketing of a plan does not implicate fiduciary conduct.
Plaintiffs' response states that they could not possibly allege facts to meet the rule's requirement of "individualized investment advice" because they "have no way of knowing what advice Wachovia provided to other clients." Resp. (Doc. # 18) at page 13. However, none of the facts or circumstances of this case justify plaintiffs pleading something less than the rules require. Simply because plaintiffs do not know who else may have gotten the same advice as them, does not mean that the communication from Wachovia was not "advice."
The relevant ERISA regulations explain that fiduciaries must have discretionary authority with respect to purchasing or selling securities for the plan on a regular basis, pursuant to a mutual agreement that the services "will serve as a primary basis for investment decisions" and that the investment advice will be "individualized." 29 C.F.R. § 2510.3-21(c); Hussey v. Chase Manhattan Bank, 418 F. Supp. 2d 702, 714 (E.D. Pa. 2005) (a person is a fiduciary under ERISA only to the extent "he has any discretionary authority or discretionary responsibility in the administration of such plan"). Here, the plaintiffs have not alleged and appear unable to show, under the facts as they describe them, that Wachovia had any discretionary authority over the Plan. In fact, ...