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Renfro v. Unisys Corp.

April 26, 2010


The opinion of the court was delivered by: Schiller, J.


Plaintiffs, Mark Renfro and Gerald Lustig, allege on behalf of a putative class that various defendants violated fiduciary duties imposed upon them by the federal Employee Retirement Income Security Act ("ERISA"). Plaintiffs claim that Defendants caused them to pay excessive fees for investments in their retirement savings plan. Two motions are currently before the Court: a motion to dismiss filed by one set of Defendants and a motion to dismiss or in the alternative for summary judgment filed by another set of Defendants. For the reasons explained below, both motions will be granted.


Unisys Corporation ("Unisys") is engaged in the business of information technology consulting. (Sec. Am. Compl. ¶ 5.) Unisys sponsors the Unisys Corporation Savings Plan (the "Plan"), a defined contribution savings plan (commonly referred to as a 401(k) plan) in which employees can contribute a portion of their earnings to an individual account. (Id. at ¶¶ 5, 33.) Employees contributing to these accounts receive certain tax advantages and partial matching contributions from Unisys. (Id. at ¶ 34.) Each participant's account is credited with the participant's contributions, the participant's share of matching contributions, and the earnings or losses on the investments the participant chose. (Id. at ¶ 35.)

Unisys has delegated some of its authority for administration of the Plan to several committees. Unisys's Board of Directors selects the members of these committees. Defendants J.P. Buldoc, Matthew J. Espe, Gail D. Fosler, Randal J. Hogan, Clayton M. Jones, Clay B. Lifflander, Theodore E. Martin, Charles B. McQuade, and Lawrence W. Weinbach (collectively the "Individual Defendants") served on the Unisys Board's Finance Committee. (Id. at ¶ 7.) Plaintiffs allege that this committee and its individual members are "responsible for issuing the investment guidelines to be used by the other Plan fiduciaries in the selection, retention and removal of investment options available in the Plan, and monitoring them to determine whether they are complying with their fiduciary obligations." (Id.) Plaintiffs allege that the Unisys Corporation Employee Benefits Administrative Committee (the "Administrative Committee") and the Unisys Corporation Savings Plan Manager (the "Plan Manager") are plan administrators under ERISA. (Id. at ¶ 9.) The Court will refer to all the defendants associated with Unisys collectively as the "Unisys Defendants."

In 1993, Unisys and Fidelity Management Trust Company ("FMTC"), a Massachusetts Corporation, entered into a trust agreement whereby Unisys designated FMTC the trustee of the "Unisys Savings Trust," which holds Plan assets. (Sec. Am. Compl. at ¶ 14; Fidelity Defs. Mot. to Dismiss Ex. A [Trust Agreement].) Pursuant to the trust agreement, FMTC agreed to provide a wide variety of services, such as record keeping of participant account balances and activity, participant education and communication, reviews with plan sponsors, and trustee services such as facilitating the monetary inflows and outflows of the Plan. (Sec. Am. Compl. at ¶ 16.) FMTC delegated certain of these tasks to its affiliate, Fidelity Investments Institutional Operations Company, Inc. ("FIIOC").

(Id. at ¶ 17.) Fidelity Management & Research Company ("FMRCo") is the investment adviser for the mutual fund investment options in the Plan. (Id. at ¶ 19.) FMTC, FIIOC, and FMRCo are all subsidiaries of FMR LLC ("FMR") and will be referred to collectively as the "Fidelity Defendants." The terms of the trust agreement stipulated that the only mutual funds that could be offered to Plan participants would be those advised by FMRCo., except that Unisys could add additional investment options with FMTC's consent. (Sec. Am. Compl. at ¶ 45; Trust Agreement §§ 1(j), 5(b).)*fn1

As of 2006, Plan participants could direct their contributions among more than 70 investment options, including mutual funds, index funds (Sec. Am. Compl. at ¶ 50(I)(58--60, 64--65)), commingled pools (Id. at ¶ 50(I)(64, 69--71)), fixed income funds (Id. at ¶ 50(I)(34--35)), and a money market fund (Id. at ¶50(I)(39)). These funds came with varying degrees of risk, reward opportunity, and fees. The funds offered had fees ranging from as little as 0.10% to as high as 1.21% (see Decl. of Michael Lapetina Ex. E [Spartan Index Fund Prospectus]; Sec. Am. Compl. ¶ 50(I)(58), (60); Decl. of Michael Lapetina Ex. G [Targeted International Equity Funds Prospectus]; Sec. Am. Compl. ¶ 50(I)(56)).*fn2 From 2000 to 2007, the total assets in the Plan exceeded $2 billion with total participants in the Plan exceeding 30,000, placing it in the largest 1% of all 401(k) plans in the United States. (Id. at ¶ 44.) Nearly $1.9 billion of those Plan assets were held in Fidelity-branded retail mutual funds and all of the assets were held in vehicles managed or operated to some extent by a Fidelity affiliate. (Id.)

Plaintiffs filed a lawsuit in the Central District of California, which was transferred to this Court pursuant to 28 U.S.C. § 1404(a). Plaintiffs twice amended their complaint. The operative complaint accuses Fidelity Defendants and Unisys Defendants of breaching ERISA fiduciary duties by causing Plan participants and beneficiaries to pay excessive administrative and investment management fees. Plaintiffs in particular complain that the Defendants did not take advantage of the Plan's large size to negotiate lower fees or increased services for Plan participants and beneficiaries.


A. Motion to Dismiss

In reviewing a motion to dismiss for failure to state a claim upon which relief can be granted, a district court must accept as true all well-pleaded allegations and draw all reasonable inferences in favor of the non-moving party. See Bd. of Trs. of Bricklayers and Allied Craftsman Local 6 of N.J. Welfare Fund v. Wettlin Assocs., 237 F.3d 270, 272 (3d Cir. 2001). A court should accept the complaint's allegations as true, read those allegations in the light most favorable to the plaintiff, and determine whether a reasonable reading indicates that relief may be warranted. Umland v. PLANCO Fin. Servs., 542 F.3d 59, 64 (3d Cir. 2008). A court need not credit "bald assertions" or "legal conclusions" when deciding a motion to dismiss. Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997); see also Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009).

"Factual allegations [in a complaint] must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). To survive a motion to dismiss, a complaint must include "enough facts to state a claim to relief that is plausible on its face." Id. at 570. Although the federal rules impose no probability requirement at the pleading stage, a plaintiff must present "enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary element[s]" of a cause of action. Phillips v. County of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949. Simply reciting the elements will not suffice. Id. (concluding that pleading that offers labels and conclusions without further factual enhancement will not survive motion to dismiss); see also Phillips, 515 F.3d at 231.

The Third Circuit Court of Appeals has recently directed district courts to conduct a two-part analysis when faced with a 12(b)(6) motion. First, the legal elements and factual allegations of the claim should be separated, with the well-pleaded facts accepted as true but the legal conclusions disregarded. Fowler v. UPMC Shadyside, 578 F.3d 203, 210--11 (3d Cir. 2009). Second, the court must then make a common sense determination of whether the facts alleged in the complaint are sufficient to show a plausible claim for relief. Id. at 211. If the court can only infer the mere possibility of misconduct, the complaint must be dismissed because it has alleged-but has failed to show-that the pleader is entitled to relief. Id.

When faced with a motion to dismiss for failure to state a claim, courts may consider the allegations in the complaint, exhibits attached to the complaint, matters of public record, and documents that form the basis of a ...

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