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Gray v. Citigroup Inc. (In re Citigroup ERISA Litig.)

Gray v. Citigroup Inc. (In re Citigroup ERISA Litig.)

United States Court of Appeals for the Second Circuit

September 28, 2010, Argued; October 19, 2011, Decided

Docket No. 09-3804-cv

Opinion

 [*132]  JOHN M. WALKER, JR., Circuit Judge:

Plaintiffs, participants in retirement plans offered by defendants Citigroup  [**4] Inc. and Citibank, N.A., and covered by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., appeal from the judgment of the United States District Court for the Southern District of New York (Sidney H. Stein, Judge) dismissing their ERISA class action complaint.1 Plan documents required that a stock fund consisting primarily of employer stock (the Citigroup Common Stock Fund) be offered among the investment options. Plaintiffs allege that, because Citigroup stock became an imprudent investment, defendants' failure to limit plan participants' ability to invest in the company violated ERISA. We hold that the plan fiduciaries' decision to continue offering participants the opportunity  [*133]  to invest in Citigroup stock should be reviewed for an abuse of discretion, and we find that they did not abuse their discretion here. We also hold that defendants did not have any affirmative duty to disclose to plan participants nonpublic information regarding the expected performance of Citigroup stock, and that the complaint does not sufficiently allege that defendants, in their fiduciary capacities, made any knowing misstatements to plan participants regarding Citigroup  [**5] stock. We therefore AFFIRM the district court's dismissal of plaintiffs' complaint.

BACKGROUND

I. Factual Background

Plaintiffs are participants in the Citigroup 401(k) Plan (the "Citigroup Plan") or the Citibuilder 401(k) Plan for Puerto Rico (the "Citibuilder Plan") (collectively, the "Plans"). These ] employee pension benefit plans are governed by ERISA, which characterizes them as "eligible individual account plans."2 29 U.S.C. § 1107(d)(3); see also 29 U.S.C. § 1002(2)(A) (defining "employee pension benefit plan"). Defendant Citigroup Inc. ("Citigroup"), a Delaware corporation and financial services company, is the sponsor of the Citigroup Plan. Defendant Citibank, N.A. ("Citibank"), a subsidiary of Citigroup, is the sponsor of the Citibuilder Plan and the trustee of the Citigroup Plan. The Citibuilder Plan's trustee — not a defendant in this action — is Banco Popular de Puerto Rico. Each Plan is managed by the same two committees: the "Administration Committee," consisting of eight members, charged with administering the Plans and construing the  [**6] Plans' terms, and the "Investment Committee," consisting of ten members, responsible for selecting the investment fund options offered to Plan participants.

The Citigroup Plan is offered to Citigroup employees, and the Citibuilder Plan is offered to Puerto Rico employees of Citibank. In all material respects, the Plans are the same. Participants in each Plan may make pre-tax contributions, up to a certain percentage of their salary, to individual retirement accounts. The participants are then free to allocate the funds within their accounts among approximately 20 to 40 investment options selected by the Investment Committee. Both Plans state that participants' accounts are to be invested in these investment options "in the proportions directed by the Participant."

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662 F.3d 128 *; 2011 U.S. App. LEXIS 21463 **; 51 Employee Benefits Cas. (BNA) 1737

IN RE: CITIGROUP ERISA LITIGATION; STEPHEN GRAY, JAMES BOLLA, and SAMIER TADROS, Lead Plaintiffs-Appellants, SANDRA WALSH, ANTON K. RAPPOLD, and ALAN STEVENS, Plaintiffs-Appellants, -- v. -- CITIGROUP INC., CITIBANK, N.A., THE PLANS ADMINISTRATION COMMITTEE, THE PLANS INVESTMENT COMMITTEE, CHARLES O. PRINCE, ROBERT E. RUBIN, JORGE BERMUDEZ, MICHAEL BURKE, STEVE CALABRO, LARRY JONES, FAITH MASSINGALE, THOMAS SANTANGELO, ALISA SEMINARA, RICHARD TAZIK, JAMES COSTABILE, ROBERT GROGAN, ROBIN LEOPOLD, GLENN REGAN, CHRISTINE SIMPSON, TIMOTHY TUCKER, LEO VIOLA, DONALD YOUNG, MARCIA YOUNG, and JOHN DOES 1-20, Defendants-Appellees.

Subsequent History: As Corrected November 29, 2011.

As Corrected December 5, 2011.

US Supreme Court certiorari denied by Gray v. Citigroup Inc., 2012 U.S. LEXIS 8246 (U.S., Oct. 15, 2012)

Prior History: In re Citigroup ERISA Litig., 2009 U.S. Dist. LEXIS 78055 (S.D.N.Y., Aug. 31, 2009)

Disposition:  [**1] Plaintiffs, participants in retirement plans offered by defendants Citigroup Inc. and Citibank, N.A., and covered by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., appeal from a judgment of the United States District Court for the Southern District of New York (Sidney H. Stein, Judge) dismissing their ERISA class action complaint. Plan documents required that a stock fund consisting primarily of Citigroup common stock be offered among the plans' investment options. Plaintiffs argue that because Citigroup stock became an imprudent investment, defendants should have limited plan participants' ability to invest in it. We hold that plan fiduciaries' decision to continue offering participants the opportunity to invest in Citigroup stock should be reviewed for an abuse of discretion, and we find that they did not abuse their discretion here. We also hold that defendants did not have an affirmative duty to disclose to plan participants nonpublic information regarding the expected performance of Citigroup stock, and that the complaint does not sufficiently allege that defendants, in their fiduciary capacities, made any knowing misstatements regarding Citigroup  [**2] stock. AFFIRMED.

CORE TERMS

fiduciaries, stock, Plans, plaintiffs', invest, plan participant, allegations, subprime, Communications, fiduciary duty, retirement, circumstances, quotations, exposure, benefits, investment decision, plan administrator, standard of review, district court, plenary review, standard of conduct, diversify, employees, stock fund, terms, common stock, prudent man, breached, disclose, loyalty

Pensions & Benefits Law, ERISA, General Overview, Fiduciary Responsibilities, Prohibited Transactions, Civil Procedure, Appeals, Standards of Review, De Novo Review, Defenses, Demurrers & Objections, Motions to Dismiss, Failure to State Claim, Business & Corporate Compliance, Fiduciaries, Duty of Loyalty, Civil Litigation, Causes of Action, Breach of Fiduciary Duty, Duty of Prudence, Pension Benefit Plans, Eligible Individual Account Plans, Employee Stock Ownership Plans, Employer Securities & Real Property, Employee Benefit Plans, Eligible Individual Account Plans, Evidence, Inferences & Presumptions, Presumptions, Rebuttal of Presumptions, Particular Presumptions, Regularity, Claim Procedures, Plan Administration, Adherence to Plan, Disclosure, Notice & Reporting, Disclosure & Reporting Exemptions, Named Fiduciary Appointment & Obligations, Handling of Claims, Judicial Review