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Patterson v. Stanley

United States District Court for the Southern District of New York

October 7, 2019, Decided; October 7, 2019, Filed

No. 16-cv-6568 (RJS)

Opinion

OPINION AND ORDER

Richard J. Sullivan, Circuit Judge:

Plaintiffs Robert J. Patterson, Terri Lo Sasso, and Ralph A. Colo bring this putative class action against Morgan Stanley, Morgan Stanley Domestic Holdings, Inc., Morgan Stanley & Co., LLC, the Morgan Stanley Retirement Plan Investment Committee, and a group of unnamed John Doe defendants (collectively, "Defendants"), raising various claims under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. Now before the Court are (1) Defendants' motion to dismiss Plaintiffs' Second Amended Complaint, the operative pleading in this action; and (2) [*2]  Plaintiffs' motion to strike extrinsic evidence and factual assertions in exhibits filed by Defendants in support of their motion to dismiss. For the reasons set forth below, Defendants' motion is GRANTED, and Plaintiffs' motion is DENIED.

I. Background

A. Facts

Defendant Morgan Stanley "operates various investment-related businesses, including investment banking, brokerage, and investment management" services.1 (Compl. ¶ 31.) Morgan Stanley offers its employees the opportunity to invest in the Morgan Stanley 401(k) Retirement Plan, which is an "individual account," defined-contribution plan. (Doc. No. 94-1 (the "Plan").) Under the terms of the Plan, "[i]ndividual accounts are maintained for each Plan participant" and are "credited with the participant's contributions, allocations of [Morgan Stanley's] contributions, and Plan earnings." (Doe. No. 94-2 at 8.) Individual Plan participants select the investments made on their behalf from a set menu of "investment options offered by the Plan." (Id.) The individual Plan participant's contributions and investment choices determine the individual's retirement benefits — "[t]he benefit to which a participant is entitled is the benefit that can [*3]  be provided from the participant's vested account." (Id.; see also Compl. ¶ 6.) Approximately 60,000 current and former employees have invested in the Plan. (Compl. ¶¶ 1-2, 6.)

Throughout the class period, Defendants Morgan Stanley Domestic Holdings, Inc. ("MSDH") and Morgan Stanley & Co., LLC (or its predecessor, Morgan Stanley & Co., Inc.) ("MSC") served as the "sponsor" of the Plan. (Compl. ¶¶ 33-34.) In that capacity, MSDH and MSC — and the boards of directors of those entities — "appointed members to the investment committee that was responsible for the management of the investment funds in the plan." (Id.) MSDH and MSC also "had the authority to remove members of the investment committee and to amend and terminate the Plan." (Id.)

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2019 U.S. Dist. LEXIS 174832 *; 2019 WL 4934834

ROBERT J. PATTERSON, TERRI LO SASSO, AND RALPH A. COLO, Plaintiffs, VERSUS MORGAN STANLEY, MORGAN STANLEY DOMESTIC HOLDINGS, INC., MORGAN STANLEY & CO., LLC, THE MORGAN STANLEY RETIREMENT PLAN INVESTMENT COMMITTEE, AND JOHN DOES 1-30, Defendants.

CORE TERMS

Funds, Plaintiffs', fiduciaries, plan participant, options, invest, allegations, Defendants', Retirement, offering, underperformance, benchmark, duty of loyalty, Target, comparable, imprudent, mutual fund, breached, Mid-Cap, prohibited transaction, Trusts, motion to dismiss, separate account, fiduciary duty, monitor, breach of fiduciary duty, class period, exemption, fees charged, proprietary

Civil Procedure, Responses, Defenses, Demurrers & Objections, Motions to Dismiss, Motions to Dismiss, Failure to State Claim, Pleadings, Complaints, Requirements for Complaint, Constitutional Law, Case or Controversy, Standing, Elements, Pensions & Benefits Law, ERISA, Administration & Enforcement, Business & Corporate Compliance, Fiduciaries, Fiduciary Responsibilities, Duty of Loyalty, Fiduciary Responsibilities, Civil Litigation, Causes of Action, Breach of Fiduciary Duty, Duty of Prudence