Urakhchin v. Allianz Asset Mgmt. of Am., L.P.
United States District Court for the Central District of California
August 5, 2016, Decided; August 5, 2016, Filed
SACV 15-1614-JLS (JCGx)
CIVIL MINUTES — GENERAL
PROCEEDINGS: (IN CHAMBERS) ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS THE FIRST AMENDED COMPLAINT (Doc. 32)
Before the Court is Defendants' Motion to Dismiss the First Amended Complaint. (Mot., Doc. 32.) Plaintiffs Aleksandr Urakhchin and Nathan Marfice opposed, and Defendants replied. (Opp., Doc. 34; Reply, Doc. 38.) Having taken the matter under submission, and having read and considered the parties' briefs, the Court GRANTS IN PART and DENIES IN PART the Motion.
The First Amended Complaint alleges the following facts: The Allianz Asset Management of America, L.P. 401(k) Savings and Retirement Plan covers [*2] eligible employees and former employees of Defendants Allianz Asset Management of America, L.P. and Allianz Asset Management of America, LLC (together "AAM"). (FAC ¶ 1, Doc. 28.) The Plan also covers employees of various AAM subsidiaries including Defendants Allianz Global Investors Fund Management LLC, Pacific Investment Management Company, LLC ("PIMCO"), Allianz Global Investors U.S. LLC, and NFJ Investment Group LLC. (Id. ¶ 18.) Plaintiffs Aleksandr Urakhchin and Nathan Marfice have participated in the Plan since 2011 and 2009, respectively. (Id. ¶¶ 12-13.) AAM-L.P. is the "plan sponsor" of the Plan, and John Maney is the Chief Operating Officer and Managing Director of AAM. (Id. ¶¶ 19-20, 24.) Pursuant to the Plan document, the Committee and its members are designated as Plan fiduciaries as well as "administrator[s]" of the Plan. (Id. ¶¶ 22-23.)
The Plan is a defined-contribution or 401(k) plan, a type of employee retirement plan in which employees invest a percentage of their earnings on a pre-tax basis. (Id. ¶ 40.) Employers often match employee contributions up to a certain percentage. (Id.) Participants direct the investment of their contributions by choosing from "a lineup of options offered [*3] by the Plan." (Id.) At retirement, an employee's benefits are generally limited to the value of their own investment accounts, which is determined by the market performance of the contributions less expenses. (Id. ¶ 46.) Maximizing retirement benefits is therefore influenced by two "critical, interrelated functions of plan fiduciaries: designing the menu of investment options and minimizing plan expenses." (Id.) Fiduciaries can minimize plan expenses by hiring low-cost service providers and by selecting a menu of low-cost investment options. (Id. ¶ 50.) Economies of scale generally lower administrative expenses on a per-participant or percentage-of-assets basis. (Id.)
Plaintiffs allege that during the statutory period, the only "core" investment options offered within the Plan were investments managed by PIMCO or Allianz Global Investors, both of which are AAM subsidiaries. (Id. ¶ 59.) Taking into account the administrative and investment expenses within the Plan, the 2013 year-balances of the investments, and publicly available information regarding each investment's expenses, Plaintiffs estimate the total Plan costs for 2013 were equal to .77% of the $772 million in Plan assets. ( [*4] Id. ¶ 65.) According to Plaintiffs, this total plan cost is "outrageously high for a defined-contribution plan with over $500 million in assets." (Id. ¶ 66.) In 2013, the average plan cost for plans between $500 million and $1 billion in assets was .44%, and 90% of plans with such assets had total plan costs of less than .63%. (Id.) Plan participants allegedly would have saved approximately $2.25 million in fees had the Plan limited its total costs to .44%. (Id. ¶ 67.)Read The Full CaseNot a Lexis Advance subscriber? Try it out for free.
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2016 U.S. Dist. LEXIS 104244 *; 62 Employee Benefits Cas. (BNA) 1837
Aleksandr Urakhchin et al. v. Allianz Asset Management of America, L.P., et al.
Subsequent History: Request denied by, Without prejudice Urakhchin v. Allianz Asset Mgmt. of Am., L.P., 2017 U.S. Dist. LEXIS 73680 (C.D. Cal., Mar. 28, 2017)
Class certification granted by Urakhchin v. Allianz Asset Mgmt. of Am., L.P., 2017 U.S. Dist. LEXIS 144369 (C.D. Cal., June 15, 2017)
Settled by Urakhchin v. Allianz Asset Mgmt. of Am., L.P., 2018 U.S. Dist. LEXIS 54681 (C.D. Cal., Feb. 6, 2018)
Motion granted by, Costs and fees proceeding at, Motion granted by Urakhchin v. Allianz Asset Mgmt. of Am., L.P., 2018 U.S. Dist. LEXIS 127131 (C.D. Cal., July 30, 2018)
fiduciary, funds, allegations, options, plan participant, judicial notice, monitor, Defendants', expenses, invest, motion to dismiss, Plaintiffs', courts, documents, equitable relief, fiduciary duty, restitution, Retirement, plans, Investors, mutual fund, selecting, subject matter jurisdiction, defendants breached, comparable, equitable, imprudent, breached, publicly, loyalty