Court Refuses to Dismiss Mutual of Omaha Self-Dealing Suit

The decision against Mutual of Omaha’s preliminary motions to dismiss a self-dealing lawsuit underscores the way district court judges tend to allow for discovery in ERISA matters, given the complex and often secretive nature of the facts and circumstances in question.

A federal district court has denied Mutual of Omaha’s motion to summarily dismiss a lawsuit accusing its 401(k) plan’s fiduciaries of violating their fiduciary duties by selecting numerous investment options not for the benefit of the plan or its employees, but instead because they paid fees to Mutual of Omaha or its subsidiaries.

Citing a series of precedent-setting cases, Senior U.S. District Judge Joseph F. Bataillon of the U.S. District Court for the District of Nebraska explains in his opinion that an ERISA complaint of this nature does not need to describe in exhaustive detail the ways in which plaintiffs claim defendants breached their fiduciary duties.

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“Under the federal rules, a complaint must contain a short and plain statement of the claim showing that the pleader is entitled to relief,” Bataillon states. “Specific facts are not necessary; the statement need only give the defendant fair notice of what the claim is and the grounds upon which it rests.”

On the other hand, as the judge explains, in order for a claim to survive a motion to dismiss under federal rules, the plaintiff’s obligation to provide the grounds for his entitlement to relief necessitates that the complaint contain “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.”

Weighing these two sides in the context of ruling on a summary motion for dismissal is “a context specific task” that requires the court “to draw on its judicial experience and common sense,” the decision states.

Under precedent, a court considering a motion to dismiss may begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. The fact of the matter is that, although legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. As the judge here notes, federal courts follow a two-pronged approach to evaluate summary dismissal challenges. First, a court divides the allegations between factual and legal allegations; factual allegations should be accepted as true, but legal allegations should be disregarded. Second, the factual allegations must be parsed for facial plausibility.

Important to this decision, precedent also states that the plausibility standard “does not require a probability, but asks for more than a sheer possibility that a defendant has acted unlawfully.” In turn, the court must find enough factual matter (taken as true) to suggest that discovery will reveal evidence of the elements of the claim. When the allegations in a complaint, however true, could not raise a claim of entitlement to relief, the complaint should be dismissed.

This standard may seem to unfairly favor plaintiffs, but the judge points out that “no matter how clever or diligent, ERISA plaintiffs generally lack the inside information necessary to make out their claims in detail unless and until discovery commences.” Thus, without this benefit of the doubt, it is likely that few if any ERISA complaints would survive the motion to dismiss stage. The Supreme Court, for its part, has sought to enforce a middle ground, instructing lower courts to engage in “careful, context-sensitive scrutiny of a complaint’s allegations.”

Turning to the specific matter at hand, the court’s ruling is unequivocal.

“The court is cognizant of its role as the gatekeeper in these types of cases, particularly in terms of halting frivolous cases at the outset,” the decision states. “Such monitoring and review theoretically keep the cost lower and the payout higher for plan participants. However, the court finds that the facts as alleged by plaintiffs constitute a plausible claim of misconduct in the form of a breach of fiduciary duty and loyalty at this point in the lawsuit. Accordingly, the court will deny the motion to dismiss as to these claims.”

The court similarly rules flatly against the defense’s statute of limitations arguments, setting up a discovery process and potentially a full trial at some point in the future. The full text of the decision is available for download here

Retirement Industry People Moves

Resources adds two firms in growing partnerships, and Hooker & Holcombe hires retirement plan education specialist.

Art by Subin Yang

Art by Subin Yang

Resources Adds Two Firms in Growing Partnerships

Resources Investment Advisors (Resources) has added two firms as affiliate and partner—Strategic Retirement Group and StoneStreet Equity.

SRG is an institutional consulting and investment advisory firm, while StoneStreet provides investment advisory services for retirement plan fiduciaries.

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“We selected Resource Investment Advisors after a national search for an SEC registered investment adviser,” says Robert Goldstein, principal at Stonestreet Equity, LLC. “Resource was selected because they share Stonestreet’s client-first values while their analytical resources and operational expertise lead the field. Most importantly, the people at Resources and StoneStreet combine to provide clients with the best opportunity to succeed.” 

”We know a lot of players in the retirement plan industry and looked at many of them. Resources is a firm led by people we can trust to help us take our business to the next level,” says David Hinderstein, president at Strategic Retirement Group. “We are excited about working with this group of successful advisers to lead the retirement industry into the future.”  

The affiliations come at a time when Resources is seeing its integrations growing. In the last 12 months, eight retirement plan-focused advisory firms have aligned with the investment advisory firm. According to Vince Morris, founder and president at Resources, more partnerships are expected in the upcoming future.

“Our goal is to add value to all our partner firms,” he says. “As we continue to bring on new affiliates, we not only improve our economies of scale but also increase our ability to share best practices and develop innovative products and processes to help our advisers grow their independent businesses.”

Hooker & Holcombe Hires Retirement Plan Education Specialist

Hooker & Holcombe has expanded its Investment Advisory Group by hiring long-time portfolio strategist and consultant Pam Minish to the role of managing director, and Brenda Bachman as retirement plan education specialist

As managing director, Minish is responsible for managing client relationships, in addition to projects within the sales and management areas of the firm. A Chartered Financial Analyst (CFA) Charterholder and recipient of the Chartered Alternative Investment Analyst (CAIA) designation, her robust strategy and consulting background extends from Chicago to China and includes working with high net worth individuals, educational institutions, and non-profit organizations. 

Prior to joining Hooker & Holcombe, Minish was with Key Bank as vice president and portfolio strategist, where she managed trust and non-profit portfolios.  Previous positions include strategic consultant for A.T. Kearney Ltd. In Hong Kong and vice president of loan syndications and trading with Bank of America. Minish is a board member of the CFA Society Hartford, a member of the Board of Governors at the Hartford Club and has been a conference panel speaker and student mentor at the UConn School of Business. She earned her bachelor’s degree from Vanderbilt University and her master’s from The Thunderbird School of Global Management at Arizona State. 

As retirement education specialist, Bachman is responsible for developing a comprehensive portfolio of retirement education and financial wellness programs for the firm’s institutional clients and their participants. 

Most recently, Bachman was with CM Smith Financial, LLC, serving as a registered investment adviser for individual clients.  Prior to that, she was with Cigna Corporation in various capacities, including roles in Healthcare National Accounts and team development in Integrated Care and Group Insurance. Bachman earned her degree from Central Connecticut State University. She holds the FINRA Series 6, 63, and 66 licenses and is an Accredited Investment Fiduciary (AIF). 

“We are thrilled to welcome Pam and Brenda to our team.  They are experts in their respective areas and having them will elevate the level of knowledge and service we can offer our valued clients,” says Rodger Metzger, president and chief investment officer, Investment Advisory Group.  

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