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Schultz v. Edward D. Jones & Co., L. P.

United States District Court, E.D. Missouri, Eastern Division

March 27, 2018

VALESKA SCHULTZ, et al., Plaintiffs,
EDWARD D. JONES & CO., L.P., et al., Defendants.



         This matter is before the Court on Defendants' Motion to Dismiss The First Amended Consolidated Complaint. (Doc. No. 61) The motion is fully briefed and ready for disposition.[1]


         On August 19, 2016, Charlene McDonald, a participant in the Edward D. Jones & Co. Profit Sharing and 401(k) Plan (the “Plan”), initiated the present action on behalf of herself, a class of others similarly situated, and the Plan itself, against Defendants Edward D. Jones & Co., L.P. (“Edward Jones”), the Jones Financial Companies, L.L.L.P., the Edward Jones Investment and Education Committee (“Investment Committee”), and Jane and John Does 1-25. (Doc. No. 2) On October 12, 2016, Defendants filed their initial motion to dismiss. (Doc. No. 26) On January 26, 2017, the Court dismissed the Jones Financial Companies, L.L.L.P., because the complaint failed to allege any facts establishing it was a plan fiduciary. In all other respects the Court denied the motion, finding the complaint stated viable claims. (Doc. No. 43)

         On February 10, 2017, an amended complaint was filed by Plaintiffs Windle Pompey, Valeska Schultz and Melanie Waugh[2] against Defendants Edward Jones, the Investment Committee, and the Investment Committee members during the relevant period. (Doc. No. 44) On March 31, 2017, Defendants moved to dismiss all claims relating to the inclusion in the Plan lineup of three investment options referred to as the Edward Jones Plan Portfolios (the Edward Jones Growth Fund, the Edward Jones Growth and Income Fund, and the Edward Jones Income Fund) for failure to state a claim for breach and as time-barred under ERISA's statute of limitations; Count II of the Complaint as to the Investment Committee for failure to allege that the Committee had any involvement in the selection or oversight of the Plan's record-keeper; and the claims asserted by Plaintiff Pompey because she was not a Plan participant and thus lacked standing. (Doc. Nos. 51, 52)

         In response to Defendants' motion, Plaintiffs amended their complaint on May 1, 2017 by replacing Pompey with Plaintiff Rosalind Staley; removing allegations concerning the three Edward Jones managed mutual funds; and adding the Edward Jones Profit Sharing and 401(k) Administrative Committee (“Administrative Committee”) and its members as defendants. (First Amended Consolidated Complaint for Violations of the Employee Retirement Income Security Act (ERISA) (“FAC”), Doc. No. 58)

         The Plan is an “employee benefit plan” covered by ERISA. 29 U.S.C. § 1002. It is also an “employee pension benefit plan” or “pension plan, ” 29 U.S.C. § 2002(2)(A), and a “defined contribution plan” or “individual account plan, ” 29 U.S.C. § 1002(34), establishing a profit sharing and 401(k) account for each participant. (FAC ¶¶ 25-27) Edward Jones is the Plan Administrator and responsible for selecting, monitoring, and removing investment options in the Plan. (FAC ¶¶ 19, 29) The Administrative Committee, comprised of employees and/or partners[3]of Edward Jones, controls the Plan's administrative contracts and relationships, including the Plan's payment of fees to Mercer HR Services, Inc. (“Mercer”), the Plan's record-keeper. (FAC ¶¶ 20, 30) The Investment Committee, also comprised of employees and/or partners[4] of Edward Jones, selects investment options and educates participants about the Plan. (FAC ¶¶ 21, 30)

         As in their original complaint, Plaintiffs claim Defendants ran the Plan to benefit Edward Jones and its corporate partners, rather than in the interests of participants and beneficiaries in violation of their fiduciary duties under ERISA. (FAC ¶¶ 126-140) In their first claim for relief (Claim I), Plaintiffs challenge the Plan's inclusion of: (1) funds that Edward Jones separately recommends to its clients as part of Edward Jones's business (Preferred Fund Families or “PFF”) (FAC ¶¶ 35-54); (2) a Money Market Fund (as opposed to a stable value fund) (FAC ¶¶ 55-72); (3) R-5 retirement share classes of mutual funds (as opposed to an allegedly lower cost R-6 class of shares) (FAC ¶¶ 73-84); and (4) actively managed Large-Cap Funds (instead of passively-managed Large-Cap Index Funds) (FAC ¶¶ 85-97). In their second claim for relief (Claim II), Plaintiffs contend Defendants breached their fiduciary duties by failing to negotiate a more favorable fee arrangement with Mercer for administrative services. (FAC ¶¶ 98-114)

         Defendants move to dismiss the complaint, arguing that Plaintiffs have failed to plausibly allege a breach of fiduciary duties (Doc. No. 63 at 11-28) and failed to state a claim as to the Administrative Committee and the Investment Committee (id. at 28-30).

         Legal standard

         In ruling on a motion to dismiss, the Court assumes all facts alleged in the complaint are true, and liberally construes the complaint in the light most favorable to the plaintiff. Eckert v. Titan Tire Corp., 514 F.3d 801, 806 (8th Cir. 2008). The purpose of a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) is to test the legal sufficiency of the complaint. An action fails to state a claim upon which relief can be granted if it does not plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007). To survive a motion to dismiss, a plaintiff's factual allegations “must be enough to raise a right to relief above the speculative level.” Id. at 555.

         In considering Rule 12(b) motions, courts may consider the pleadings themselves, materials embraced by the pleadings, exhibits attached to the pleadings whose authenticity is undisputed, as well as matters of public record.[5] Dittmer Properties, L.P. v. F.D.I.C., 708 F.3d 1011, 1021 (8th Cir. 2013).


         Defendants acknowledge that their arguments in support of dismissal (with the exception of their argument that Plaintiffs have improperly conflated their allegations as to the Administrative and Investment Committees, discussed below) are similar to the arguments previously raised by the Edward Jones entities named in the original complaint, and rejected by the Court. Nevertheless, Defendants assert that because of the new parties (both Plaintiffs and Defendants), it ...

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