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District Court Denies Motion to Dismiss Fiduciary Duty Claims Under ERISA

Cannon v. MBNA Corp., 2007 WL 2009672 (D. Del. July 6, 2007)

In this class action lawsuit brought by former MBNA employees, Plaintiffs asserted various breaches of fiduciary duty arising under ERISA in connection with administration of their 401(k) plan. Plaintiffs’ claims arose out of MBNA’s 2005 announcement of expected 10% annual growth for several years. Plaintiffs’ 401(k) plan contained MBNA stock. Several months later MBNA announced lower-than-expected earnings and MBNA stock fell nearly 35%. Plaintiffs alleged that the Defendants breached various fiduciary duties that resulted in this loss. Defendants were MBNA, the former CEO of MBNA, the committee responsible for the administration of the 401(k), and the individual committee members. Defendants moved to dismiss the various claims under F.R.C.P. 12(b)(6). The District Court found that dismissal as to all counts in the complaint was inappropriate at the pleading stage, and denied the motion.

Plaintiffs’ claimed that MBNA was itself a fiduciary under ERISA and was vicariously liable for individual fiduciaries under respondent superior. The Court found that the doctrine of respondent superior may apply to ERISA cases and whether it did in this case required further discovery that made dismissal of claims against MBNA inappropriate. Plaintiffs also claimed that the CEO was a fiduciary under ERISA because he was responsible for the appointment, removal and replacement of committee members. The Court found that fiduciary duty extended to monitoring the committee members’ performance and therefore refused to dismiss claims against the CEO. Plaintiffs alleged that several Defendants breached the duty of loyalty through ownership of shares while maintaining MBNA stock in the 401(k). The Court found that potential conflicts of interest could not be resolved at the pleadings stage and refused to dismiss the claim. Plaintiffs also alleged breach of the duty of care, duty of disclosure and duty to monitor. The Court found that under ERISA these duties exist and without further discovery it could not dismiss the claims at the pleadings stage. Finally, the Court refused to dismiss Plaintiffs’ claim that each fiduciary was liable as a co-fiduciary for other fiduciaries’ breaches, given that it would not dismiss the other fiduciary breach claims at the pleadings stage.

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