U.S. District Judge Percy Anderson of the U.S. District Court for the Central District of California has dismissed a lawsuit in which a participant in the Disney Savings and Investment Plan challenged plan fiduciaries’ continued offering of The Sequoia Fund as a plan investment option.
According to the complaint, the Sequoia Fund is a high cost mutual fund run by adviser Ruane, Cunniff & Goldbarb and its portfolio managers, Robert D. Goldfarb and David M. Poppe. The lawsuit claims that, in violation of plan investment policies, the fund managers concentrated The Sequoia Fund’s assets in a single stock, Valeant Pharmaceuticals, Inc.
Anderson noted that generally, plaintiffs in federal court are required to give only “a short and plain statement of the claim showing that the pleader is entitled to relief.” However, in Bell Atlantic Corp. v. Twombly, the Supreme Court rejected the notion that “a wholly conclusory statement of a claim would survive a motion to dismiss whenever the pleadings left open the possibility that a plaintiff might later establish some set of undisclosed facts to support recovery.” Instead, Anderson said in his opinion, the court adopted a “plausibility standard,” in which the complaint must “raise a reasonable expectation that discovery will reveal evidence of [the alleged infraction].”
In construing the Twombly standard, the Supreme Court has advised that “a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.”
Anderson also considered the Supreme Court decision inFifth Third Bancorp v. Dudenhoeffer. “As Dudenhoeffer instructs, the precipitous decline in the value of Valeant’s stock does not alone suggest that Plaintiffs have stated a plausible fiduciary duty claim against the Plan. The Consolidated Complaint contains no allegations of ‘special circumstances’ that could support even an inference that the Plan had any reason not to rely on the market’s valuation of Valeant up until the collapse in its price. More fundamentally, the Consolidated Complaint alleges no facts plausibly suggesting that the Plan had any reason to investigate the prudence of continuing to include the Sequoia Fund as one of the investment options for the Plan’s participants,” Anderson wrote in his opinion. NEXT: Plaintiff presents an implausible theory