U.S. District Judge Leonard D. Wexler of the U.S. District Court for the Eastern District of New York ruled that plaintiffs Betsabe Montoya and Blanche Pesce are not allowed the pursue state law claims in the dispute because the matter is governed by the federal Securities Litigation Uniform Standard Act (SLUSA). After considering the claims of misconduct in the case, Wexler dismissed the suit because SLUSA bars the pursuit of class-action state law allegations that are actually securities fraud claims.
In reaching that conclusion, Wexler rejected Montoya and Pesce’s contention that ING’s inclusion of a single fixed annuity option, which is within an integrated variable annuity contract, affected the nature of the variable annuity, rendering it outside the definition of a “covered security,” which would have then rendered the matter outside the dictates of SLUSA.
Both Montoya and Pesce, are New York public school teachers who belong to the New York State United Teachers (NYSUT), a teachers union. Both plaintiffs participated in a 403(b) annuity program offered by their Long Beach school district through ING. NYSUT Member Benefits Trust endorsed, marketed, and promoted the ING 403(b) product to its members.
A Second Court Trip
Wexler’s late November 2010 ruling represented the second time the same basic set of allegations has been through the courts.
In August 2009, U.S. District Judge Naomi Reice Buchwald of the U.S. District Court for the Southern District of New York threw out the case because the 403(b) plan in which the two plaintiffs participated is exempt from the Employee Retiree Income Security Act (ERISA) (see Judge Rejects 403(b) 'Kickback' Suit).
Plaintiffs claimed in that suit that ING and trustees of the NYSUT had breached their ERISA fiduciary duties because NYSUT had "endorsed" the plan in exchange for "millions of dollars in kickback payments" from ING.
The dispute was first refiled in New York state court but then moved to federal court where it was assigned to Wexler’s court. Wexler's latest ruling is available here.
The teacher union announced in June 2006 that it had reached a settlement with the New York state attorney general's office on the claims in profited from steering retirement funds to ING (see NYSUT and NY Atty. Gen. Reach Settlement).