The U.S. District Court for the Northern District of Georgia’s Atlanta Division has issued a lengthy new order in a long-running Employee Retirement Income Security Act (ERISA) lawsuit filed against SunTrust Bank.
The lawsuit alleges that SunTrust Bank’s 401(k) plan engaged in corporate self-dealing at the expense of plan participants. The lead plaintiff suggests that plan officials violated their fiduciary duties of loyalty and prudence by selecting a series of proprietary funds (referred to as the STI Classic Funds) that were more expensive and performed worse than other funds they could have included in the plan—and by repeatedly failing to remove or replace the funds.
The ruling addresses multiple motions filed by the parties, including defendants’ motion to exclude the opinion of plaintiffs’ expert Dr. Steve Pomerantz, as well as plaintiffs’ motion to exclude the reports of the defense experts Dr. John Minahan and Dr. Bruce Stangle. The ruling grants the defendants’ motion seeking to discredit Pomerantz’ testimony, and it denies the plaintiffs’ motion to reject the expert reporting of Minahan and Stangle.
Lastly, defendants’ motion for summary judgment is granted in part and denied in part. It is granted to the extent plaintiffs’ claims are premised on defendants’ conduct regarding the Short Term Bond Fund, Investment Grade Bond Fund, Small Cap Growth Fund, Capital Appreciation Fund, and Prime Quality Money Market Fund. It is denied to the extent plaintiffs’ claims are premised on defendants’ conduct regarding the Mid-Cap Equity Fund, Growth and Income Fund, and International Equity Index Fund.
The Court directs the parties to file a proposed consolidated pretrial order no later than 30 days from the date of entry of its new order. The parties are further directed to file proposed findings of fact and conclusions of law no later than seven business days before the trial, which will be set at a later date.
Rejection of Certain Expert Testimony
The nearly 100-page decision includes substantial discussion of the facts of the case and the legal precedents which the court has applied in allowing some claims to proceed while dismissing others. One informative section explains the court’s reasoning for rejecting certain testimony of the plaintiffs’ expert witness.
“The Federal Rules of Evidence require expert testimony be offered by a witness who is qualified by knowledge, skill, experience, training, or education, and that the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; the testimony is based on sufficient facts or data; the testimony is the product of reliable principles and methods; and the expert has reliably applied the principles and methods to the facts of the case,” the decision explains.
Defendants’ first argument, that Dr. Pomerantz’s “Opinion 5” is unreliable, targets the following statement: “I do not believe a prudent and loyal fiduciary would have selected or retained the Affiliated Funds in the Plan.”
Defendants argue that this opinion necessarily involves an evaluation of defendants’ monitoring process, about which Dr. Pomerantz admits he is unfamiliar. Specifically, defendants argue Dr. Pomerantz’s opinion is factually baseless because he did not review the plan committee’s meeting minutes (with the exception of minutes from one meeting) or any other evidence of the plan committee’s monitoring process for the affiliated funds.
Plaintiffs, in response, agree with defendants that “in determining whether a breach of fiduciary duty occurred, the focus should be on whether, at the time of the decision, defendants employed a prudent process in making their decisions.” Moreover, Plaintiffs agree that “any conclusions Dr. Pomerantz would make regarding the prudence of the specific process employed by the defendant fiduciaries would be speculative.” Plaintiffs contend, however, that Dr. Pomerantz’s opinion is not about the prudence of defendants’ processes, but instead the prudence of “the decisions that resulted from those processes.”
“In short, the Court agrees with defendants that, according to Dr. Pomerantz’s own deposition testimony, his Opinion 5 is based on his conceptions of the plan committee’s monitoring processes, or lack thereof,” the decision states. “Because Dr. Pomerantz admits his opinion is based on the plan Committee’s monitoring processes—yet also admits he is uninformed regarding those processes—the Court agrees with defendants that his Opinion 5 is unreliable and should be excluded.”
From here, the decision goes into a lengthy explanation for why the defense’s witness testimony is germane, citing among other statues and precedents Federal Rule of Civil Procedure 26.