Daniel Draney v. Westco Chemicals, Inc.

Opinion

Case 2:19-cv-01405-ODW-AGR Document 107 Filed 02/23/23 Page 1 of 20 Page ID #:1842

O 1

6 7 United States District Court 8 Central District of California 9 10 11 DANIEL DRANEY et al., Case № 2:19-cv-01405-ODW (AGRx)

12 Plaintiffs, ORDER GRANTING MOTION FOR 13 v. SUMMARY JUDGMENT [87], 14 DENYING AS MOOT MOTION TO WESTCO CHEMICALS, INC. et al., 15 CERTIFY CLASS [95], AND

DISMISSING FIRST AMENDED 16 Defendants. COMPLAINT 17 19 Plaintiffs Daniel Draney and Lorenzo Ibarra bring suit pursuant to the Employee 20 Retirement Income Security Act of 1974 (“ERISA”) against their employer, Defendant 21 Westco Chemicals, Inc., and its principals, Ezekiel Zwillinger and Steven Zwillinger, 22 for mismanaging an employee defined-contribution pension plan. Defendants now 23 move for summary judgment on the grounds that ERISA’s three-year statute of 24 limitations bars Draney’s and Ibarra’s claims. (Mot. Summ. J. (“Motion”) or (“Mot.”), 25 ECF No. 87.) The Court carefully considered the papers filed in connection with the 26 Motion and deemed the matter appropriate for decision without oral argument. Fed. R. 27 Civ. P. 78; C.D. Cal. L.R. 7-15. For the reasons that follow, the Court GRANTS the 28 Motion. Case 2:19-cv-01405-ODW-AGR Document 107 Filed 02/23/23 Page 2 of 20 Page ID #:1843

2 As employees of Westco, Draney and Ibarra participated in Westco’s 3 401(k) Plan, a defined-contribution, individual account pension plan subject to ERISA. 4 (Defs.’ Statement of Uncontroverted Facts (“SUF”) 2, 4, 20, 21, ECF No. 87-8; First 5 Am. Compl. (“FAC”) ¶¶ 1–2, ECF No. 23.) Throughout most of the 2010s, the 6 Zwillingers invested Plan funds exclusively in low-interest-bearing certificates of 7 deposit (“CDs”), without diversifying the Plan’s investment portfolio. (SUF 5, 7–8, 11; 8 FAC ¶ 25.) Plaintiffs allege that Westco employees missed out on over $1 million of 9 collective fund growth as a result. (FAC ¶ 25.) 10 Draney first became a Plan participant in 2010. (SUF 4.) Before he elected to 11 participate in the Plan, he was aware that the plan was invested solely in CDs and cash. 12 (SUF 5; see Pls.’ Statement of Genuine Disputes (“SGD”) 16, ECF No. 89-1.) At first, 13 he chose not to invest in the Plan because, in his words, its “earnings were too low,” 14 (SUF 14), but he eventually became a Plan participant as part of his overall tax and 15 savings strategy, (SUF 15). 16 In 2010 and 2011, Draney had conversations with almost every employee in the 17 company about the Plan’s investment strategy, and according to Draney, most Westco 18 employees were dissatisfied with the Plan’s investment in CDs. (SUF 17–18.) There 19 was a “running joke” among Westco employees regarding the Plan’s investment in CDs, 20 and “virtually everyone” at the company was aware of it. (SUF 19.) Until 2018, when 21 the Zwillingers changed the Plan’s investment strategy, Draney maintained an 22 understanding that the Plan remained invested solely in CDs. (SUF 7–9.) 23 Ibarra became a Plan participant by no later than 2009. (SUF 21.) In 2008 and 24 2011, Ibarra received participant statements showing the Plan’s assets were invested in 25 cash or CDs. (SUF 22.) Ibarra saw at least one of these statements. (SUF 23.) 27 On February 25, 2019, Plaintiffs filed their initial Complaint, asserting individual 28 and class claims arising from two Westco retirement plans: the aforementioned 2 Case 2:19-cv-01405-ODW-AGR Document 107 Filed 02/23/23 Page 3 of 20 Page ID #:1844

1 401(k) Plan and a separate Defined Benefit Pension Plan. (FAC ¶¶ 2–3.) Plaintiffs 2 brought claims against Defendants for (1) breach of duty of prudence, 29 U.S.C. 3 § 1104(a)(1)(B); (2) breach of duty of loyalty, 29 U.S.C. § 1104(a)(1)(A); and 4 (3) failing to administer the 401(k) Plan in accordance with its terms, 29 U.S.C. § 1103. 5 In ruling on Defendants’ Federal Rule of Civil Procedure (“Rule”) 12(b)(1) Motion to 6 Dismiss, the Court found that the FAC lacked allegations showing that the beneficiaries 7 of the Defined Benefit Pension Plan suffered any injury-in-fact. (Order Granting Mot. 8 Dismiss 7, ECF No. 29.) Accordingly, the Court dismissed Claims One and Two to the 9 extent they were premised on mismanagement of the Defined Benefit Pension Plan. 10 (Id.) For the remainder of this Order, the term “Plan” refers to the 401(k) Plan only. 11 Thereafter, Plaintiffs moved to certify the class, and Defendants moved for 12 summary judgment. Both motions were briefed when, on May 7, 2021, the parties 13 informed the Court they agreed to settle the case. (Notice Settlement, ECF No. 57.) On 14 May 28, 2021, Plaintiffs moved for preliminary approval of a $500,000 settlement and 15 conditional certification of a non-opt-out class of Westco employees under 16 Rule 23(b)(1). (Mot. Prelim. Approve Settlement (“First Settlement Mot.”) 12, ECF 17 No. 60.) On September 29, 2021, the Court denied that motion, detailing its concerns 18 about whether the non-opt-out nature of the settlement made it unfair to certain class 19 members. (Order Den. First Settlement Mot. 2, ECF No. 62.) 20 On March 8, 2022, Plaintiffs moved a second time for approval of the settlement. 21 (Am. Mot. Prelim. Approve Settlement (“Am. Settlement Mot.”), ECF No. 66.) 22 Ultimately, the Court again denied the Motion, reasoning that the mandatory, 23 non-opt-out nature of the proposed class was inappropriate because (1) Plaintiffs sought 24 individualized monetary compensation and (2) potential conflicts existed between class 25 members whose claims were time-barred and those whose claims were not. (Order Den. 26 Am. Settlement Mot., ECF No. 84.) The parties could not reach agreement on a 27 settlement involving an opt-out class, (see Pl.’s Notice re: Settlement, ECF No. 82; 28 3 Case 2:19-cv-01405-ODW-AGR Document 107 Filed 02/23/23 Page 4 of 20 Page ID #:1845

1 Defs.’ Resp., ECF No. 83), and accordingly, the Court restored the case to active status 2 and re-set a trial date, (Order Restoring Case Active Status, ECF No. 86). 3 Now, Defendants move for summary judgment on the grounds that the ERISA 4 three-year statute of limitations bars the claims of individual Plaintiffs Draney and 5 Ibarra. The Motion is fully briefed. (Opp’n, ECF No. 89; Reply, ECF No. 92.) 7 A court “shall grant summary judgment if the movant shows that there is no 8 genuine dispute as to any material fact and the movant is entitled to judgment as a matter 9 of law.” Fed. R. Civ. P. 56(a). A disputed fact is “material” where the resolution of 10 that fact “might affect the outcome of the suit under the governing law,” and the dispute 11 is “genuine” where “the evidence is such that a reasonable jury could return a verdict 12 for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 13 The burden of establishing the absence of a genuine issue of material fact lies with the 14 moving party, and the moving party may meet this burden with arguments or evidence 15 or both. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). 16 Once the moving party satisfies its burden, the nonmoving party cannot simply 17 rest on the pleadings or argue that any disagreement or “metaphysical doubt” about a 18 material issue of fact precludes summary judgment. Matsushita Elec. Indus. Co. v. 19 Zenith Radio Corp., 475 U.S. 574, 586 (1986); Cal. Architectural Bldg. Prods., Inc. v. 20 Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987). The non-moving 21 party must show that there are “genuine factual issues that . . . may reasonably be 22 resolved in favor of either party.” Franciscan Ceramics, 818 F.2d at 1468 (quoting 23 Anderson, 477 U.S. at 250) (emphasis omitted). Provided the moving party has 24 satisfied its burden, the court should grant summary judgment against a party who fails 25 to present evidence establishing an essential element of its claim or defense when that 26 party will ultimately bear the burden of proof on that claim or defense at trial. See 27 Celotex, 477 U.S. at 322. 28 4 Case 2:19-cv-01405-ODW-AGR Document 107 Filed 02/23/23 Page 5 of 20 Page ID #:1846

1 In ruling on summary judgment motions, courts draw all reasonable inferences 2 in the light most favorable to the nonmoving party, refraining from making credibility 3 determinations or weighing conflicting evidence. Scott v. Harris, 550 U.S. 372, 378 4 (2007); Hous. Rts. Ctr. v. Sterling, 404 F. Supp. 2d 1179, 1183 (C.D. Cal. 2004). 6 As a preliminary matter, Plaintiffs stipulate to judgment in Defendants’ favor on 7 Plaintiffs’ third claim for failure to administer the Plan in accordance with its terms. 8 (Opp’n 12.) The Court therefore grants summary judgment as to this claim. The 9 remaining issue is whether the two remaining claims—for breach of duty of prudence 10 and breach of duty of loyalty—are barred by 29 U.S.C. § 1113, ERISA’s statute of 11 limitations. 12 A. Duty of Prudence 13 Plaintiffs’ first claim is for breach of the duty of prudence that ERISA plan 14 fiduciaries owe under 29 U.S.C. § 1104(a)(1)(B). (FAC ¶¶ 57–67.) “Retirement plans 15 governed by ERISA must have at least one named fiduciary, who must manage the plan 16 prudently . . . .” Intel Corp. Inv. Pol’y Comm. v. Sulyma, 140 S. Ct. 768, 773 (2020) 17 (“Sulyma II”) (citation omitted). In discharging this duty, plan fiduciaries must act 18 “with the care, skill, prudence, and diligence under the circumstances then prevailing 19 that a prudent [person] acting in a like capacity and familiar with such matters would 20 use in the conduct of an enterprise of a like character and with like aims.” 29 U.S.C. 21 § 1104(a)(1)(B). 22 The ERISA statute of limitations provides that an action under ERISA, including 23 one for breach of the duty of prudence, is time-barred after the earlier of: 24 (1) six years after (A) the date of the last action which constituted a part of 25 the breach or violation, or (B) in the case of an omission the latest date on which the fiduciary could have cured the breach or violation, or 26 (2) three years after the earliest date on which the plaintiff had actual 27 knowledge of the breach or violation[.] 28 5 Case 2:19-cv-01405-ODW-AGR Document 107 Filed 02/23/23 Page 6 of 20 Page ID #:1847

1 29 U.SC. § 1113. This same provision of ERISA sets forth an exception that applies 2 “in the case of fraud or concealment,” but neither party argues that this exception applies 3 here. (Mot. 11–12; see Opp’n 1–3.) 4 To determine a claim’s accrual date under 29 U.S.C. § 1113(2), courts first 5 “isolate and define the underlying violation upon which the plaintiff’s claim is 6 founded.” Guenther v. Lockheed Martin Corp., 972 F.3d 1043, 1052 (9th Cir. 2020) 7 (quoting Sulyma v. Intel Corp. Inv. Pol’y Comm., 909 F.3d 1069, 1072–73 (9th Cir. 8 2018) (“Sulyma I”), aff’d, Sulyma II). Second, courts determine “‘when the plaintiff 9 had “actual knowledge” of the alleged breach or violation,’ and whether suit was filed 10 within three years of the date that knowledge was obtained.” Id. (quoting Sulyma I, 11 909 F.3d at 1073); 9 U.S.C. § 1113(2). 12 1. Isolation and Definition of Underlying Violation 13 Regarding step one of this two-step analysis, Defendants argue that the Court 14 should isolate and define the underlying violation as Defendants’ decision to invest Plan 15 funds entirely and solely in CDs. (Mot. 10 (“Plaintiffs’ primary allegation relating to 16 Defendants’ purported breach of fiduciary duty is that Defendants invested nearly all of 17 the Plan’s assets in CDs, thereby causing the Plan to have ‘a smaller dollar amount of 18 assets than it would have had the [P]lan assets been invested differently.’” (quoting 19 Decl. Joseph Faucher ISO Mot. (“Faucher Decl.”) Ex. A (“Draney Dep.”) 44:16–21, 20 ECF No. 87-3)).) 21 Plaintiffs disagree and argue the Court should isolate and define the underlying 22 violations differently, as either (1) each individual purchase or sale of a CD, or (2) the 23 various breaches of Defendants’ duty to monitor that occurred on an ongoing basis 24 throughout the 2010s as Defendants maintained their allegedly insufficient investment 25 strategy. (Opp’n 4–7, 12.) As to this latter category, Plaintiffs argue that Defendants’ 26 breaches of the duty to monitor include (1) failing to hire a professional investment 27 advisor; (2) failing to possess the requisite expertise to manage a pension plan; 28 (3) failing to hire a professional recordkeeper; (4) failing to possess the requisite 6 Case 2:19-cv-01405-ODW-AGR Document 107 Filed 02/23/23 Page 7 of 20 Page ID #:1848

1 expertise to keep records for the Plan; (5) failing to design and implement a process to 2 ensure the Plan complied with ERISA; and (6) failing to monitor and replace poorly 3 performing investments. (Opp’n 4–7; FAC ¶ 61.) 4 Plaintiffs’ argument is not well taken. Even if one or more of these events 5 qualifies as an underlying violation that could theoretically trigger the start of a new 6 limitations period, the triggering of any such period would not operate to revive a claim 7 that already expired under § 1113(2) due to actual knowledge of a breach and the 8 passage of three years. “Section 1113(2) is a statute of limitations, which ‘encourage[s] 9 plaintiffs to pursue diligent prosecution of known claims.’” Sulyma II, 140 S. Ct. at 774 10 (quoting Cal. Pub. Emps.’ Ret. Sys. v. ANZ Sec., Inc., 137 S. Ct. 2042, 2049 (2017)); 11 Tibble v. Edison Int’l, 843 F.3d 1187, 1196 (9th Cir. 2016) (“Tibble II”) (noting 12 § 1113(2) operates to keep a plaintiff with actual knowledge of a breach “from sitting 13 on her rights and allowing the series of related breaches to continue”). In particular, 14 “[w]hen an ERISA breach is ongoing such that it may be characterized as multiple 15 violations, ‘the earliest date on which a plaintiff became aware of any breach starts the 16 limitation period of section 1113 running.’” Sulyma I, 909 F.3d at 1078 (quoting 17 Phillips v. Alaska Hotel & Rest. Emps. Pension Fund, 944 F.2d 509, 520 (1991)) 18 (emphasis added) (cleaned up). Consistent with these principles, plaintiffs may not rely 19 on a “continuing breach” theory to overcome ERISA’s three-year statute of limitations 20 where the alleged breaches are all of the same character and the plaintiff knew of early 21 breaches more than three years before bringing suit. Phillips, 944 F.2d at 520 (“While 22 the trustees’ conduct may be viewed as a series of breaches, all were of the same 23 character: a failure to amend vesting rules. Once a plaintiff knew of one breach, an 24 awareness of later breaches would impart nothing materially new.”), as amended 25 (Dec. 6, 1991), cert. denied, 504 U.S. 911 (1992). 26 Applying this principle here, the individual purchases and sales of CDs that 27 happened throughout most of the 2010s were all of the same character, such that 28 Draney’s or Ibarra’s knowledge of additional purchases and sales of CDs would have 7 Case 2:19-cv-01405-ODW-AGR Document 107 Filed 02/23/23 Page 8 of 20 Page ID #:1849

1 imparted to them “nothing materially new” about Defendant’s underlying lack of 2 prudence. Id. The same is true of Defendants’ various alleged breaches of the duty to 3 monitor. These breaches were all of the same character because they are derivative of 4 and arise out of the original breach, which was Defendants’ decision, unchanged 5 throughout most of the 2010s, to maintain a CDs-only investment strategy. Thus, for 6 example, if a Plan participant knew in 2010 that the Plan was invested entirely in CDs, 7 and then in 2016 that participant gained some sort of newfound knowledge that 8 Defendants were at that point failing to “monitor or replace poorly performing 9 investments,” it would not be the case that a new limitations clock would begin in 2016. 10 The participant’s newfound knowledge would have imparted nothing new, because that 11 participant already knew, back in 2010, that the Plan was CDs-only, and the participant 12 could have acted to compel the plan administrator to replace the investments at that 13 time. 14 Moreover, this is not the type of duty-to-monitor case where a material change in 15 circumstances caused the accrual of a new and different cause of action with an 16 independently running limitations or repose period. As a contrasting example, in Baird 17 v. BlackRock Institutional Trust Co., 403 F. Supp. 3d 765 (N.D. Cal. 2019), the 18 plaintiffs alleged that their plan’s fund underperformed by 20% over time compared to 19 objective benchmark indices. 403 F. Supp. 3d at 772, 780. The court first noted that 20 these allegations, without more, would not necessarily establish that the fund was “an 21 imprudent choice at the outset.” Id. (quoting Meiners v. Wells Fargo & Co., 898 F.3d 22 820, 823 (8th Cir. 2018)). Even so, the court explained, fiduciaries nevertheless have a 23 duty to “monitor investments and remove imprudent ones.” Id. (quoting Terraza v. 24 Safeway Inc., 241 F. Supp. 3d 1057, 1076 (N.D. Cal. 2017)). The court found that the 25 plaintiffs stated a claim for breach of the duty to monitor because it was plausible that 26 the underperformance of the fund over time constituted new information that was not 27 available to the plan administrators when they first chose to make the funds available 28 to plan participants. See id. (“Plaintiffs allege more than just underperformance and a 8 Case 2:19-cv-01405-ODW-AGR Document 107 Filed 02/23/23 Page 9 of 20 Page ID #:1850

1 fee differential.”). By alleging that the plan administrators ignored or failed to act upon 2 this new information, the plaintiffs in Baird stated a timely claim for the plan 3 administrators’ breach of the duty to monitor. Id.; see also Tibble v. Edison Int’l, 4 575 U.S. 523, 529 (2015) (“Tibble I”) (“[T]he trustee cannot assume that if investments 5 are legal and proper for retention at the beginning of the trust, or when purchased, they 6 will remain so indefinitely.” (quoting A. Hess, G. Bogert, & G. Bogert, Law of Trusts 7 and Trustees § 684, pp. 145–146 (3d ed. 2009)). 8 Here, on the other hand, no party suggests that anything new happened (in the 9 market or elsewhere) in the mid-2010s that might have made a CDs-only investment 10 strategy an imprudent strategy where it was not before. To the extent Defendants had 11 an obligation to review the Plan’s portfolio and diversify its investments, that obligation 12 existed from the Plan’s very genesis, and certainly by 2010 or 2011. Nothing new 13 happened in the interim, and any continuing breaches were “of the same kind and 14 nature.” Phillips, 944 F.2d at 521. 15 At root, Plaintiffs are arguing for a new rule that would require courts to ignore 16 the fact that a three-year § 1113(2) limitations period has run merely because the 17 plaintiff points to a breach of a derivative duty to monitor that may have happened more 18 recently. But such a rule does not comport with case law; Phillips is very clear on this 19 point. Id. (“[I]f the breaches are of the same kind and nature and the plaintiff had actual 20 knowledge of one of them more than three years before commencing 21 suit, § 1113[](2) bars the action.”). And Phillips is still good law, even after Sulyma I 22 and Sulyma II. See Sulyma I, 909 F.3d at 1074 (discussing Phillips and distinguishing 23 it on the basis that actual knowledge of the breach was not at issue); Sulyma II, 140 S. 24 Ct. at 779 (affirming Sulyma I). 25 The parties engage with the Tibble series of cases on this point, including the 26 cases the Court has labeled herein as Tibble I and Tibble II. For purposes of this Order, 27 it suffices to say that Tibble I and Tibble II contribute nothing to today’s discussion for 28 the simple reason that actual knowledge was not at issue. Thus, Tibble I and Tibble II 9 Case 2:19-cv-01405-ODW-AGR Document 107 Filed 02/23/23 Page 10 of 20 Page ID #:1851

1 dealt only with 29 U.S.C. § 1113(1) and not § 1113(2). Tibble I, 575 U.S. at 525 2 (framing issue for decision as “whether a fiduciary’s allegedly imprudent retention of 3 an investment is an ‘action’ or ‘omission’ that triggers the running of the 6-year 4 limitations period (quoting 29 U.S.C. § 1113(1)); Tibble II, 843 F.3d at 1196 n.3 (“The 5 district court held that . . . § 1113(2) [was] inapplicable. . . . We affirmed . . . . The 6 Supreme Court also applied § 1113(1).”). 7 The Supreme Court has described § 1113(1) as a “statute of repose,” Sulyma II, 8 140 S. Ct. at 774, reflecting the legislature’s intent “that a defendant should be free from 9 liability after the legislatively determined period of time,” ANZ Sec., 137 S. Ct. at 2049, 10 regardless of when a plaintiff may have learned of pertinent information. Because the 11 plaintiffs in the Tibble cases did not have knowledge of the underlying transactions or 12 decisions, the § 1113(2) three-year statute of limitations was not at issue, and the Tibble 13 tribunals never had occasion to consider the interplay between the earlier running of a 14 three-year limitations period and the later running of a derivative limitations or repose 15 period. The same is true of Terraza, cited by Plaintiffs; in that case, the defendants did 16 not argue that the plaintiff had actual knowledge, and the plaintiff “affirmatively 17 allege[d] that she did not have such knowledge until shortly before th[e] lawsuit was 18 filed.” 241 F. Supp. 3d at 1069. Here, by contrast, the three-year statute of 19 limitations—§ 1113(2)—is at issue with respect to both Draney and Ibarra, because, as 20 will be explained in the next section, the evidence shows it is undisputed that both 21 Draney and Ibarra had the requisite actual knowledge at a point in the past. 22 To summarize, the Court has isolated and defined the underlying violation as the 23 investment of the Plan solely in CDs, and has rejected the argument that later similar 24 transactions and related or derivative breaches of the duty to monitor qualify as 25 underlying violations triggering new limitations periods that supersede or invalidate an 26 earlier expiration under § 1113(2). Thus, if, more than three years before commencing 27 suit, Draney and Ibarra had actual knowledge that the Plan was invested solely in CDs, 28 then § 1113(2) “bars the action,” Phillips, 944 F.2d at 521, even if they point to later, 10 Case 2:19-cv-01405-ODW-AGR Document 107 Filed 02/23/23 Page 11 of 20 Page ID #:1852

1 related, derivative breaches that may have taken place. See Tibble II, 843 F.3d at 1196 2 (“When a plaintiff has actual knowledge of a breach, § 1113(2) operates to keep her 3 from sitting on her rights and allowing the series of related breaches to continue.”). 4 2. Plaintiffs’ Actual Knowledge 5 The Court now considers whether each named Plaintiff had knowledge of the 6 defined underlying violation—the investment of the Plan in CDs—more than three 7 years before the Complaint was filed. Guenther, 972 F.3d at 1052. 8 a. Draney 9 The Court first considers whether Draney knew, more than three years before 10 bringing suit, that the Plan was invested solely in cash and CDs. 29 U.S.C. § 1113(2). 11 Draney does not dispute that by 2011 at he latest he was aware of how the Plan was 12 invested—that is, that he was aware that the Plan was invested solely in cash and CDs. 13 (See, e.g., SUF 16.) The § 1113(2) three-year statute of limitations thus ran by 2014 at 14 the latest, well before he brought suit in 2019. Compare In re Northrop Grumman 15 Corp. ERISA Litig., No. 2:06-cv-06213-MMM (JCx), 2015 WL 10433713, at *23 (C.D. 16 Cal. Nov. 24, 2015) (“In re Northrop”) (concluding plaintiff’s continuing violation 17 theory “founders on the plain language” of ERISA’s three-year statute of limitations 18 (quoting Phillips, 944 F.2d at 520), where discrete deductions of excessive fees from 19 participant investments were “of the same character”), with Marshall v. Northrop 20 Grumman Corp., No. 2:16-cv-06794-AB (JCx), 2017 WL 2930839, at *11 (C.D. Cal. 21 Jan. 30, 2017) (recognizing, on motion to dismiss, a duty-to-monitor claim, and finding 22 claim timely, where changes in circumstances caused corresponding change in 23 prudence of investments). 24 Draney knew in 2010 or 2011 that the Plan was invested solely in cash and CDs, 25 and any breaches of the duty of prudence that happened after that time, including any 26 alleged failure to monitor, were merely breaches of the same kind and nature. Thus, a 27 three-year statute of limitations began to run in 2010 or 2011, and the period was not 28 altered or reset by any future breaches. Draney’s duty of prudence claim, filed in 2019, 11 Case 2:19-cv-01405-ODW-AGR Document 107 Filed 02/23/23 Page 12 of 20 Page ID #:1853

1 is time-barred. The Court correspondingly grants Defendants’ Motion as to Draney’s 2 duty of prudence claim (Claim One) and dismisses Draney’s claim with prejudice. 3 b. Ibarra 4 The Court next considers whether Ibarra knew, more than three years before 5 bringing suit, that the Plan was invested solely in cash and CDs. 29 U.S.C. § 1113(2).1 6 Unlike with Draney, the issue of when Ibarra gained “actual knowledge” is in dispute, 7 at least nominally. (See Opp’n 10.) To determine whether this dispute precludes 8 summary judgment, the Court must consider (1) whether there is a factual dispute over 9 what Ibarra knew, and, given that there is not, (2) whether Ibarra’s undisputed 10 knowledge constitutes “actual knowledge” under § 1113(2). 11 i. No genuine factual dispute about what Ibarra knew 12 What the parties do not dispute is that (1) “[a]round 2011, Mr. Ibarra had seen at 13 least one participant statement showing the Plan’s assets were invested in cash or CDs,” 14 and (2) Ibarra is able to read “some” English. (SUF 23, 24.) The Participant Statement 15 is only five pages long, and the last page clearly shows the CDs-only investment 16 strategy: 17 18 19 20 21 22 23 24 1 Defendants argue in a footnote that Landwehr v. DuPree, 72 F.3d 726, 732 (9th Cir. 1995), stands 25 for the proposition that an entire case is time-barred if any named plaintiff had actual knowledge of the alleged breach more than three years before the complaint’s filing. (Mot. 6–7 n.1.) This rather 26 remarkable suggestion finds no support in Landwehr or any other case law of which the Court is aware. See Browe v. CTC Corp., 15 F.4th 175, 191–92 (2d Cir. 2021) (discussing Landwehr and specifying 27 that “[a]n individual participant’s failure to act in a timely way on her knowledge of a fiduciary breach 28 may prevent her from bringing suit but does not forever foreclose others from vindicating the rights of all who are affected by the breach”). 12 Cate 2:19-cv-01405-ODW-AGR Document 107 Filed 02/23/23 Page 13o0f20 Page ID #:1854 2 Westco Chemicals, Inc. 3 Retirement Plan FYE 9-30-11 Ending Assets 5 Cash & Cash Funds: Wells Fargo -2.19% Certificates of Deposit: Ally Bank CD 8-18-14 1.78% 9 Ally Bank CD 5-26-15 3.37% American Exp Centurion Bk 4-2-12 2.93% 10 Bank of America 5-21-12 1.46% Bank of Holland 6-12-12 2.92% 11 BMW Bank North America CD 9-23-14 2.91% Colombus CD 2-22-12 5.84% 12 Colombus CD 4-9-12 5.85% First Commercial 10-14-11 2.91% B First National Bank CD 11-18-13 7.31% First Trust Int. Rate Hedge Series 20 Cash 0.76% 14 GE Money Bank CD 11-7-11 1.46% GE Money Bank 10-15-14 5.85% Goldman Sachs Bank USA CD 6-10-13 5.90% 15 Goldman Sachs Bank USA CD 10-5-15 2.91% Harris Nat'l Assn CD 4-15-19 4.67% 16 Heritage Bank Comm CD 1-31-14 1.78% Hinsdale Bk CD 7-22-13 5.87% 17 Key Source Caml Bk 1-9-14 2.95% Lake Forest 7-15-13 7.34% 18 Lakeside Bank 9-17-15 3.18% Metlife Bank Nat'l Assn CD 10-21-13 2.28% 19 Metlife Bank Nat'l Assn CD 11-4-13 2.49% Mizrahi Tafahot Bk CD 3-25-15 1.02% 20 Plainscap Bk CD 6-11-12 2.78% Tennessee Comm Bk CD 4-17-15 3.46% 21 Tennessee Comm Bk, CD 6-30-15 0.87% World Fin'l 4-15-12 5.84% 22 World Fin'l 9-21-15 2.91% 23 24 Participant Loans: 0.58% 25 26 (Faucher Decl. 4 5 Ex. D (“Ibarra Participant Statement’’) 5, ECF No. 87-6.) 27 Defendants meet their initial burden on summary judgment by pointing out the 28 undisputed fact that, by 2011, Mr. Ibarra had seen at least one participant statement

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1 showing the Plan’s assets were invested solely in cash or CDs. This provides sufficient 2 evidence from which a jury could conclude that Ibarra was aware of how the Plan was 3 invested. 4 In response, Plaintiffs submit a declaration from Ibarra in which Ibarra states that, 5 while he did receive two participant statements, one in 2009 and one in 2011, he “do[es] 6 not recall reading the documents when [he] received them.” (Decl. Lorenzo Ibarra ISO 7 Opp’n (“Ibarra Decl.”) ¶ 3, ECF No. 89-3.) He further declares that these disclosures 8 “did not suggest to [him] there was anything wrong with or anything to be concerned 9 about regarding the Plan.” (Id. ¶ 5.) 10 Ibarra’s declaration fails to place in genuine dispute Defendants’ showing that 11 Ibarra knew in 2011 how the Plan was invested. While Ibarra does not recall reading 12 the Statements, he clearly did read at least one of them, as indicated by paragraph five 13 of his declaration and the undisputed fact that by 2011 he “had seen at least one 14 participant statement showing the Plan’s assets were invested in cash or CDs.” 15 (SUF 23.) Moreover, there is no evidence suggesting Ibarra was not able to read and 16 comprehend the Statements. Instead, the evidence before the Court tends to indicate 17 only the contrary. Ibarra declares he is able to read “some English,” (Ibarra Decl. ¶ 4), 18 and when shown a copy of the Participant Statement during this deposition, he 19 confirmed he was able to read it. (Faucher Decl. ¶ 4 Ex. C (“Ibarra Dep.”) 12:25–13:1, 20 ECF No. 87-5 (“Q: Can you read this English document?” A: “Yes.”).) 21 To the extent Ibarra’s lack of memory contradicts the rest of the record, Plaintiffs 22 nevertheless fail to demonstrate a genuine dispute of fact. Self-serving testimony that 23 contradicts prior or concurrent testimony does not create a genuine factual dispute. See 24 Van Asdale v. Int’l Game Tech., 577 F.3d 989, 998 (9th Cir. 2009) (“The general rule 25 in the Ninth Circuit is that a party cannot create an issue of fact by an affidavit 26 contradicting his prior deposition testimony.” (quoting Kennedy v. Allied Mut. Ins. Co., 27 952 F.2d 262, 266 (9th Cir. 1991))); see also Kennedy v. Applause, Inc., 90 F.3d 1477, 28 1481 (9th Cir. 1996) (“[T]his deposition testimony flatly contradicts both her prior 14 Case 2:19-cv-01405-ODW-AGR Document 107 Filed 02/23/23 Page 15 of 20 Page ID #:1856

1 sworn statements and the medical evidence. As such, we conclude her deposition 2 testimony does not present ‘a sufficient disagreement to require submission to a jury.’” 3 (footnote omitted) (quoting Anderson, 477 U.S. at 251–52)). Thus, to the extent 4 Ibarra’s inability to recall reading the Participant Statement contradicts either (1) his 5 testimony that the Participant Statement did not suggest to him that there was anything 6 wrong with the Plan, (Ibarra Decl. ¶ 5), or (2) his concession that he “had seen” a 7 Participant Statement “showing the Plan’s assets were invested in cash or CDs,” (SUF 8 23), the contradiction does not create a genuine factual dispute. Van Asdale, 577 F.3d 9 at 998; see Sulyma II, 140 S. Ct. at 779 (instructing that if a plaintiff’s denial of 10 knowledge is “blatantly contradicted by the record,” “a court should not adopt that 11 version of the facts for purposes of ruling on a motion for summary judgment” (quoting 12 Scott v. Harris, 550 U.S. 372, 380 (2007)). 13 ii. As a matter of law, what Ibarra knew constitutes “actual 14 knowledge” 15 The Court next considers whether the undisputed fact of Ibarra’s knowledge is 16 sufficient to allow the Court to conclude that, as a matter of law, Ibarra had “actual 17 knowledge” such that § 1113(2) was triggered. In Sulyma I, the Ninth Circuit 18 considered at length the “actual knowledge” requirement of the ERISA three-year 19 statute of limitations and noted that “actual knowledge” “mean[s] something between 20 bare knowledge of the underlying transaction, which would trigger the limitations 21 period before a plaintiff was aware he or she had reason to sue, and actual legal 22 knowledge, which only a lawyer would normally possess.” 909 F.3d at 1075 (emphasis 23 added). Pursuant to Sulyma I, in a duty of prudence case, “the plaintiff must be aware 24 [1] that the defendant has acted and [2] that those acts were imprudent.” Id. Here, as 25 discussed, the evidence shows that Ibarra read the 2011 Participant Statement, including 26 its last page, which is a clear list of the portfolio’s investments. This evidence 27 establishes the first prong—that Ibarra knew that Defendants “ha[d] acted.” Sulyma I, 28 909 F.3d at 1075. 15 Case 2:19-cv-01405-ODW-AGR Document 107 Filed 02/23/23 Page 16 of 20 Page ID #:1857

1 The remaining issue, therefore, is whether Ibarra had knowledge that the Plan’s 2 investment strategy was imprudent. Sulyma I, 909 F.3d at 1075. On one hand, “[t]he 3 disclosure of a transaction that is not inherently a statutory breach of fiduciary duty . . . 4 cannot communicate the existence of an underlying breach.” Fink v. Nat’l Sav. & Tr. 5 Co., 772 F.2d 951, 957 (D.C. Cir. 1985); Sulyma I, 909 F.3d at 1075 (confirming the 6 continued viability of this observation from Fink). On the other hand, the triggering of 7 the three-year limitations period does not require that a plaintiff understand “that the 8 facts establish a cognizable legal claim under ERISA.” In re Northrop, 2015 WL 9 10433713, at *19 (quoting Wright v. Heyne, 349 F.3d 321, 330 (6th Cir. 2003); 10 Sulyma I, 909 F.3d at 1075. The question here is whether Ibarra knew that the Plan’s 11 investment strategy was imprudent, keeping in mind that this standard is something less 12 than understanding that he had a legal claim under ERISA. 13 The answer to this question is ‘yes.’ Plaintiffs themselves allege that a retirement 14 investment portfolio consisting entirely of CDs is per se imprudent: 15 The [Department of Labor] has stated in the preamble to regulations issued 16 under the fiduciary rules of ERISA Section 404 that capital preservation funds, like certificates of deposit, were not appropriate long-term default 17 investments because they would not produce returns that were equivalent 18 to funds with greater exposure to equities and were less likely, therefore, to produce returns that would be needed to provide adequate income at 19 retirement. 20 21 (FAC ¶ 62.) The conclusions of both parties’ experts support this allegation; the 22 experts agree that, between 2013 and 2018, the Plan suffered over $600,000 in losses 23 as a result of the CDs-only investment strategy. (Opp’n 7; Decl. Michael C. McKay 24 ISO Mot. Prelim. Settlement Approval ¶ 9, ECF No. 60-4 (“Plaintiffs’ expert 25 witness . . . opined that the class monetary damages were between $778,308 and 26 $710,441 . . . . Defendants’ expert . . . opined that class monetary damages were 27 between $698,089 and $616,944 . . . .”).) Additionally, the undisputed evidence 28 indicates that “most if not all” of Westco’s employees were dissatisfied with the Plan’s 16 Case 2:19-cv-01405-ODW-AGR Document 107 Filed 02/23/23 Page 17 of 20 Page ID #:1858

1 investment in CDs and that it was a “running joke” in the company. (SUF 18–19.) 2 Moreover, one need not wait to see how CDs will perform; the yield on a CD is known 3 from the start, and the passage of time is not required to understand that a CD is a low- 4 risk, low-return investment vehicle. Cf. Marine Bank v. Weaver, 455 U.S. 551, 559 5 (1982) (“[T]he holders of bank certificates of deposit are abundantly protected under 6 the federal banking laws.”). Under these facts, Defendants’ CDs-only investment 7 strategy was “inherently a statutory breach of fiduciary duty” from the outset. Fink, 8 772 F.2d at 957. Thus, under the facts of this case, no reasonable juror could find that 9 Ibarra’s knowledge of the fact of the CDs-only investment strategy did not equate to 10 knowledge that the investment strategy was imprudent. 11 Ibarra’s declaration, (Ibarra Decl. ¶¶ 3–6), does not alter this conclusion. Ibarra 12 knew the Plan was invested in only CDs, and it was and is commonly known, both at 13 Westco and in general, that such an investment strategy would not yield acceptable 14 returns for Plan participants. Thus, Ibarra knew that the Plan’s strategy was imprudent, 15 and he cannot avoid this finding on the basis of “willful blindness” to what was obvious 16 and clear to him. See Sulyma II, 140 S. Ct. at 779 (noting that evidence of “willful 17 blindness” may properly support a finding of “actual knowledge”). 18 When, Ibarra received and saw a Participant Statement, which happened no later 19 than 2011, he had actual knowledge of Defendants’ imprudent investments under 20 29 U.S.C. § 1113(2). Thus, the three-year limitations period began to run at that time, 21 and expired at the latest in 2015. As Ibarra did not bring his duty of prudence claim 22 until 2019, his claim is time-barred. Moreover, for the reasons discussed in the previous 23 section in relation to Draney, Plaintiffs’ allegations and arguments regarding continuing 24 violations and the duty to monitor do not alter this conclusion. The Court therefore 25 grants Defendants’ Motion as to Ibarra’s duty of prudence claim (Claim One) and 26 dismisses Ibarra’s claim with prejudice. 27 28 17 Case 2:19-cv-01405-ODW-AGR Document 107 Filed 02/23/23 Page 18 of 20 Page ID #:1859

1 B. Duty of Loyalty 2 Plaintiffs’ second claim is for breach of the duty of loyalty that ERISA plan 3 fiduciaries owe under 29 U.S.C. § 1104(a)(1)(B). (FAC ¶¶ 68–73.) “ERISA requires 4 that plan fiduciaries . . . act ‘solely in the interest of the participants and beneficiaries,’ 5 and ‘for the exclusive purpose of . . . providing benefits to participants and their 6 beneficiaries.’” Anderson v. Intel Corp. Inv. Pol’y Comm., 579 F. Supp. 3d 1133, 1155 7 (N.D. Cal. 2022) (second alteration in original) (quoting 29 U.S.C. § 1104(a)(1)(A)), 8 appeal docketed, No. 22-16268 (9th Cir. Aug. 22, 2022); White v. Chevron Corp., 9 No. 16-cv-0793-PJH, 2016 WL 4502808, at *4 (N.D. Cal. Aug. 29, 2016) (noting plan 10 fiduciaries must act “with an eye single to the interests of the participants and 11 [beneficiaries]” (quoting Donovan v. Bierwirth, 680 F.2d 263, 271 (2d Cir. 1982))). 12 Plaintiffs’ duty of loyalty claim is based on the same underlying wrong as the 13 duty of prudence claim: maintaining the Plan’s investments entirely in CDs. Plaintiffs 14 allege that such action was disloyal because Defendants placed their own interests 15 above those of the Plan’s participants. (See FAC ¶ 70C (accusing Defendants of 16 “[s]electing only certificates of deposit for the 401(k) Plan because Ezekiel and Steven 17 Zwillinger personally want to invest only in certificates of deposit in part because they 18 have other retirement resources and are not concerned about returns on the Plans’ 19 assets”).) 20 Defendants meet their burden on summary judgment by arguing that the duty of 21 loyalty claim, like the duty of prudence claim, is barred by ERISA’s three-year statute 22 of limitations, and by pointing to the evidence they submitted in connection with the 23 duty of prudence claim. (Mot. 8.) Thus, to save the duty of loyalty claim from the same 24 fate as the duty of prudence claim, Plaintiffs need to distinguish the former from the 25 latter in some material way. But Plaintiffs point to no breaches of the duty of loyalty 26 that could be viewed as separate and apart from the alleged breaches of the duty of 27 prudence. (See generally Opp’n.) Thus, Plaintiffs fail to distinguish the two claims, 28 and accordingly, any breaches of the duty of loyalty fall outside the limitations period 18 Case 2:19-cv-01405-ODW-AGR Document 107 Filed 02/23/23 Page 19 of 20 Page ID #:1860

1 to the same extent as the breaches of the duty of prudence. Accordingly, the duty of 2 loyalty claim is likewise time-barred by ERISA’s three-year statute of limitations. Cf. 3 Tobias v. NVIDIA Corp., No. 20-CV-06081-LHK, 2021 WL 4148706, at *16 4 (N.D. Cal. Sept. 13, 2021) (dismissing claim for breach of the duty of loyalty where 5 claim “hing[ed] entirely on breach of the duty of prudence allegations”). The Court 6 therefore grants Defendants’ Motion as to Draney’s and Ibarra’s duty of loyalty claim 7 (Claim Two) and dismisses that claim with prejudice. 8 C. Denial of Class Certification and Dismissal 9 Plaintiffs filed a Motion to Certify Class, which is fully briefed and under 10 submission. (Mot. Certify Class, ECF No. 95; ECF No. 109 (taking matter under 11 submission).) In the Motion to Certify Class, Draney and Ibarra propose themselves as 12 Lead Plaintiffs. (Id.) However, as discussed above, Draney’s and Ibarra’s claims are 13 time-barred, such that dismissal of their individual claims with prejudice is appropriate. 14 “When a defendant has obtained summary judgment against putative class 15 plaintiffs, a motion for class certification becomes moot.” Sperling v. Stein Mart, Inc., 16 291 F. Supp. 3d 1076, 1087 (C.D. Cal. 2018); see Wu v. Sunrider Corp., No. 2:17-cv- 17 04825-DSF (SSx), 2018 WL 2717863, at *1 (C.D. Cal. May 29, 2018) (denying class 18 certification motion as moot after granting summary judgment on all of the named 19 plaintiff’s claims); cf. Emp’rs-Teamsters Local Nos. 175 & 505 Pension Tr. Fund v. 20 Anchor Cap. Advisors, 498 F.3d 920, 924 (9th Cir. 2007) (“[A] suit brought as a class 21 action must as a general rule be dismissed for mootness when the personal claims of all 22 named plaintiffs are satisfied and no class has been properly certified.”). Accordingly, 23 the Court denies Plaintiffs’ Motion to Certify Class as moot and dismisses the remainder 24 of the action, including by dismissing the class claims without prejudice. 25 /// 26 /// 27 /// 28 /// 19 Cate 2:19-cv-01405-ODW-AGR Pecument □□ Filed 02/23/23 Page 200f20 Page ID

1 /// 2] /// 3} /// 4 /// 6 For the foregoing reasons, the Court GRANTS Defendants’ Motion for 7 Summary Judgment. (ECF No. 87.) The Court DISMISSES the First Amended 8 Complaint (1) WITH PREJUDICE as to Draney’s and Ibarra’s individual claims and 9 (2) WITHOUT PREJUDICE as to the class claims. Plaintiffs’ Motion to Certify Class 10 is DENIED AS MOOT. (ECF No. 95.) 11 All dates and deadlines in this matter are VACATED and taken off calendar. 12 The Court will issue Judgment. 13 15 16 February 23, 2023 NN . 17 18 led 19 OTIS D. WRIGHT, I 90 UNITED STATES DISTRICT JUDGE

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