1 2 3 4 IN THE UNITED STATES DISTRICT COURT 5 FOR THE NORTHERN DISTRICT OF CALIFORNIA 6 7 GREGOR MIGUEL, et al., Case No. 20-cv-01753-MMC
8 Plaintiffs, ORDER DENYING PLAINTIFFS' MOTION FOR LEAVE TO FILE 9 v. AMENDED CLASS ACTION COMPLAINT 10 SALESFORCE.COM, INC., et al., Re: Dkt. No. 101 11 Defendants.
12 13 Before the Court is plaintiffs Gregor Miguel and Amanda Bredlow’s “Motion,” filed 14 May 30, 2023, “for Leave to File Amended Class Action Complaint.” Defendants 15 Salesforce.com, Inc. (“Salesforce”), Board of Directors of Salesforce, Marc Benioff, the 16 Investment Advisory Committee (“Committee”), Joseph Allanson, Stan Dunlap, and 17 Joachim Wettermark have filed opposition, to which plaintiffs have replied. Having read 18 and considered the papers filed in support of and in opposition to the motion, the Court 19 rules as follows.1 20 BACKGROUND 21 Plaintiffs are former Salesforce employees who participated in the Salesforce 22 401(k) Plan (“the Plan”). (See First Am. Compl. (“FAC”) ¶¶ 21-22, Dkt. No. 38.) 23 Salesforce established the Plan in 2000 to provide benefits to eligible employees. 24 Specifically, the Plan is a “defined contribution plan,” i.e., a plan wherein participants’ 25 benefits are “based solely upon the amount contributed to [participants’] accounts,” as 26 well as “any income, expense, gains and losses, and any forfeitures . . . allocated to such 27 1 participant’s account.” (See FAC ¶ 53.) As of December 31, 2018, the Plan offered 2 “twenty-seven investment options” that were “mutual funds,” as well as “additional 3 investment options through a brokerage link,” and had over $2 billion in “assets under 4 management.” (See FAC ¶¶ 63-64.) 5 On March 11, 2020, plaintiffs filed their initial complaint in the instant action. On 6 October 23, 2020, plaintiffs filed the FAC, the operative complaint, alleging defendants 7 breached their fiduciary duties to the Plan and Plan participants in violation of the 8 Employee Retirement Income Security Act of 1974 (“ERISA”), and based thereon, 9 asserting two claims for relief, specifically, a claim for breach of the fiduciary duty of 10 prudence and a claim for failure to adequately monitor fiduciaries. By order filed April 15, 11 2021, the Court granted defendants’ motion to dismiss the FAC. 12 Plaintiffs appealed, and, on April 8, 2022, the Ninth Circuit affirmed in part and 13 reversed in part. Specifically, the Ninth Circuit agreed with the Court that “plaintiffs have 14 not plausibly alleged that defendants breached the duty of prudence by failing to 15 adequately consider passively managed mutual fund alternatives to the actively managed 16 funds offered by the [P]lan,” see Davis v. Salesforce.com, Inc., 2022 WL 1055557, at *2 17 n.1 (9th Cir. Apr. 8, 2022), but also found “plaintiffs have stated a plausible claim that 18 defendants imprudently failed to select lower-cost share classes or collective investment 19 trusts with substantially identical underlying assets,” see id. at *1. Accordingly, the Ninth 20 Circuit remanded the action. 21 Thereafter, on February 23, 2023, the Court granted plaintiffs’ motion for class 22 certification. A trial is set for May 6, 2024. 23 DISCUSSION 24 By the instant motion, plaintiffs seek to amend the FAC by adding “allegations in 25 support of [their] imprudent investment claims.” (See Pls.’ Mot. for Leave to File Am. 26 Class Action Compl. (“Pls.’ Mot.”) ¶ 10, Dkt. No. 101.) Specifically, plaintiffs seek to add 27 allegations that “the Plan’s fiduciaries relied almost exclusively on the advice of 1 (see PAC ¶ 44), that the “Bridgebay data relied on by the fiduciaries was deficient” (see 2 PAC ¶ 110), and that there were “many superior performing alternatives” to the funds 3 used by the Plan (see PAC ¶ 112, 118, 124); plaintiffs further seek to add a number of 4 charts comparing historical performances of funds used by the Plan with those of “known 5 superior performing alternatives which should have been selected” instead (see PAC 6 ¶¶ 109, 111, 112, 114, 119, 122; see also PAC, Attach. A). Plaintiffs assert “[t]hese 7 alternatives are apples-to-apples comparisons, unlike the previous’ complaint’s 8 comparison of active funds to passive funds deemed inappropriate by the Court.” (See 9 Reply in Supp. of Pls.’ Mot. (“Pls.’ Reply”) at 9:3-5, Dkt. No. 106.) According to plaintiffs, 10 their “additional factual allegations cure the defects in the previous complaint[,] thus 11 allowing [p]laintiffs to sufficiently plead [d]efendants breached their fiduciary duties by 12 selecting and retaining imprudent investments for the Plan.” (See id. at 11:9-12.) 13 In opposing the proposed amendments, defendants first point out that plaintiffs, by 14 citing Rule 15(a)(2) of the Federal Rules of Civil Procedure, “have briefed the wrong rule” 15 (see Defs.’ Opp’n to Pls.’ Mot. (“Defs.’ Opp’n”) at 3:15, Dkt. No. 104), in that “where a 16 party seeks leave to amend after the date specified in a scheduling order, Rule 16(b) 17 applies” (see id. at 3:18-19 (quoting Mogel v. Hanni, 2014 WL 120682, at *2 (N.D. Cal. 18 Jan. 10, 2014)) (alterations omitted)). In particular, where a court has issued a pretrial 19 scheduling order containing a deadline to amend the pleadings, a motion to amend is 20 governed by Rule 16 of the Federal Rules of Civil Procedure. See Johnson v. Mammoth 21 Recreations, Inc., 975 F.2d 604, 607-08 (9th Cir. 1992) (noting, “[o]nce the district court 22 had filed a pretrial scheduling order pursuant to Federal Rule of Civil Procedure 16 which 23 established a timetable for amending pleadings[,] that rule’s standards controlled”). In 24 the instant case, the Court issued its pretrial scheduling order on July 8, 2022, by which 25 order the Court set October 3, 2022, as the deadline for amendment of the pleadings, 26 i.e., nearly eight months before the filing of the instant motion. 27 Under Rule 16, “[a] schedule may be modified only for good cause and with the 1 1831944, at *3 (E.D. Cal. May 8, 2017) (noting “[a] district court has broad discretion to 2 grant or deny a continuance” (internal quotation and citation omitted)). “Unlike Rule 3 15(a)'s liberal amendment policy which focuses on the bad faith of the party seeking to 4 interpose an amendment and the prejudice to the opposing party, Rule 16(b)’s ‘good 5 cause’ standard primarily considers the diligence of the party seeking the amendment” 6 and that party’s “reasons for seeking [such] modification.” See Johnson, 975 F.2d at 609; 7 see also Sako v. Wells Fargo Bank, Nat. Ass'n, 2015 WL 5022326, at *1 (S.D. Cal. Aug. 8 24, 2015) (noting “Rule 16's ‘good cause’ standard is more stringent than a Rule 15 9 analysis”). If the party seeking amendment “was not diligent, the inquiry should end.” 10 See Johnson, 975 F.2d at 609. If, on the other hand, “‘good cause’ is shown, the party 11 must demonstrate [the proposed] amendment is proper under Rule 15.” See Sako, 2015 12 WL 5022326, at *1. 13 Here, plaintiffs assert they diligently filed the instant motion, in that “[i]t was not 14 until approximately mid-April of 2023” that the proffered additional “information had been 15 discovered.” (See Pls.’ Mot.
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1 2 3 4 IN THE UNITED STATES DISTRICT COURT 5 FOR THE NORTHERN DISTRICT OF CALIFORNIA 6 7 GREGOR MIGUEL, et al., Case No. 20-cv-01753-MMC
8 Plaintiffs, ORDER DENYING PLAINTIFFS' MOTION FOR LEAVE TO FILE 9 v. AMENDED CLASS ACTION COMPLAINT 10 SALESFORCE.COM, INC., et al., Re: Dkt. No. 101 11 Defendants.
12 13 Before the Court is plaintiffs Gregor Miguel and Amanda Bredlow’s “Motion,” filed 14 May 30, 2023, “for Leave to File Amended Class Action Complaint.” Defendants 15 Salesforce.com, Inc. (“Salesforce”), Board of Directors of Salesforce, Marc Benioff, the 16 Investment Advisory Committee (“Committee”), Joseph Allanson, Stan Dunlap, and 17 Joachim Wettermark have filed opposition, to which plaintiffs have replied. Having read 18 and considered the papers filed in support of and in opposition to the motion, the Court 19 rules as follows.1 20 BACKGROUND 21 Plaintiffs are former Salesforce employees who participated in the Salesforce 22 401(k) Plan (“the Plan”). (See First Am. Compl. (“FAC”) ¶¶ 21-22, Dkt. No. 38.) 23 Salesforce established the Plan in 2000 to provide benefits to eligible employees. 24 Specifically, the Plan is a “defined contribution plan,” i.e., a plan wherein participants’ 25 benefits are “based solely upon the amount contributed to [participants’] accounts,” as 26 well as “any income, expense, gains and losses, and any forfeitures . . . allocated to such 27 1 participant’s account.” (See FAC ¶ 53.) As of December 31, 2018, the Plan offered 2 “twenty-seven investment options” that were “mutual funds,” as well as “additional 3 investment options through a brokerage link,” and had over $2 billion in “assets under 4 management.” (See FAC ¶¶ 63-64.) 5 On March 11, 2020, plaintiffs filed their initial complaint in the instant action. On 6 October 23, 2020, plaintiffs filed the FAC, the operative complaint, alleging defendants 7 breached their fiduciary duties to the Plan and Plan participants in violation of the 8 Employee Retirement Income Security Act of 1974 (“ERISA”), and based thereon, 9 asserting two claims for relief, specifically, a claim for breach of the fiduciary duty of 10 prudence and a claim for failure to adequately monitor fiduciaries. By order filed April 15, 11 2021, the Court granted defendants’ motion to dismiss the FAC. 12 Plaintiffs appealed, and, on April 8, 2022, the Ninth Circuit affirmed in part and 13 reversed in part. Specifically, the Ninth Circuit agreed with the Court that “plaintiffs have 14 not plausibly alleged that defendants breached the duty of prudence by failing to 15 adequately consider passively managed mutual fund alternatives to the actively managed 16 funds offered by the [P]lan,” see Davis v. Salesforce.com, Inc., 2022 WL 1055557, at *2 17 n.1 (9th Cir. Apr. 8, 2022), but also found “plaintiffs have stated a plausible claim that 18 defendants imprudently failed to select lower-cost share classes or collective investment 19 trusts with substantially identical underlying assets,” see id. at *1. Accordingly, the Ninth 20 Circuit remanded the action. 21 Thereafter, on February 23, 2023, the Court granted plaintiffs’ motion for class 22 certification. A trial is set for May 6, 2024. 23 DISCUSSION 24 By the instant motion, plaintiffs seek to amend the FAC by adding “allegations in 25 support of [their] imprudent investment claims.” (See Pls.’ Mot. for Leave to File Am. 26 Class Action Compl. (“Pls.’ Mot.”) ¶ 10, Dkt. No. 101.) Specifically, plaintiffs seek to add 27 allegations that “the Plan’s fiduciaries relied almost exclusively on the advice of 1 (see PAC ¶ 44), that the “Bridgebay data relied on by the fiduciaries was deficient” (see 2 PAC ¶ 110), and that there were “many superior performing alternatives” to the funds 3 used by the Plan (see PAC ¶ 112, 118, 124); plaintiffs further seek to add a number of 4 charts comparing historical performances of funds used by the Plan with those of “known 5 superior performing alternatives which should have been selected” instead (see PAC 6 ¶¶ 109, 111, 112, 114, 119, 122; see also PAC, Attach. A). Plaintiffs assert “[t]hese 7 alternatives are apples-to-apples comparisons, unlike the previous’ complaint’s 8 comparison of active funds to passive funds deemed inappropriate by the Court.” (See 9 Reply in Supp. of Pls.’ Mot. (“Pls.’ Reply”) at 9:3-5, Dkt. No. 106.) According to plaintiffs, 10 their “additional factual allegations cure the defects in the previous complaint[,] thus 11 allowing [p]laintiffs to sufficiently plead [d]efendants breached their fiduciary duties by 12 selecting and retaining imprudent investments for the Plan.” (See id. at 11:9-12.) 13 In opposing the proposed amendments, defendants first point out that plaintiffs, by 14 citing Rule 15(a)(2) of the Federal Rules of Civil Procedure, “have briefed the wrong rule” 15 (see Defs.’ Opp’n to Pls.’ Mot. (“Defs.’ Opp’n”) at 3:15, Dkt. No. 104), in that “where a 16 party seeks leave to amend after the date specified in a scheduling order, Rule 16(b) 17 applies” (see id. at 3:18-19 (quoting Mogel v. Hanni, 2014 WL 120682, at *2 (N.D. Cal. 18 Jan. 10, 2014)) (alterations omitted)). In particular, where a court has issued a pretrial 19 scheduling order containing a deadline to amend the pleadings, a motion to amend is 20 governed by Rule 16 of the Federal Rules of Civil Procedure. See Johnson v. Mammoth 21 Recreations, Inc., 975 F.2d 604, 607-08 (9th Cir. 1992) (noting, “[o]nce the district court 22 had filed a pretrial scheduling order pursuant to Federal Rule of Civil Procedure 16 which 23 established a timetable for amending pleadings[,] that rule’s standards controlled”). In 24 the instant case, the Court issued its pretrial scheduling order on July 8, 2022, by which 25 order the Court set October 3, 2022, as the deadline for amendment of the pleadings, 26 i.e., nearly eight months before the filing of the instant motion. 27 Under Rule 16, “[a] schedule may be modified only for good cause and with the 1 1831944, at *3 (E.D. Cal. May 8, 2017) (noting “[a] district court has broad discretion to 2 grant or deny a continuance” (internal quotation and citation omitted)). “Unlike Rule 3 15(a)'s liberal amendment policy which focuses on the bad faith of the party seeking to 4 interpose an amendment and the prejudice to the opposing party, Rule 16(b)’s ‘good 5 cause’ standard primarily considers the diligence of the party seeking the amendment” 6 and that party’s “reasons for seeking [such] modification.” See Johnson, 975 F.2d at 609; 7 see also Sako v. Wells Fargo Bank, Nat. Ass'n, 2015 WL 5022326, at *1 (S.D. Cal. Aug. 8 24, 2015) (noting “Rule 16's ‘good cause’ standard is more stringent than a Rule 15 9 analysis”). If the party seeking amendment “was not diligent, the inquiry should end.” 10 See Johnson, 975 F.2d at 609. If, on the other hand, “‘good cause’ is shown, the party 11 must demonstrate [the proposed] amendment is proper under Rule 15.” See Sako, 2015 12 WL 5022326, at *1. 13 Here, plaintiffs assert they diligently filed the instant motion, in that “[i]t was not 14 until approximately mid-April of 2023” that the proffered additional “information had been 15 discovered.” (See Pls.’ Mot. ¶ 20 (citing PAC ¶¶ 105-06, 119, 125).) In particular, 16 plaintiffs point to the “2019 Bridgebay Report” and the “April 2019 meeting minutes of 17 Salesforce’s Investment Advisory Committee,” both of which, plaintiffs allege, show funds 18 in the Plan “had serious performance issues” and that defendants knew about those 19 issues. (See PAC ¶¶ 106, 119, 125.) Such “recently discovered evidence,” according to 20 plaintiffs, “reveal[s] the failings and imprudence of the process used by the Salesforce 21 fiduciaries.” (See PAC ¶¶ 105-06.) The Court is not persuaded. 22 First, the majority of plaintiffs’ proposed allegations consist of performance 23 comparisons between funds used by the Plan and plaintiffs’ proffered “superior 24 performing alternatives” (see, e.g., PAC ¶ 109), which allegations appear to rest not on 25 any recently discovered evidence, but rather, on data from Morningstar, an investment 26 database (see, e.g., PAC ¶ 109 (analyzing “three target date series from [a] Morningstar 27 peer group . . . [as] against the JPMorgan SmartRetirement series” used by the Plan)). 1 amend. Rather, plaintiffs appear to allege the opposite (see PAC ¶ 109 (alleging “the 2 JPMorgan SmartRetirement series was an imprudent selection” given “data that would 3 have been available to the Plan at the start of the Class Period”)), and, indeed, have not 4 disputed defendants’ assertion that such data was “public information that was always 5 readily available to [p]laintiffs” (see Defs.’ Opp’n at 5:4-5). 6 As to the remainder of the proposed allegations, namely, those regarding 7 Bridgebay (see PAC ¶¶ 106, 110), plaintiffs seek to allege the 2019 Bridgebay Report 8 “shows that the Plan’s fiduciaries relied almost exclusively on the advice of Bridgebay” 9 (see PAC ¶ 106), that “a review of the recently acquired Bridgebay data from the 2014 10 period[] shows . . . i[t] failed to take into account the performance of [the JPMorgan series 11 of target date] funds as against their peers in any meaningful way” (see PAC ¶ 110), and 12 that “[t]hus, the Committee failed to make an accurate and prudent decision for the 13 JPMorgan target date series” (see PAC ¶ 110). Defendants, in their opposition, assert 14 the 2019 Bridgebay Report “was produced on March 29, 2023 (not April 27, 2023, as 15 [p]laintiffs state)” (see Defs.’ Opp’n at 5:1 n.1), which plaintiffs, in their reply, do not 16 refute, and, “[c]ourts have held that waiting two months after discovering new facts to 17 bring a motion to amend does not constitute diligence under Rule 16,” see Sako, 2015 18 WL 5022326, at *2 (collecting cases).2 Further, plaintiffs concede “the other documents 19 [they] relied on were produced in October of 2022.” (See Pls.’ Reply at 4:18-19.) 20 In any event, the Ninth Circuit has already found “plaintiffs have adequately 21 alleged a claim for breach of the duty of prudence” predicated on the Plan’s use of the 22 JPMorgan target date series. See Davis, 2022 WL 1055557, at *2. Plaintiffs essentially 23 seek to bolster their claim for breach of the duty of prudence by belatedly proffering 24 allegations that do not alter the substance of their claim. Such circumstances do not 25 constitute good cause for amendment under Rule 16. Cf. Akey, 2017 WL 1831944, at *8 26 2 As defendants also point out, plaintiffs “fail to explain how the Committee’s 27 reliance on expert advice from a fiduciary investment consultant shows imprudence.” 1 (finding good cause for amendment under Rule 16 where “plaintiffs were sufficiently 2 || diligent in pursuing discovery” and “rel[ied] heavily on information acquired through recent 3 || discovery” to “address [previously identified] shortcomings’). 4 CONCLUSION 5 For all of the reasons set forth above, the Court finds plaintiffs have failed to 6 || demonstrate good cause for amendment under Rule 16,° and, accordingly, plaintiffs’ 7 || motion is hereby DENIED. 8 9 IT IS SO ORDERED. 10 11 || Dated: September 8, 2023 . XINE M. CHESNEY 12 United States District Judge — 13
17 18 19 20 21 22 23 24 25 26 27 3 In light of this finding, the Court does not address herein the parties’ arguments 2g || with respect to Rule 15.