Acosta v. Wedbush: Motion to Dismiss Claim of Violations of ERISA Denied
Wednesday, October 18, 2017 at 08:36PM
Kevin Watson

In Acosta v. Wedbush Secs., C.D. Cal., No. 2:17-cv-02471-SVW-KS, (C.D. Cal Aug. 15, 2017), the United States District Court for the Central District of California denied Wedbush Securities, Inc., Edward Wedbush, Gary Wedbush, Wedbush Securities In. Employees’ PS Retirement Plan, and the Wedbush Securities Inc. Commissioned Employees’ PS Retirement plan (collectively “Defendants”) motion to dismiss a complaint filed by the Department of Labor (“Plaintiff”) alleging violations of the Employee Retirement Income Security Act of 1974 (“ERISA”), finding that the issues raised in the motion were fact-intensive and therefore more appropriately resolved at trial.

Plaintiff alleged Defendants violated their fiduciary duties with respect to two retirement plans it maintained for its employees. Plaintiff alleged the Defendants: (1) violated ERISA by engaging in self-dealing by receiving commissions for executing transactions on behalf of participants in their employees’ retirement plans; and (2) breached their fiduciary duties by allowing Defendants and their subsidiaries to receive compensation, including fees and brokerage commissions paid from the plans’ assets, in exchange for services rendered relating to investment in two hedge funds associated with Defendants.

To succeed on a Rule 12(b)(6) motion to dismiss, a plaintiff’s complaint must contain sufficient factual matter, that when accepted as true, states a claim to relief that is plausible on its face. Rule 12(b)(6) allows a party to assert a statute of limitations defense on a motion to dismiss. A motion based on the statute of limitations, however, can only be granted if the assertions in the complaint would not allow the plaintiff to prove that the statute was tolled.

The court found the question of whether disclosure forms filed by Defendants provided the Plaintiff with notice of potential ERISA violations relating to the retirement funds was sufficiently factual and could not be resolved in a motion to dismiss. Similarly, the court found a careful analysis of the context and nature of the transactions and how they relate to the disclosures was required to determine whether the disclosures in the necessary forms were sufficient to notify the Plaintiff of potential ERISA violations. The court distinguished this case from another case in which there was only a single breach by the repetition of the prohibited transactions here. The court determined that Plaintiff asserted sufficient facts in the complaint to demonstrate the suit may not be time barred.

For the above reasons, the court denied Defendants motion to dismiss.

Primary materials are available on the DU Corporate Governance Website

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