United States District Court, D. Nebraska
MARC J. MURI, individually and on behalf of all others similarly situated, Plaintiff,
NATIONAL INDEMNITY COMPANY, Defendants.
MEMORANDUM AND ORDER
M. Gerrard, United States District Judge
plaintiff, Marc Muri, is suing his former employer, National
Indemnity Company, for allegedly breaching the fiduciary
duties owed to him, and all others similarly situated, under
the Employee Retirement Income Security Act of 1974 (ERISA),
29 U.S.C. § 1001 et seq. National Indemnity has
moved to dismiss the complaint for failure to state a claim
for which relief can be granted. Filing 25. For the reasons
discussed below, the Court will deny National Indemnity's
motion to dismiss.
allegations are summarized as follows. Muri was employed by
National Indemnity, an insurance provider located in Omaha,
Nebraska. Filing 1 at 7. During his employment, Muri
participated in National Indemnity Company's Employee
Retirement Savings Plan ("the Plan"). Filing 1 at
2. The Plan, in essence, allows participating employees to
contribute a portion of their salary, which National
Indemnity then matches, towards individual retirement
accounts. Filing 1 at 8. Participants do so by choosing from
a variety of fund options, all of which offer different
investment styles and risk profiles, in which to invest their
contributions. Muri elected to invest in the Sequoia Fund.
Filing 1 at 2; see also filing 27-4 at 2.
speaking, the Sequoia Fund is a non-diversified, long-term
growth mutual fund managed by Ruane, Cunniff & Goldfarm,
Inc. Filing 1 at 2, filing 1 at 11; filing 1 at 13. The
Sequoia Fund invests in "common stocks it believes are
undervalued at the time of purchase and have the potential
for growth." Filing 1 at 13. And it sells common stocks
"when the company shows deteriorating fundamentals . . .
or its value appears excessive relative to its expected
future earnings." Filing 1 at 11.
Muri alleges, the Sequoia Fund was, as of January 2015, no
longer a prudent investment option. Filing 1 at 4. To that
end, Muri contends the Sequoia Fund violated its own
"value policy" by over-concentrating its
investments in one, high risk stock: Valeant Pharmaceuticals.
Filing 1 at 3; see also filing 1 at 2. In essence,
Valeant's business model is to acquire various
competitors and products, then drastically cut research and
development costs in an effort to boost profits. Filing 1 at
to Muri, Valeant's acquisition strategy, along with its
accounting practices, began raising "red flags"
around the industry. See filing 1 at 16-17.
Specifically, investors began questioning Valeant's
"cash earnings per share" accounting method, which
appeared to vastly overstate Valeant's net income. Filing
1 at 18. And suspicions also arose surrounding Valeant's
stock price which, at its peak, had a trade value almost
ninety-eight times higher than its previous year's
earnings. Filing 1 at 17. As a result, Valeant became the
subject of intense scrutiny by investors, analysists, and
elected officials. See filing 1 at 22-26. Despite
that skepticism, however, Sequoia Fund managers allegedly
refused to diminish the Fund's concentration in Valeant
stock, and instead, acquired more. See filing 1 at
October 2015, Valeant's stock price fell dramatically,
and by November 2015, Valeant had lost more than $65 billion
in market value. Filing 1 at 27. This, in turn, caused the
Sequoia Fund to lose approximately twenty five percent of its
value--vastly diminishing the retirement account of Muri, and
other Plan participants, who had invested in the Fund.
See filing 1 at 27.
with that backdrop that this litigation ensued. Muri claims
that from January 1, 2015, through the date of judgment in
this action (the "Class Period"), National
Indemnity violated the fiduciary duties it owed to Muri, and
other Plan participants by: (1) failing to prudently manage
the Plan by offering "shortsighted" investment
options, such as the Sequoia Fund; and (2) failing to avoid
conflicts of interest in choosing its investment options,
specifically those with close relationships to its parent
company--Berkshire Hathaway. Filing 1 at 34-37.
Indemnity has moved to dismiss the complaint under
Fed.R.Civ.P. 12(b)(1) and (b)(6). Filing 25.
motion pursuant to Federal Rule of Civil Procedure 12(b)(1)
challenges whether the court has subject matter jurisdiction.
The party asserting subject matter jurisdiction bears the
burden of proof. Great Rivers Habitat Alliance v.
FEMA, 615 F.3d 985, 988 (8th Cir. 2010). And Rule
12(b)(1) motions can be decided in three ways: at the
pleading stage, like a Rule 12(b)(6) motion; on undisputed
facts, like a summary judgment motion; and on disputed facts.
Jessie v. Potter, 516 F.3d 709, 712 (8th Cir. 2008).
deciding a motion under Rule 12(b)(1) must distinguish
between a "facial attack"' and a "factual
attack." Branson Label, Inc. v. City of Branson,
Mo., 793 F.3d 910, 914 (8th Cir. 2015). In a facial
attack, the Court merely needs to look and see if the
plaintiff has sufficiently alleged a basis of subject matter
jurisdiction. Id. Accordingly, the Court restricts
itself to the face of the pleadings and the non-moving party
receives the same protections as it would defending against a
motion brought under Rule 12(b)(6)-that is, the Court accepts
all factual allegations in the pleadings as true and views
them in the light most favorable to the nonmoving party.
Id.; Hastings v. Wilson, 516 F.3d 1055,
1058 (8th Cir. 2008).
in a factual attack, the existence of subject matter
jurisdiction is challenged in fact, irrespective of the
pleadings, and matters outside the pleadings, such as
testimony and affidavits, may be considered. Branson
Label, 793 F.3d at 914. Thus, the nonmoving party would
not enjoy the benefit of the allegations in its pleadings
being accepted as true by the reviewing court. Id.
But factual challenges do not arise only when a court
considers matters outside the pleadings. Faibisch v.
Univ. of Minnesota, 304 F.3d 797, 801 (8th Cir. 2002). A