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UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

JACLYN SANTOMENNO, KAREN 

POLEY, and BARBARA POLEY, et 

al.,

Plaintiffs,

v.

TRANSAMERICA LIFE 

INSURANCE COMPANY, 

TRANSAMERICA INVESTMENT 

MANAGEMENT, LLC, and 

TRANSAMERICA ASSET 

MANAGEMENT, INC.,

 

Defendants.

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Civil Action No. 11-736 (FSH) (PS)

Motion Returnable: June 20, 2011

Oral Argument Requested

MEMORANDUM IN SUPPORT OF DEFENDANT 

TRANSAMERICA LIFE INSURANCE COMPANY’S 

MOTION TO DISMISS CLASS ACTION COMPLAINT

Thomas R. Curtin 

George C. Jones

GRAHAM CURTIN

A Professional Association

4 Headquarters Plaza, P.O. Box 1991

Morristown, New Jersey 07962-1991

(973) 292-1700

Robert N. Eccles (pro hac vice pending)

Gary S. Tell (pro hac vice pending)

O’MELVENY & MYERS LLP

1625 Eye Street, NW

Washington, D.C. 20006-4001

(202) 383-5300

Attorneys for Defendants

Transamerica Life Insurance Company,

Transamerica Investment Management, LLC

and Transamerica Asset Management, Inc.

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TABLE OF CONTENTS

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INTRODUCTION .................................................................................................1

BACKGROUND ...................................................................................................3

ARGUMENT.......................................................................................................12

I. STANDARD OF REVIEW .......................................................................12

II. PLAINTIFFS’ ERISA CLAIMS SHOULD BE DISMISSED....................13

A. Counts I and II Should Be Dismissed Because TLIC Is Not A 

Fiduciary With Respect To Its Own Compensation..........................18

B. Count III Should Be Dismissed Because TLIC Is Not A 

Fiduciary With Respect To Its Receipt of Revenue Sharing 

Payments .........................................................................................22

C. Counts IV and VII Should Be Dismissed Because TLIC Is Not 

A Fiduciary With Respect To The Selection of Affiliates Who 

Advise Its Separate Account Products..............................................23

D. Count V Should Be Dismissed Because TLIC Has No Fiduciary 

Obligation To Select The Cheapest Share Class Available In 

The Mutual Funds In The Separate Account Investment 

Options ............................................................................................26

E. Count VI Should Be Dismissed Because TLIC Has No 

Fiduciary Obligation To Negotiate Lower Sub-Advisory Fees 

For The Plan Investments In Collective Trusts And Separate 

Accounts..........................................................................................27

III. COUNTS VIII AND IX SHOULD BE DISMISSED BECAUSE 

THEY FAIL TO STATE VALID CLAIMS UNDER THE 

INVESTMENT ADVISERS ACT.............................................................27

A. TLIC Has Not Provided Investment Advice to “Others” Within 

the Meaning of the IAA ...................................................................29

B. Count IX Fails For The Additional Reason That Plaintiffs Do 

Not State a Proper Derivative Claim................................................31

CONCLUSION ...................................................................................................33

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Cases

Ashcroft v. Iqbal, 

129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) ........................................................13

Baraka v. McGreevey, 

481 F.3d 187 (3d Cir. 2007) ..............................................................................12

Bell Atlantic Corp. v. Twombly,

550 U.S. 544 (2007)....................................................................................12, 21

Campo v. Oxford Health Plans, Inc., 

No. 06-4332, 2007 U.S. Dist. LEXIS 45804 (D.N.J. June 26, 2007) .................13

Columbia Air Servs., Inc. v. Fidelity Mgmt. Trust Co.,

No. 07-11344-GAO, 2008 WL 4457861 (D. Mass. Sept. 30, 2008) ..................20

Ellis v. Rycenga Homes, Inc., 

484 F. Supp. 2d 694 (W.D. Mich. 2007)............................................................24

Fowler v. UPMC Shadyside, 

578 F.3d 203 (3d Cir. 2009) ..............................................................................21

Gelman v. State Farm Mut. Auto. Ins. Co., 

583 F.3d 187 (3d Cir. 2009) ..............................................................................12

Goldstein v. SEC, 

451 F.3d 873 (D.C. Cir. 2006)............................................................................30

Hecker v. Deere & Co., 

556 F.3d 575 (7th Cir. 2009) ......................................................................passim

Hozier v. Midwest Fasteners, Inc.,

908 F.2d 1155 (3d Cir. 1990) ............................................................................14

Lum v. Bank of Am., 

361 F.3d 217 n.3 (3d Cir. 2004) ........................................................................13

Mack Boring and Parts v. Meeker,

930 F.2d 267 (3rd Cir. 1991).............................................................................32

Marks v. Independence Blue Cross, 

71 F. Supp. 2d 432 (E.D. Pa. 1999)................................................. 15, 17, 19, 22

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Mayer v. Belichick, 

605 F.3d 223 (3d Cir. 2010) ..............................................................................12

Miller v. Fortis Benefits Ins. Co.,

363 F. Supp. 2d 700 (D.N.J. 2005)....................................................................13

Pegram v. Herdrich, 

530 U.S. 211 (2000)....................................................................................14, 15

Renfro v. Unisys Corp.,

No. 07-2098, 2010 WL 1688540 (E.D. Pa. Apr. 26, 2010), appeal docketed, No. 

10-2447 (3d Cir. May 27, 2010)........................................................................20

Schulist v. Blue Cross of Iowa, 

717 F.2d 1127 (7th Cir. 1983) ...............................................................17, 19, 23

SEC v. Northshore Asset Mgmt.,

No. 05-2192, 2008 U.S. Dist. LEXIS 36160 (S.D.N.Y. May 5, 2008).................30

Tibble v. Edison Int’l,

639 F. Supp. 2d 1122 (C.D. Cal. 2009) .............................................................24

Trustees of Laborers’ Local No. 72 Pension Fund v. Nationwide Life Ins. Co., 

783 F. Supp. 899 (D.N.J. 1992).........................................................................32

Wright v. Or. Metallurgical Corp.,

 360 F.3d 1090 (9th Cir. 2004) ..........................................................................24

Zang v. Paychex Inc., 

728 F. Supp. 2d 261 (W.D.N.Y. 2010)..............................................................25

Statutes

15 U.S.C. § 80b, et seq........................................................................................... 1

15 U.S.C. § 80b-2(11).....................................................................................28, 29

15 U.S.C. § 80b-3(b)(2) ........................................................................................30

ERISA § 3(17), 29 U.S.C. § 1002(17).........................................................5, 29, 31

ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(a).............................................14, 21, 25

ERISA § 3(34), 29 U.S.C. § 1002(34).................................................................... 6

ERISA § 406, 29 U.S.C. § 1106......................................................................10, 23

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ERISA § 502(a)(2), 29 U.S.C. § 1132(a)(2)..........................................................10

ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3)..........................................................14

ERISA § 502(d), 29 U.S.C. § 1132(d)...................................................................32

Iowa Code § 508A.1(5).........................................................................................32

Regulations

29 C.F.R. § 2509.96-1(d)(3)..................................................................................16

29 C.F.R. § 2550.408b-2(c)(2)..............................................................................25

Other Authorities

75 Fed. Reg. 65263, 65277 ...................................................................................17

DOL Advisory Op. 97-16A, 1997 ERISA LEXIS 17 (May 22, 1997)...................20

DOL Advisory Op. 97-15A, 1997 ERISA LEXIS 18 (May 22, 1997)...................23

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INTRODUCTION

Plaintiffs’ employers purchased a package of retirement plan services from 

Transamerica Life Insurance Company (“TLIC”). The Complaint challenges those

decisions, alleging the fees charged in connection with Plaintiffs’ plans are 

“excessive.” But rather than seeking to hold their employers accountable for their

decisions, Plaintiffs instead level a 111-page, multi-count class action complaint 

against TLIC.1 If Plaintiffs, as beneficiaries of those plan services, wish to second 

guess the merits of the vendor selection choices, they should take up those disputes

with their employers, not with TLIC. In any event, the allegations in the Complaint 

fail to state a claim under ERISA2 or the Investment Advisers Act (“IAA”).3

The Complaint alleges that TLIC breached fiduciary duties under ERISA by 

charging “excessive” fees on the separate account investment products in Plaintiffs’ 

plans. The Complaint further alleges that TLIC’s retirement plan product runs afoul 

of the Investment Advisers Act because TLIC acts as an unregistered investment 

advisor. At core, these claims challenge TLIC’s ability to design and offer a 

 

1 The Complaint also names Transamerica Asset Management, Inc. (“TAM”) 

and Transamerica Investment Management, LLC (“TIM”) as defendants with 

respect to Counts IV and VII. TAM and TIM have filed a separate motion to 

dismiss those claims pursuant to Fed. R. Civ. P. 12(b)(6).

2

Employee Retirement Income Security Act of 1974, as amended (“ERISA”), 

29 U.S.C. § 1001, et seq.

3

15 U.S.C. § 80b, et seq.

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bundled retirement benefits product in the marketplace for a fee. As developed 

below, none of those claims has merit. 

As a threshold matter, the allegations fail to establish that TLIC had relevant 

ERISA fiduciary status with respect to the conduct alleged. The gravamen of 

Plaintiffs’ ERISA attack is that the group annuity contract through which TLIC 

offers plan sponsors a menu of investment options generates excessive fees 

regardless of the actual investment options selected by plan sponsors or 

participants. That theory is fatally deficient because it is the plan sponsor, who 

selects the plan structure and therefore the plan’s fees. TLIC fully discloses the 

total expense ratio of the separate account investment options to plan sponsors at 

the time of contracting, and it is well-settled that plan service providers are not 

fiduciaries for purposes of negotiating the terms of their own retention. Plaintiffs’

remaining theories of fiduciary status are similarly flawed.

Moreover, although Plaintiffs contend that TLIC had fiduciary authority to 

control its own compensation through unilateral modifications to the group annuity 

contract or the revenue sharing rates associated with the underlying investments in 

TLIC separate account products, the Complaint does not allege that TLIC actually 

exercised such authority. There are likewise no allegations that TLIC caused the 

plans to engage in any particular “transactions” in violation of ERISA’s 

“prohibited transaction” provision § 406(b)(3). Here again, the lack of any 

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allegations identifying conduct by TLIC with respect to the specific retirement 

plans at issue in this case only underscores that Plaintiffs’ attack is targeted at

TLIC’s retirement product as a whole, rather than the prudence of any particular 

investment option offered to the plans. 

Plaintiffs’ claims under the IAA are similarly defective. Plaintiffs allege 

that TLIC violated the IAA by providing investment “advice” to certain of the 

investment vehicles available in the retirement plans, without having registered as 

an investment adviser with the Securities and Exchange Commission. But TLIC’s 

management of its own investment product options is not advice to others, as 

required for coverage under the IAA. Nor would Plaintiffs have an IAA claim 

even if TLIC were “advising” the investment vehicles. The Plaintiffs themselves 

are not the direct beneficiaries of the advice. And they cannot bring a derivative 

claim on behalf of the insurance accounts at issue, because those accounts are 

neither corporations nor associations under Federal Rule 23.1, which governs 

derivative suits.

Therefore, under Fed. R. Civ. P. 12(b)(6), the Court should grant TLIC’s 

motion to dismiss.

BACKGROUND

TLIC sells a retirement plan product consisting of a bundle of administrative 

services and investment options. The product is sold by TLIC through a network 

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of independent financial advisors to small and medium sized employers who wish 

to offer retirement plan benefits to their employees. (Compl. ¶ 62.)

4

 TLIC’s 

401(k) plan product enables participants to select from a menu of investment 

options, transfer amounts in their plan accounts between investment options, and 

receive periodic reporting on their investments

Because the product is offered by an insurance company, the contractual 

relationship between TLC, the plan sponsor and the plan are governed by a group 

annuity contract and services agreement administrative arrangements through 

which plan services are delivered are somewhat different from other types of 

401(k) plans. TLIC provides plan administrative services pursuant to the terms of 

an initial application and agreement with the plan sponsor.5TLIC also makes 

available a range of investment options from which plan sponsors can select the 

investment lineup to be offered to participants in their particular plan through a 

 

4

See also QualCare Plan Commission Disclosure (attached at Declaration of 

Darcy Hatton (“Hatton Decl.”) Ex. F); Gain Plan Commission Disclosures

(attached at Hatton Decl. Ex. G).

5

See, e.g., Application and Agreement for Services between TLIC and Gain 

Capital Group, LLC (dated April 14, 2009) (“Gain Plan 2009 Services 

Agreement”) at § 1.1 (Description of Services) (attached at Hatton Decl. Ex. A);

Application and Agreement for Services between TLIC and Gain Capital Group, 

LLC (dated Dec. 24, 2007) (“Gain Plan 2007 Services Agreement”) (attached at 

Hatton Decl. Ex. B) at §§ 1.1 (Description of Services), 1.7 (Optional Services); 

(collectively, the “Gain Plan Services Agreements”); Application and Agreement 

for Services between TLIC and QualCare Alliance Networks, Inc. (dated Dec. 6, 

2004) (“QualCare Plan Services Agreement”) (attached at Hatton Decl. Ex. C) 

(collectively, the “Services Agreements”) at § 1.1 (Description of Services).

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group annuity contract between TLIC and the plan. (Compl. ¶¶ 12-13.)6 Under the 

terms of the group annuity contract, each investment option selected by the plan 

sponsor is structured as a “separate account.”7 (Compl. ¶¶ 19-20.) The separate 

accounts contain different types of underlying investments, including mutual 

funds, collective trusts and directly-advised accounts. (Id. ¶¶ 214-217.)

Plaintiffs and the Plaintiff Plans. Plaintiffs Jaclyn Santomenno, Karen 

Poley and Barbara Poley (collectively, the “Plaintiff Participants”) are participants 

in retirement plans to which TLIC provided administrative services and investment 

options through an administrative services agreement and group annuity contract. 

(Compl. ¶¶ 54-57.) Until December 2010, Santomenno was a participant in the 

Gain Capital Group, LLC 401(k) Plan (the “Gain Plan,” a “Plaintiff Plan”). (Id. ¶ 

5.) Karen Poley and Barbara Poley are participants in the QualCare Alliance 

Networks, Inc. Retirement Plan, formerly known as the Scibal Associates, Inc. 

401(k) Plan (the “QualCare Plan,” a “Plaintiff Plan”). (Id. ¶ 4.) The Plaintiff Plans 

 

6

See Application and Group Annuity Contract (dated Dec. 24, 2007) 

(attached at Hatton Decl. Ex. D.1); Application and Group Annuity Contract (dated 

Feb. 7, 2008) (attached at Hatton Decl. Ex. D.2); Application and Group Annuity 

Contract (dated Jan. 1, 2005) (“QualCare Plan Contract”) (collectively, the “Group 

Annuity Contracts”) (attached at Hatton Decl. Ex. E).

7 A “separate account” is defined under ERISA § 3(17), 29 U.S.C. § 1002(17)

as “an account established or maintained by an insurance company under which 

income, gains, and losses, whether or not realized, from assets allocated to such 

account, are, in accordance with the applicable contract, credited to or charged 

against such account without regard to other income, gains, or losses of the 

insurance company.” 

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are “defined contribution” plans within the meaning of ERISA § 3(34), 29 U.S.C. § 

1002(34). (Id. ¶¶ 2, 70.) Gain Capital Group, LLC, a foreign exchange and asset 

management company, is the plan sponsor and plan administrator of the Gain 

Plan.8 QualCare Alliance Networks, Inc., New Jersey’s largest providersponsored, managed care company, is the plan sponsor and plan administrator of 

the QualCare Plan.

9

Under the terms of the Services Agreements, TLIC agreed to provide certain 

services to the Plaintiff Plans, including recordkeeping and administrative 

services.

10 In addition to the core services, the Gain Plan Agreement lists a number 

of optional services available to a plan and plan sponsor including, inter alia, the 

offering of AdviceSolutions, “an interactive online retirement and investment 

planning tool provided by an outside vendor.”11 The stated fees are guaranteed for 

one year from the effective date of the Services Agreements, after which time 

TLIC reserved the right to change fees upon 30 days’ written notice to the plan 

 

8

See Gain Plan Services Agreements at 1; see also

https://www.gaincapital.com (last visited May 10, 2011).

9

See QualCare Plan Services Agreement at 1; see also

https://www.qualcareinc.com (last visited May 10, 2011).

10 See Gain Plan 2007 Services Agreement; Gain Plan 2009 Services 

Agreement; QualCare Plan Services Agreement.

11 See Gain Plan 2009 Services Agreement at § 1.7.F.

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administrator.12 The Services Agreements terminate upon termination of the 

Group Annuity Contracts or upon 30-days written notice by either party.

13

Under the terms of the Group Annuity Contracts, the Plan sponsors selected 

the investments to offer Plan participants from a menu of investment options 

provided by TLIC. (Compl. ¶¶ 12-13.) The Group Annuity Contracts were sold to 

the Gain Capital and QualCare Plans through financial advisors who were paid a 

commission in connection with the sale, following disclosure to and acceptance by 

the plan sponsors.14 Approximately 170 investment options were made available 

by TLIC for Plaintiffs’ plan sponsors which, as noted above, are an asset 

management firm and a large managed healthcare company. (Id. ¶ 241.) The Gain 

Plan selected 46 investment options. (Id. ¶¶ 17, 206, 208.) The QualCare Plan 

selected 36 investment options. (Id. ¶¶ 16, 206-207.)

The total fees charged in connection with the separate account investment 

options offered to plan sponsors vary depending on the nature of the underlying 

investment option. As the Complaint alleges, for separate account investment 

options invested in mutual funds, the Administrative and Investment Management 

 

12 See Gain Plan 2009 Services Agreement at 1; QualCare Plan Services 

Agreement at 1.

13 See Gain Plan Services Agreements at § 1.5; QualCare Plan Services 

Agreement at §1.5.

14 See Gain Plan Commission Disclosures (attached at Hatton Decl. Ex. G); 

QualCare Plan Commission Disclosure (attached at Hatton Decl. Ex. F). 

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fees total approximately 75 basis points, or 0.75% of Plan assets invested in those 

options. (Id. ¶ 271.) These fees, along with the expense ratio on the underlying 

mutual fund, comprise the maximum fees charged in connection with separate 

account investment options invested in mutual funds. (Id. ¶¶ 275-76.) However, 

for certain separate account investment options, TLIC receives fee reimbursements 

or revenue sharing from the underlying mutual fund. (Id. ¶¶ 281-284.) The 

Complaint alleges that these revenue sharing payments were used to reduce the 

total fees under the Group Annuity Contracts, including Administrative and 

Investment Management fees.

15 (Id. ¶ 288.) For each separate account investment 

option invested in collective trusts or “traditional” separate accounts, TLIC charges 

a comprehensive fee ranging from 79 basis points to 150 basis points. (Id. ¶¶ 331, 

333-334.) TLIC reserved the right to change the Administrative or Investment 

Management fees upon 30 days’ advance written notice to the Plan sponsor. 16

 

15 See Gain Plan Contract, Schedule of Separate Accounts, Investment 

Management Charges and Administrative Charges (“For some Separate Accounts, 

we receive fee reimbursements from the underlying investment. The fees 

reimbursed to us are applied to adjust the Contract Asset Charges, and/or the 

Investment Management Charge and/or the Administrative Charge.”); QualCare

Plan Contract (same).

16 See, e.g., Gain Plan Contract ¶ B.08 (“We reserve the right to change the 

Investment Management Charge or the Administrative Charge upon advance 

written notice to the Contractholder of at least 30 days.”); QualCare Plan Contract 

¶ B.08 (same).

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In addition to the fees disclosed in the Services Agreements and Group 

Annuity Contracts, TLIC provides plan sponsors with Investment Fact Sheets 

which include information regarding the investment strategy, expense ratios, share 

class, and performance (including performance against benchmarks) of the 

investments held in the approximately 170 separate account investment options 

offered to plan sponsors. (Compl. ¶¶ 227-244.)17 Where applicable, the 

Investment Fact Sheets also disclose that revenue sharing payments made by the 

underlying fund company will be used to reduce the Investment and 

Administrative Charges under the Group Annuity Contract.18

Plaintiffs’ Complaint. In their Complaint, purportedly brought on behalf of 

all defined contribution plans to which TLIC provided investment options through 

one of its group annuity contracts (Compl. ¶ 54), Plaintiffs allege that TLIC 

breached its fiduciary duties under ERISA because the Group Annuity Contracts 

sold to the Plaintiffs’ employers resulted in “unreasonable and excessive” fees 

being charged to plaintiffs and plaintiff plans. (Id. ¶ 139.) Plaintiffs, on 

 

17 See Investment Fact Sheets (attached at Hatton Decl. Ex. H)

18 See, e.g., Investment Fact Sheet, First American Mid Cap Growth 

Opportunities Ret Opt. (“The Investment Management and Administrative Charges 

(IM and Admin Charges) are 0.75%, reduced by the 0.25% fee income received 

from the underlying mutual fund company.”); Investment Fact Sheet, Loomis 

Sayles Investment Grade Bond Ret Opt (“The IM and Admin Charges are 0.75%, 

reduced by the 0.15% net income received from the underlying fund company.”).

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information and belief, contend that the alleged impermissible fee practices “apply 

to all, or most” of the investment options TLIC offers to plan sponsors. (Id. ¶ 18.)

Plaintiffs bring seven claims under ERISA and two claims under the 

IAA. Counts I-III are asserted under ERISA § 502(a)(2), 29 U.S.C. § 1132(a)(2), 

and allege that TLIC engaged in prohibited transactions or otherwise breached 

fiduciary duties by charging Administrative and Investment Management fees in 

connection with TLIC separate accounts containing underlying mutual fund 

investments and by receiving revenue sharing payments from these mutual funds. 

Counts IV and VII allege that, by allowing the Plans to choose to invest in, and pay 

set investment management, investment advisory or other fees to, TLIC-affiliated 

funds, TLIC “caused” the Plans to engage in prohibited transactions in violation of 

ERISA § 406, 29 U.S.C. § 1106. Counts V and VI are asserted under ERISA § 

502(a)(2). 29 U.S.C. § 1132(a)(2) and allege, respectively, that TLIC breached 

fiduciary duties by not selecting the cheapest share class available for the mutual 

funds included in its separate account investment options and by failing to use its 

size to negotiate lower expenses for collective trusts and traditional separate 

accounts.

Counts VIII and IX assert essentially identical claims under Section 215(b) 

of the Investment Advisers Act. Count VIII alleges that TLIC violated the IAA by 

providing investment advice, without having registered as an investment adviser, 

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to the separate account products to which Plaintiffs allocated their accounts 

through the plans’ purchase of variable annuities from TLIC. (See, e.g., Compl. ¶¶

13, 349-52.) Count IX recasts Count VIII as a derivative claim on behalf of the 

various separate accounts, of which Plaintiffs claim to be “security holders.”

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ARGUMENT

I. STANDARD OF REVIEW

Dismissal is proper under Rule 12(b)(6) if plaintiffs cannot prove a set of 

facts that would entitle them to their requested relief. Baraka v. McGreevey, 481 

F.3d 187, 195 (3d Cir. 2007). While the Court must accept plaintiffs’ well-pleaded 

facts as true, the Court is not compelled to accept “unsupported conclusions and 

unwarranted inferences” or “legal conclusions couched as factual allegations.” Id. 

Further, a motion to dismiss should be granted if the facts set forth in the complaint 

undermine plaintiffs’ own claims. Id. As the Supreme Court held, “a plaintiff’s 

obligation to provide the ‘grounds’ of his ‘entitlement to relief’ requires more than 

labels and conclusions, and a formulaic recitation of the elements of a cause of 

action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)

(citation omitted). In order to withstand a motion to dismiss after Twombly, “a 

complaint’s ‘[f]actual allegations must be enough to raise a right to relief above the 

speculative level.’” Mayer v. Belichick, 605 F.3d 223, 229 (3d Cir. 2010) (quoting 

Twombly, 550 U.S. at 555). The pleading must contain sufficient factual 

allegations so as to state a facially plausible claim for relief. See, e.g., Gelman v. 

State Farm Mut. Auto. Ins. Co., 583 F.3d 187, 190 (3d Cir. 2009). A claim 

possesses such plausibility “‘when the plaintiff pleads factual content that allows 

the court to draw the reasonable inference that the defendant is liable for the 

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misconduct alleged.’” Id. at 190 (quoting Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949, 

173 L. Ed. 2d 868 (2009)). 

In reviewing a motion to dismiss under Rule 12(b)(6), the Court may

consider the allegations in the complaint and documents that form the basis of the 

claims. Lum v. Bank of Am., 361 F.3d 217, 222 n.3 (3d Cir. 2004); Miller v. Fortis 

Benefits Ins. Co., 363 F. Supp. 2d 700, 704-05 & n.4 (D.N.J. 2005) (dismissing 

claims based on plain meaning of plan terms, where plan document was attached to 

the motion to dismiss). A document forms “the basis of a claim if the document is 

‘integral to or explicitly relied upon in the complaint.’” See Lum, 361 F.3d at 222 

n. 3; see also Campo v. Oxford Health Plans, Inc., No. 06-4332, 2007 U.S. Dist. 

LEXIS 45804, at *10-13 (D.N.J. June 26, 2007) (holding that governing plan 

document was “integral” to claims where the Court needed it to determine “who 

among the parties is responsible for which portions of the plan”). Without such a 

rule, plaintiffs with legally insufficient claims could escape dismissal by failing to 

attach key documents to their pleadings. Lum, 361 F.3d at 222 n.3.

II. PLAINTIFFS’ ERISA CLAIMS SHOULD BE DISMISSED.

Counts I-VII assert that TLIC breached fiduciary duties under ERISA §§ 

404(a) and 406(b) by causing the Plaintiffs and Plaintiff Plans to incur excessive 

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costs for administrative services and investment options.

19 These counts lack merit 

because, although TLIC has certain fiduciary responsibilities with respect to the 

Plans, it does not act as a fiduciary with respect to the conduct alleged—it is the 

plan sponsors, not TLIC, who caused the Plans to purchase TLIC’s services.

ERISA provides that a person is a plan fiduciary:

to the extent (i) he exercises any discretionary authority or 

discretionary control respecting management of such plan or exercises 

any authority or control respecting management . . . or disposition of 

its assets, (ii) he renders investment advice for a fee or other 

compensation, direct or indirect, with respect to any moneys or 

property of such plan, or has any authority or responsibility to do so, 

or (iii) he has any discretionary authority or discretionary 

responsibility in the administration of such plan.

ERISA § 3(21)(A) (emphasis added); 29 U.S.C. § 1002(21)(a).

Because ERISA makes a person a fiduciary only “to the extent” that the 

person performs fiduciary functions, see Pegram v. Herdrich, 530 U.S. 211, 225-

26 (2000), a plan fiduciary as to one function is not necessarily a fiduciary with 

respect to other plan functions. Hozier v. Midwest Fasteners, Inc., 908 F.2d 1155, 

1158 (3d Cir. 1990) (“Fiduciary duties under ERISA attach not just to particular 

persons, but to particular persons performing particular functions.”). Accordingly, 

 

19 All of Plaintiffs’ claims against TLIC are based on TLIC’s alleged fiduciary 

status. To the extent Plaintiffs purport to assert claims against TLIC as a nonfiduciary under ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(2), those claims fail for 

the same reasons as they fail against non-fiduciary co-defendants TIM and TAM as

addressed in a separate motion to dismiss pursuant filed by those defendants. 

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“[i]n every case charging breach of ERISA fiduciary duty . . . the threshold 

question is ... whether [the defendant] was acting as a fiduciary (that is, was 

performing a fiduciary function) when taking the action subject to complaint.” 

Pegram, 530 U.S. at 226. Thus, to hold TLIC liable as a fiduciary, the Court 

would have to conclude—which it cannot—that TLIC was acting as a fiduciary to 

the plan in undertaking the conduct at issue in the Complaint.20

Although Plaintiffs seek to establish TLIC’s fiduciary status for purposes of 

this action under several different theories (see Compl. V.A.-J. ¶¶ 148-205), those 

arguments are either facially erroneous or have nothing to do with any of 

Plaintiffs’ actual theories of liability. For example, a number of Plaintiffs’ 

fiduciary status arguments attempt to establish that TLIC controlled or influenced 

(1) how plan sponsors selected a plan’s investment options from among the range 

of TLIC separate accounts; or (2) how participants invested their accounts among 

the TLIC separate accounts offered through their respective plans.21 (See Compl. § 

 

20 See Pegram, 530 U.S. at 226 (“In every case charging breach of ERISA 

fiduciary duty . . . the threshold question is . . . whether [the defendant] was acting 

as a fiduciary (that is, was performing a fiduciary function) when taking the action 

subject to complaint.”); Marks v. Independence Blue Cross, 71 F. Supp. 2d 432, 

436 (E.D. Pa. 1999) (“Even assuming that IBC exercised discretion over certain of 

the plan’s administrative functions, it does not become liable as an ERISA 

fiduciary unless there is a nexus between the alleged breach and the discretionary 

authority exercised.”).

21 Although not relevant to any specific claim, Plaintiffs allege that TLIC is a 

fiduciary because it rendered investment advice through “AdviceSolutions.” 

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V.C, H, I, ¶¶ 155-163, 180-184, 185-202 .) Such fiduciary status theories have no 

relevance where, as here, Plaintiffs not only assert that the entire range of 

investment options on TLIC’s platform is imprudent but also seek to certify a 

multiple-plan class on that basis. (See, e.g., Compl. ¶¶ 8, 10, 23, 142, 374.)

Under this broad-based attack, Plaintiffs do not assert that they were harmed 

through the selection of any particular investment option over another for inclusion 

in their Plan investment lineup. Rather, Plaintiffs’ core contention is that it was 

improper for the Plans to use the TLIC platform at all. But the threshold decision 

to select TLIC to provide administrative services and investment options to the 

Plaintiff Plans was squarely and solely in the hands of the relevant plan sponsors, 

and not within the scope of TLIC’s fiduciary obligations. It is well-settled that a 

party does not act as an ERISA fiduciary in setting the terms of its own retention, 

even if it is being retained to serve in a fiduciary capacity. See Hecker v. Deere &

Co., 556 F.3d 575, 583 (7th Cir. 2009) (party “does not act as a fiduciary with 

respect to the terms in the service agreement if it does not control the named 

 

(Compl. ¶¶ 185-202.) Plaintiffs are wrong. As an initial matter, the Complaint 

does not identify any actual investment advice that TLIC provided to the Plaintiffs. 

Moreover, the alleged functionality of “AdviceSolutions” (id. ¶¶ 195-197) 

comports with the Department of Labor’s 1996 Interpretive Bulletin Pertaining to 

Participant Investment Education. See 29 C.F.R. § 2509.96-1(d)(3) (explaining 

that certain investment-related information and materials provided to plan 

participants including, inter alia, asset allocation models, do not constitute 

“investment advice” under ERISA § 3(21)(A)(ii)). 

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fiduciary’s negotiation and approval of those terms”); Marks, 71 F. Supp. 2d 436

(agreeing with other circuits that “a person negotiating a contract with a . . . plan . 

. . is not an ERISA fiduciary with respect to the terms of the agreement for his 

compensation.”); accord Schulist v. Blue Cross of Iowa, 717 F.2d 1127, 1131-32 

(7th Cir. 1983).

22

To be clear, TLIC does have limited fiduciary responsibilities for monitoring 

the investment performance within its separate account investment products.23 But 

for the reasons stated above, Plaintiffs’ broad scale attack on TLIC’s retirement 

service product does not target those responsibilities. The flaws in Plaintiffs’ 

remaining fiduciary status arguments become evident in reviewing their individual 

claims, as described below.

 

22 See also Definition of the Term “Fiduciary,” 75 Fed. Reg. 65263, 65277

(proposed Oct. 22, 2010) (the Department of Labor proposing to exempt from 

definition of “fiduciary” under 29 C.F.R. 2510.3-21 vendors who merely offer a 

platform from which plan fiduciaries may offer investment options to plan 

participants).

23 Plaintiffs allege that TLIC is a fiduciary by virtue of the “Fiduciary 

Warranty” it offers to plan sponsors. (See Compl. § V.C ¶¶ 155-163.) This 

“warranty” is not an admission of fiduciary status but merely represents an 

indemnification of the plan sponsor fiduciaries by TLIC in the event that claims are 

asserted against the fiduciaries in connection with certain aspects of the selection 

or performance of plan investment options. (See Hatton Decl. Ex. I.) Moreover, 

consistent with TLIC’s narrow fiduciary responsibilities, the “warranty” pertains 

only to investment performance; it expressly excludes claims, such as those 

asserted here, challenging whether the “fees paid directly or indirectly by the plan 

are reasonable.” (Id.)

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A. Counts I and II Should Be Dismissed Because TLIC Is Not A 

Fiduciary With Respect To Its Own Compensation.

Plaintiffs allege in Counts I and II that TLIC engaged in prohibited 

transactions or otherwise breached fiduciary duties by charging Administrative and 

Investment Management fees in connection with Transamerica separate accounts 

containing underlying mutual fund investments. Consistent with the central 

premise of the Complaint that the plans paid too much for the product provided by 

TLIC, Plaintiffs contend that any fee charged by TLIC in addition to the expense 

ratios of the underlying investments in the separate accounts is inherently 

excessive. (See, e.g., Compl. ¶¶ 140-141, 147, 257, 260.) Counts I and II must be 

dismissed for the straightforward reason that TLIC was not a fiduciary with respect 

to the Administrative and Investment Management fees it set when offering the 

separate account investment options to Plan sponsors.

As a threshold matter, Plaintiffs’ argument entirely ignores the myriad 

services that TLIC provides to the Plans, including recordkeeping and 

administrative services.24 In its contracts with the sponsors of the Plaintiff Plans, 

TLIC disclosed that the revenues received from the investment options (including 

Administrative and Investment Management Fees) would effectively defray 

TLIC’s costs of providing those services to the Plans, and that the services contract 

 

24 See Gain Plan Services Agreements at § 1.1; QualCare Plan Services 

Agreement at § 1.1.

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would terminate with the termination or discontinuance of the Group Annuity 

Contracts.

25

 Even if TLIC’s Administrative and Investment Management fees 

could be deemed “excessive,” TLIC was not the fiduciary responsible for the 

Plans’ decision to pay those fees. Those fees were fully disclosed to Plan 

sponsors,26 and the Plan sponsors thus made the fiduciary decision to cause their 

Plans to incur such fees when they selected the investment options to be included 

in their Plan investment lineups. See Hecker, 556 F.3d at 583; Marks, 71 F. Supp. 

2d at 436; Schulist, 717 F.2d at 1132.

Plaintiffs nonetheless attempt to establish that TLIC has relevant fiduciary 

status by alleging that TLIC has the ability to “unilaterally” remove investment 

options from the range of options available to the plans and to alter its fees. 

(Compl. §§ V.B, E ¶¶ 152-154, 169-170.) This is a red herring. The contract 

documents provide that TLIC may make such changes upon six-months advance 

notice to the plan sponsor.27 If the plan sponsor refuses to consent to such changes, 

 

25 See Gain Plan 2009 Services Agreement at § 1.5; QualCare Plan Services 

Agreement at § 1.5.

26 See Gain Plan Contract, Schedule of Separate Accounts, Investment 

Management Charges and Administrative Charges; QualCare Plan Contract 

(same).

27 See, e.g., Gain Plan Contract ¶ 2.02 (“We may establish new Contract 

Account(s) from time to time, which may be added to this Contract at the election 

of the Contractholder. With at least a 6-month notification period, we reserve the 

right to delete any Contract Account maintained under this Contract.”); QualCare

Plan Contract ¶ 2.02 (same).

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the plan sponsor remains free to terminate its relationship with TLIC and place the 

plan’s assets with a different service provider. Thus, the Plans each had a 

meaningful opportunity to avoid any announced change in the investment menu by 

terminating TLIC’s appointment.28 Accordingly, as in Hecker, the plan sponsor, 

not TLIC, had “final authority” over any changes to the plans’ investment lineup. 

Hecker, 556 F.3d at 584; see DOL Advisory Op. 97-16A, 1997 ERISA LEXIS 17 

(May 22, 1997);

29 Renfro v. Unisys Corp., No. 07-2098, 2010 WL 1688540, at *4-

*5 (E.D. Pa. Apr. 26, 2010), appeal docketed, No. 10-2447 (3d Cir. May 27, 2010)

(granting service provider’s motion to dismiss ERISA claims alleging excessive 

administrative and investment management fees on grounds that defendants lacked 

discretionary control over funds offered in the plan and thus were not fiduciaries as 

a matter of law); Columbia Air Servs., Inc. v. Fidelity Mgmt. Trust Co., No. 07-

11344-GAO, 2008 WL 4457861, at *2-5 (D. Mass. Sept. 30, 2008) (granting 

motion to dismiss in favor of service provider to ERISA plan where employer/plan 

sponsor claimed that provider breached fiduciary duty and committed prohibited 

 

28 See, e.g., Gain Plan Contract ¶ 8.04 (“By giving us written notice, the 

Contractholder may affect either a total discontinuance or a partial discontinuance 

of the Contract.”); QualCare Plan Contract ¶ 8.04 (same).

29 In the scenario addressed by the Department of Labor’s opinion, the 

recordkeeper (a unit of Aetna) identified the funds eligible to be included in a plan 

lineup, giving the sponsor notice and time to terminate Aetna as recordkeeper if the 

sponsor objected to the new lineup. The Department of Labor advised that Aetna 

was not a fiduciary, because the sponsor itself had the final say over its plan’s 

investment options, through its power to terminate Aetna. 

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transactions by receiving revenue sharing payments from affiliate’s mutual funds 

offered as investment options in plan). TLIC therefore was not a fiduciary with 

respect to the selection of investment options.

Finally, Plaintiffs’ assertions that TLIC is a fiduciary for purposes of 

managing the underlying investments in the separate accounts (Compl. §§ V.A, D, 

F, J ¶¶ ) are immaterial to these counts, as Plaintiffs do not, and cannot, allege that 

TLIC controlled the rates of its Administrative and Investment Management fees 

through the manner in which it managed the underlying investments.30 Stated 

differently, the Complaint alleges that the Administrative and Investment 

Management fees are set by contract, and there is no allegation that these fees are 

 

30 Plaintiffs also allege that TLIC has relevant fiduciary status because it can 

unilaterally change the share class of the mutual fund investments held in the 

separate accounts. (Compl. ¶¶ 152-154; 169-170.) But here too, the ability to 

change the share class on investments held by the separate accounts is irrelevant to 

TLIC’s ability to set or collect its own fees from the plans, which were fully 

disclosed to and agreed up by the relevant plan sponsors. (See Section I. A, supra.) 

Moreover, there are no allegations that TLIC ever exercised its authority to 

unilaterally change its fees, or alter the investment options in the Plans. ERISA 

§ 3(21)(A); 29 U.S.C. § 1002(21)(A). There are likewise no allegations that TLIC 

exercised any authority to unilaterally change share classes of the underlying 

mutual funds. In short, the Complaint is devoid of any specific allegations that 

would permit the Court to draw a plausible inference that TLIC unilaterally altered 

the investment lineup or its underlying fees. Twombly, 550 U.S. at 555; Fowler v. 

UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009) (“[A] complaint must do more 

than allege the plaintiff's entitlement to relief. A complaint has to ‘show’ such an 

entitlement with its facts.”) (citation omitted).

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determined by TLIC’s selection of a particular mutual fund within a particular 

separate account. (Id. ¶ 275.)

B. Count III Should Be Dismissed Because TLIC Is Not A Fiduciary 

With Respect To Its Receipt of Revenue Sharing Payments.

In Count III, plaintiffs allege that TLIC committed prohibited transactions and 

otherwise breached fiduciary duties by receiving revenue sharing payments from

mutual funds contained in the plan’s separate account investment options. (Compl. 

§ V.G, ¶¶ 178-179.) Yet Plaintiffs do not dispute that any revenue sharing payments 

TLIC receives are applied to reduce the amounts of TLIC’s Administrative and 

Investment Management charges.31 (Compl. ¶¶ 288, 295.) Rather, Plaintiffs 

contend that the reduction of those charges benefitted TLIC, and not the plans, 

because the charges themselves were illegitimate. (Count III, ¶¶ 3-4.) 

That logic merely renders Count III a crude recasting of Plaintiffs’ first two 

counts, which attack the Administrative and Investment Management charges as 

excessive. The decision to commit the Plaintiff Plans to TLIC’s Investment 

 

31 See Gain Plan Contract, Schedule of Separate Accounts, Investment 

Management Charges and Administrative Charges at 4 (“For some Separate 

Accounts, we receive fee reimbursements from the underlying investment. The 

fees reimbursed to us are applied to adjust the Contract Asset Charges, and/or the 

Investment Management Charge and/or the Administrative Charge.”); QualCare

Plan Contract (same); see also Investment Fact Sheets at First American Mid Cap 

Growth Opportunities Ret Opt. and Loomis Sayles Investment Grade Bond Ret 

Opt.

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Management and Administrative charges was the result of the fiduciary decisions 

of the Plan sponsors. See Hecker, 556 F.3d at 583; Marks, 71 F. Supp. 2d at 436; 

Schulist, 717 F.2d at 1132. As the Complaint alleges, once those sponsors made 

their decisions, TLIC’s use of revenue sharing payments to offset the Investment 

Management and Administrative charges. (Compl. ¶ 288.) Those payments 

redounded to the benefit of the Plans, and did not increase TLIC’s own 

compensation. Cf. DOL Advisory Op. 97-15A, 1997 ERISA LEXIS 18, (May 22, 

1997) (concluding that a trustee’s receipt of fees from one or more mutual funds in 

connection with an ERISA plan’s investment in such funds did not violate ERISA 

Section 406(b)(3) where the funds were used to reduce the plan’s obligation to the 

trustee).

C. Counts IV and VII Should Be Dismissed Because TLIC Is Not A 

Fiduciary With Respect To The Selection of Affiliates Who Advise 

Its Separate Account Products.

Counts IV and VII allege that, by allowing the Plans to invest in, and pay

investment management, investment advisory or other fees to, TLIC-affiliated 

funds, TLIC “caused” the Plans to engage in prohibited transactions in violation of 

ERISA § 406, 29 U.S.C. § 1106. Those claims fail for two independent reasons. 

As a threshold matter, any prohibited transaction claim against TLIC must fail 

because the Complaint does not identify any specific “transaction” that would 

trigger liability under ERISA § 406. Courts routinely have dismissed prohibited 

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transaction claims where, as here, the complaint fails to identify any specific 

“transaction” by the alleged fiduciary for its own account and involving plan 

assets. See, e.g., Wright v. Or. Metallurgical Corp., 360 F.3d 1090, 1101 (9th Cir. 

2004) (affirming dismissal of prohibited transactions claim where the plaintiffs 

failed to identify any “transaction” within § 1106); see also Tibble v. Edison Int’l, 

639 F. Supp. 2d 1122, 1127 (C.D. Cal. 2009) (dismissing prohibited transaction 

claims where plaintiff failed to allege any conduct by the defendants “dealing 

with” plan assets for defendant’s own interest). 

Indeed, the only “transaction” involving Plan assets identified in the 

Complaint is the selection of the original Plan investment lineup. (Compl. ¶¶ 12-

13.) But TLIC played no fiduciary role in the selection of the investment lineup 

and therefore cannot be said to have “caused” the selection of particular Plan 

investments that may have resulted in the payment of fees to TLIC affiliates. (See

Section I.A., supra.) Although TLIC offered separate accounts containing TAM 

and TIM-advised funds or trusts, it was the employer/plan sponsors – not TLIC –

who chose to include those options in their respective plans. To accept Plaintiffs’ 

theory, then, the Court would have to hold that TLIC “caused” the Plans to engage 

in transactions even though it played no role in allocating the Plans’ assets to 

TLIC-affiliated funds. This interpretation of ERISA § 406 cannot be squared with 

judicial authorities or Department of Labor regulations. See, e.g., Ellis v. Rycenga 

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Homes, Inc., 484 F. Supp. 2d 694, 711-12 (W.D. Mich. 2007) (holding that 

defendant could not be liable under ERISA § 406(a) because defendant did not 

actively participate in challenged transactions but merely failed to prevent them); 

29 C.F.R. § 2550.408b-2(c)(2) (“A fiduciary does not engage in an act described in 

section 406(b)(1) of the Act if the fiduciary does not use any of the authority, 

control or responsibility which makes such person a fiduciary to cause a plan to 

pay additional fees for a service furnished by such fiduciary . . . .”).

Moreover, there are no allegations that TLIC ever exercised discretion to 

change the underlying investments in the separate accounts from non-affiliated to 

affiliated funds. Under ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A), an entity is a 

fiduciary if it exercises “discretionary authority or discretionary control respecting

management of such plan or ... disposition of its assets,” id. § 1002(21)(A)(i)

(emphasis added), or if it possesses “discretionary authority or discretionary 

responsibility in the administration of such plan.” Id. § 1002(21)(A)(iii) (emphasis 

added). In other words, mere possession of discretionary authority over plan

administration suffices for fiduciary status. But for plan management or 

disposition of assets, the actual exercise of control must be shown. And 

investment selection plainly involves plan management and disposition of plan 

assets. See Zang v. Paychex Inc., 728 F. Supp. 2d 261, 269 (W.D.N.Y. 2010)

(granting service provider’s motion to dismiss breach of fiduciary duty claims for 

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lack of fiduciary status on grounds that, under ERISA § 1002(21)(A)(i), an 

individual must exercise “authority or control respecting management or 

disposition” of plan assets to be classified as a fiduciary, rather than merely having 

authority or control over the plan). Accordingly, because Plaintiffs do not allege

that TLIC ever exercised any discretion over the selection of Plan investment 

options, TLIC did not function as a fiduciary as to investment selections.

Because the Complaint fails to identify any “transaction” by TLIC involving 

Plan assets, the prohibited transaction claims in Counts IV and VII must fail.

D. Count V Should Be Dismissed Because TLIC Has No Fiduciary 

Obligation To Select The Cheapest Share Class Available In The 

Mutual Funds In The Separate Account Investment Options.

In Count V Plaintiffs allege that TLIC breached fiduciary duties by not 

selecting the cheapest share class available for the mutual funds included in its 

separate account investment options. But the expenses associated with the share 

class of any particular mutual fund included within one of TLIC’s separate account

are merely a component of the total disclosed expense ratio for that separate 

account. (Compl. ¶¶ 227-233.)32 It is the plan sponsor, not TLIC, who makes the 

fiduciary decision to then offer the separate account as a plan investment option, 

subject to the total disclosed expense ratio on that investment option. As 

 

32 See also Investment Fact Sheets. 

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discussed, the decision to retain TLIC and to include particular separate accounts 

in the Plan investment lineup is made by plan sponsors with the assistance of their 

financial advisors. TLIC had no fiduciary status or obligation with respect to that 

decision. (See Section I.A, supra.) 

E. Count VI Should Be Dismissed Because TLIC Has No Fiduciary 

Obligation To Negotiate Lower Sub-Advisory Fees For The Plan 

Investments In Collective Trusts And Separate Accounts.

In Count VI, Plaintiffs allege that TLIC breached fiduciary duties by failing 

to use its size to negotiate lower expenses for collective trusts and “traditional 

separate accounts.” For reasons previously discussed, that claim must fail because 

it challenges the retention of TLIC at rates that were fully disclosed to the plan 

sponsor. The Complaint itself alleges that the expenses for the underlying 

collective trusts and separate accounts held in certain separate account investment 

options were included in the total expense ratios that TLIC disclosed to plan 

sponsors. (Compl. ¶¶ 330-334.) And it was the plan sponsors who made the 

fiduciary decisions to include the separate accounts in their plans at those disclosed 

rates. (See Section I.A, supra.) 

III. COUNTS VIII AND IX SHOULD BE DISMISSED BECAUSE THEY 

FAIL TO STATE VALID CLAIMS UNDER THE INVESTMENT 

ADVISERS ACT.

Counts VIII and IX assert essentially identical claims under Section 215(b) 

of the Investment Advisers Act of 1940 (“IAA”). Under the IAA, an investment 

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adviser is one who, among other requirements, “engages in the business of 

advising others, either directly or through publications or writings, as to the value 

of securities or as to the advisability of investing in, purchasing, or selling

securities” for compensation. 15 U.S.C. § 80b-2(11). Count VIII alleges that 

TLIC violated the IAA by providing investment advice, without having registered 

as an investment adviser, to the separate account products to which Plaintiffs 

allocated their accounts through the plans’ purchase of variable annuities from 

TLIC. (See, e.g., Compl. ¶¶ 13, 104, 349-52.) Count IX recasts Count VIII as a 

derivative claim on behalf of the various separate accounts, of which Plaintiffs 

claim to be “security holders.”33 

Each of these counts should be dismissed for failure to allege sufficient facts 

to state a plausible claim for relief. Count IX should be dismissed for the 

additional reason that it is impermissible as a derivative action under Fed. R. Civ. 

P. 23.1.

 

33 Although other sections of the Complaint make general allegations 

concerning the on-line “AdviceSolutions” feature (Compl. ¶¶ 185-202), Plaintiffs 

make no reference to it in connection with their IAA allegations. Nor are there any 

allegations that any of the named Plaintiffs or any of the members of the putative 

IAA “Plaintiff Purchasers Class” ever used the AdviceSolutions feature. 

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A. TLIC Has Not Provided Investment Advice to “Others” Within 

the Meaning of the IAA.

The IAA applies to companies that “engage[] in the business of advising 

others” with respect to their investments. 15 U.S.C. § 80b-2(11) (emphasis 

added). It does not apply to a company’s investment decisions or advice 

respecting the management of its own accounts or investment products. Only the 

latter is at issue here. The separate accounts to which Plaintiffs allocated their 

accounts through the plans’ purchase of TLIC variable annuity products are part of 

TLIC itself, established by TLIC as a means of offering mutual funds or other 

investment products to retirement plan clients. (See, e.g., Compl. ¶¶ 128-29 (TLIC 

itself establishes separate accounts to “overlay” other investment options); ¶ 174 

(TLIC offers each of the investment options as a “separate account”).) Plaintiffs 

do not allege that the separate accounts are separate entities with their own boards 

or other management. (See, e.g., id. ¶ 50 (separate accounts are not “registered” 

entities with their own boards of directors).)34 TLIC’s decision making with 

respect to its own separate account products does not constitute providing 

investment advice to “others” for IAA purposes. 

 

34 Plaintiffs’ description is consistent with ERISA’s definition, which provides 

that a separate account is “an account”—not a subsidiary or independent entity—

that is separate in the sense that it is credited with gains and losses based on the 

performance of specific investments, not that it is a separate entity that could 

contract with the insurance company for investment advice. See ERISA § 3(17), 

29 U.S.C. § 1002(17). 

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Even if the separate accounts were deemed to have a separate existence from

TLIC itself for purposes of the IAA, it would not matter. This is because 

investment advisers whose only clients are insurance companies are exempt from 

registration under the Act. 15 U.S.C. § 80b-3(b)(2). Under Plaintiffs’ allegations, 

the separate accounts to which they have allocated their 401(k) balances—the 

recipients of TLIC’s “advice” in Plaintiffs’ make-believe world—are TLIC’s own 

insurance products. (See, e.g., Compl. ¶¶ 125-26, 140.) 

Plaintiffs appear to contend that, having allocated their variable annuity 

accounts among TLIC’s separate account products, they formed “contracts” with 

TLIC “pursuant to which TLIC rendered investment advice and acted as an 

investment adviser/manager[.]” (See, e.g., Compl. ¶ 351.) For the reasons just 

explained, this suggestion is baseless. Indeed, courts have flatly rejected this leap, 

reasoning in similar contexts that although investors in an investment fund may 

benefit or suffer from the fund manager’s advice, the manager is providing advice to 

the fund, not to the investors. See Goldstein v. SEC, 451 F.3d 873, 879-80 (D.C. 

Cir. 2006) (“The adviser [to the fund] does not tell the investor how to spend his 

money; the investor made that decision when he invested in the fund.”); see also 

SEC v. Northshore Asset Mgmt., No. 05-2192, 2008 U.S. Dist. LEXIS 36160, at *19 

(S.D.N.Y. May 5, 2008) (reasoning that the SEC could not maintain an IAA claim 

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against a hedge fund adviser for alleged misrepresentations to the investors in the 

funds, because the funds themselves, not the investors, were the adviser’s clients). 

B. Count IX Fails For The Additional Reason That Plaintiffs Do Not 

State a Proper Derivative Claim.

In Count IX, Plaintiffs attempt to restyle their IAA allegations as derivative 

claims on behalf of the investment options in which they invested. (See, e.g., 

Compl. ¶¶ 363-64.)35 Fed R. Civ. P. 23.1 does not permit such suits. 

Corporate shareholders or members of unincorporated associations may 

bring derivative suits to enforce the legal rights of a corporation or association, 

provided certain conditions are met. Fed. R. Civ. P. 23.1. Plaintiffs do not show 

that the insurance “separate accounts” at issue here are legal entities with personal 

rights that Plaintiffs can assert under Rule 23.1. Indeed, they cannot make this 

showing. In the retirement plan context, a “separate account” simply denotes “an 

account established or maintained by an insurance company” that is increased or 

decreased based on the performance of specific assets, not the performance of the 

insurance company itself. ERISA §3(17), 29 U.S.C. § 1002(17). 

 

35 Plaintiffs allege that but for the Transamerica Stable Value Option, all of the 

investment options in the plans are separate accounts. (Compl. ¶ 135.) The 

Complaint alleges that TLIC provided advice to specific investment options in 

which the named plaintiffs invested, and, more generally, to “some of the other 

investment options” in which other participants may have invested (see, e.g., id. at 

Count VIII ¶14), but does not reference the Transamerica Stable Value Option.

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Even if the separate accounts were legal entities with enforceable rights, 

Plaintiffs have not adequately alleged that they have an “ownership” interest in 

those accounts. Rather, where, as here, a retirement plan invests in insurance 

company separate accounts, assets in the separate accounts are assets of the plan. 

See Trustees of Laborers’ Local No. 72 Pension Fund v. Nationwide Life Ins. Co., 

783 F. Supp. 899, 904 (D.N.J. 1992) (observing that funds invested in separate 

accounts are categorized as plan assets); see also Mack Boring and Parts v. 

Meeker, 930 F.2d 267, 275 (3rd Cir. 1991) (summarizing legislative history 

regarding the status of funds in insurance company separate accounts as plan 

assets). And ERISA expressly provides that, similar to corporations, benefit plans 

are distinct legal entities, distinct from their participants and beneficiaries. ERISA 

§ 502(d), 29 U.S.C. § 1132(d). In sum, it is the plans, not the participants, who are 

as “security holder[s]” in those separate accounts. (See. e.g., Compl. ¶¶ 362-63.)36 

Because Plaintiffs have failed to show that the separate accounts are legal 

entities whose rights could be asserted derivatively under Rule 23.1, and likewise 

failed to show that they themselves possess an adequate interest in those accounts 

to assert such derivative claims, Count IX should be dismissed.

 

36 The result would be the same under insurance law, which dictates that the 

insurance company, not policy holders or, in this case, plan participants, has 

ownership of the assets in separate accounts. See Iowa Code § 508A.1(5). Neither 

ERISA nor insurance law provides that the individual participants have “security 

holder” rights to bring a derivative suit for violations of the IAA. 

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-33-

1271026_1

CONCLUSION

For the foregoing reasons, TLIC respectfully requests that the Class Action 

Complaint be dismissed pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a 

claim on which relief can be granted.

Dated: May 16, 2011 Respectfully submitted,

s/ Thomas R. Curtin

Thomas R. Curtin

George C. Jones

GRAHAM CURTIN

A Professional Association

4 Headquarters Plaza

P.O. Box 1991

Morristown, New Jersey 07962-1991

Telephone: (973) 292-1700

Facsimile: (973) 292-1767

Robert N. Eccles (Pro Hac Vice pending)

Gary S. Tell (Pro Hac Vice pending)

O’MELVENY & MYERS LLP

1625 Eye Street, NW

Washington, D.C. 20006-4001

Telephone: (202) 383-5300

Facsimile: (202) 383-5414

Attorneys for Defendants

Transamerica Life Insurance Company, 

Transamerica Investment Management, 

LLC, and Transamerica Asset 

Management, Inc. 

Case 2:11-cv-00736-FSH -PS Document 10-1 Filed 05/16/11 Page 38 of 38 PageID: 191