Wieck et al v. Board of Trustees of The Kentucky Teachers' Retirement System (Ktrs) et al

MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM

W.D. Ky.October 14, 2016

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF KENTUCKY LOUISVILLE DIVISION RANDOLPH WIECK ET AL., Plaintiffs v. BOARD OF TRUSTEES OF THE KENTUCKY TEACHERS RETIREMENT SYSTEM ET AL., Defendants. CASE NO. 3:15-CV-00692-CRS-CHL NOTICE OF MOTION TO DISMISS THE COMPLAINT PLEASE TAKE NOTICE THAT, upon the accompanying Memorandum of Law, Defendant The Carlyle Group L.P. (“Carlyle”), by and through its attorneys, Stites & Harbison PLLC, moves this Court for an order dismissing the Complaint as to Carlyle pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted, and for such further relief as the Court deems just and proper. Dated: Louisville, KY October 14, 2016 Respectfully submitted, /s/ Michael T. Leigh Michael T. Leigh Stites & Harbison PLLC 400 W. Market Street, Suite 1800 Louisville, Kentucky 40202 Tel: (502) 681-0583 Fax (502) 779-9859 mleigh@stites.com Counsel to The Carlyle Group L.P. Case 3:15-cv-00692-CRS-CHL Document 48 Filed 10/14/16 Page 1 of 2 PageID #: 368 CERTIFICATE OF SERVICE I hereby certify that on October 14, 2016, the foregoing was electronically filed with the clerk of the court using the CM/ECF system, which will send notice of said filing to all counsel of record. I further certify that a copy of the foregoing was mailed, first class mail, on the same date to the following: Randolph Wieck, 13013 Nightingale Lane, Goshen, KY 40026; Betsey Bell, 2030 Murray Ave, Louisville, KY 40205; Jane Norman, 1909 Emerson Ave, Louisville, KY 40205. /s/ Michael T. Leigh Counsel to The Carlyle Group L.P. Case 3:15-cv-00692-CRS-CHL Document 48 Filed 10/14/16 Page 2 of 2 PageID #: 369 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF KENTUCKY LOUISVILLE DIVISION RANDOLPH WIECK ET AL., Plaintiffs v. BOARD OF TRUSTEES OF THE KENTUCKY TEACHERS RETIREMENT SYSTEM ET AL., Defendants. CASE NO. 3:15-CV-00692-CRS-CHL MEMORANDUM OF LAW IN SUPPORT OF THE CARLYLE GROUP L.P.’S MOTION TO DISMISS THE COMPLAINT Plaintiffs’ Complaint attempts to bring a variety of investment managers, government entities, and miscellaneous parties-against whom no allegations of wrongdoing are stated-within the scope of what is otherwise a focused and circumscribed case alleging mismanagement of the Kentucky Teachers Retirement System (“KTRS”) pension fund by its Board of Trustees. To state a claim for relief, a Complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). The Complaint fails as to The Carlyle Group L.P. (“Carlyle”) in this respect-a deficiency the Court already has noted. (Op., ECF No. 46, at 21 n.4.) Even the most generous reading of the Complaint’s solitary reference to Carlyle amounts to nothing more than an unremarkable assertion that KTRS invested with Carlyle. The general allegations relating to investment managers and private-equity firms are similarly unremarkable and fail to allege any wrongdoing by Carlyle. Plaintiffs have made no effort whatsoever to specify what role Carlyle played in any allegedly illegal conduct or how its conduct harmed Plaintiffs. Case 3:15-cv-00692-CRS-CHL Document 48-1 Filed 10/14/16 Page 1 of 7 PageID #: 370 2 Carlyle has not been served in this action. It learned of this lawsuit through one of the other defendants after the Court granted the defendant’s motion to dismiss the Complaint and observed that the docket “seemed” to indicate Carlyle had “been served with process, but [] failed to make an appearance.” (Order, ECF No. 46, at 2 & 21 n.4.) Whatever plaintiffs intended by purportedly serving “Carlyle Group” at an address in Chapel Hill, North Carolina did not effect service on Carlyle, which does not have a location in Chapel Hill. In any event, Carlyle waives service of process of this action now that it is aware of it, Fed. R. Civ. P. 12(h)(1)(B), and moves to dismiss the Complaint under Rule 12(b)(6) for failure to state a claim upon which relief can be granted. RELEVANT FACTS AND PROCEDURAL HISTORY Plaintiffs Randolph Wieck, Betsey Bell, and Jane C. Norman allege that the Board of Trustees of KTRS mismanaged the pension fund, resulting in an increase in the Plaintiffs’ pension costs to pay for other retirees’ benefits. Carlyle has never been served with the Summons and Complaint. The docket reflects a return of service purportedly on “Carlyle Group” at an address in Chapel Hill, North Carolina. Carlyle, however, has no office in Chapel Hill1 and did not receive the Summons and Complaint purportedly served there. Nevertheless, in filing this Motion, Carlyle waives service of process. The Complaint is starkly lacking in factual allegations against Carlyle. In support of their claims against the Board of Trustees-which sound in violations of the Fair Labor 1 See “The Carlyle Group Web Site - Worldwide Offices,” http://www.carlyle.com/contact- us/worldwide-offices. The Court can take judicial notice of Carlyle’s web site. See, e.g., City of Monroe Empls. Ret. Sys. v. Bridgestone Corp., 387 F.3d 468, 472, n.1 (6th Cir. 2004) (taking judicial notice of former securities-industry self-regulatory body NASD’s web site); Eastman v. Pope, 2011 U.S. Dist. LEXIS 37508, at *14 (M.D. Tenn. Apr. 5, 2011) (taking judicial notice of company web site for proposition that company conducted business in Kentucky and Tennessee). Case 3:15-cv-00692-CRS-CHL Document 48-1 Filed 10/14/16 Page 2 of 7 PageID #: 371 3 Standards Act, the Contracts and Due Process Clauses of the U.S. Constitution, and breach of fiduciary duty-Plaintiffs mention Carlyle only once in the Complaint, asserting that on March 15, 2015 KTRS committed an “illegal investment” of $180 million with Carlyle, Blackstone Group, and Rockwood Capital. The Complaint does not contain any other reference to Carlyle and fails to state what claims-if any-Plaintiffs assert against Carlyle, or what damages-if any-Plaintiffs seek from Carlyle. ARGUMENT Under Fed. R. Civ. P. 12(b)(6), the Complaint fails to state a claim against Carlyle and should be dismissed. In order to survive a motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, ‘to state a claim to relief that is plausible on its face.’” D.H. v. Matti, 2015 U.S. Dist. LEXIS 97256, *10 (W.D. Ken. July 27, 2015). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. The court cannot draw any reasonable inference of Carlyle’s liability from the Complaint because it is bereft of any factual allegations of misconduct by Carlyle. The sole mention of Carlyle in the Complaint comes in the context of describing allegedly illegal conduct by the Board of Trustees in placing an investment with Carlyle and other investment managers. (See Compl. at ¶ 39 (“KTRS has committed the following additional illegal investments [in violation of KRS 386.020 and KRS 161.430]: March 15, 2015 $180 million to Carlyle Group, Blackstone Group, and Rockwood Capital”).) Plaintiffs allege no facts concerning any conduct by Carlyle, wrongful or otherwise. Plaintiffs’ “cursory references” to Carlyle “are not sufficient to state a claim upon which relief may be granted.” (Op., ECF No. 46, at 20.) Case 3:15-cv-00692-CRS-CHL Document 48-1 Filed 10/14/16 Page 3 of 7 PageID #: 372 4 Investment managers and private equity firms are referenced collectively a handful of times in the Complaint, but Plaintiffs similarly fail to allege any actual wrongdoing by any of those managers or firms either individually or collectively. (See, e.g., Compl. ¶ 17 (“As late as 2007 KTRS had no alternative investment managers listed in their Comprehensive Annual Financial Report; by 2013 there were 31 alternative managers listed [….] Alternative managers have been criticized extensively in the National Press for underperformance, excessive fees, excessive risks, and a lack of transparency.”); ¶ 29 (“KTRS has failed in their fiduciary duty by selecting investments and investment managers not permitted by statute of the Commonwealth of Kentucky [….] Many of these alternative investment entities have not documented in their contracts that they adhere to investment ethics and disclosure rules as required by KRS 161.430.”); ¶ 39 (“KTRS has, in the last 8 months, added 8 new private equity partnerships, committing over $595 million, despite a pending suit claiming that the KTRS Private Equity purchases are illegal …”).) Even if the Complaint’s vague references to “investment managers” and “private equity partnerships” were to suggest wrongdoing by those entities-which they do not- those allegations do not cure the deficient pleading against Carlyle. “[B]are allegations without any reference to the ‘who, what, where, when, how or why’” of a claim against a defendant are insufficient. Total Benefits Planning Agency v. Anthem Blue Cross and Blue Shield, 552 F. 3d 430, 437 (6th Cir. 2008) (finding pleading deficient where Complaint failed to allege when Defendants joined a conspiracy, how it was accomplished, or when or where during a multi-year time frame unlawful agreements or understandings may have occurred). The vague and limited allegations set forth in the Complaint as to Carlyle “do not supply facts adequate to show illegality as required by Twombly.” Id. Case 3:15-cv-00692-CRS-CHL Document 48-1 Filed 10/14/16 Page 4 of 7 PageID #: 373 5 Not only does the Complaint lack specific allegations against Carlyle; it lacks any indication of what laws Plaintiffs believe Carlyle violated.2 “A plaintiff's complaint fails to state a claim if it alleges freestanding facts without tying them to a cause of action, either expressly or by plain implication.” Lowe v. Boone Cnty Sherriff’s Dep’t, 2015 U.S. Dist. LEXIS 96723, *8 (E.D.KY July 24, 2015) (pro se plaintiff’s complaint dismissed when plaintiff made no effort to clearly assert the basis of claims against defendant) (citing Wells v. Brown, 891 F.2d 591, 594 (6th Cir. 1989)). Even though pro se Plaintiffs’ pleadings are afforded liberal construction, it “cannot extend so far as to require … [the courts] to explore exhaustively all potential claims of a pro se plaintiff … [and] would also place an unfair burden on the defendant, requiring him to speculate as to all potential claims that might be brought.’” Lowe, 2015 U.S. Dist. LEXIS 96723 at *8-9; accord Laster v. Pramstaller, 2008 U.S. Dist. LEXIS 34080, *4-5 (E.D. Mich. April 25, 2008) (“Neither the Court nor Defendants are obligated to search through the Complaint … [in] order to glean a clear and succinct statement of each claim for relief. It is Plaintiffs’ responsibility to edit and organize their claims and supporting allegations into a manageable format.”) (quoting Windsor v. Colo. Dep’t of Corr., 9 Fed. App’x 967, 968 (10th Cir. 2001)). Here, the Complaint must be dismissed because it lacks any factual allegations of wrongdoing by Carlyle and fails to set forth any discernible claims that Plaintiffs are asserting against Carlyle. 2 Moreover, Plaintiffs’ Demands, set forth in paragraphs 44 through 52 of the Complaint, do not seek any relief from Carlyle. Plaintiffs make no claims for injunctive relief that would require any action or inaction by Carlyle, and the only claim for money damages requests that “the court order that any amounts collected in excess of the original contribution rate be refunded to plan members,” (Compl. at ¶ 46), a claim clearly directed at the KTRS fund itself and not at Carlyle. Case 3:15-cv-00692-CRS-CHL Document 48-1 Filed 10/14/16 Page 5 of 7 PageID #: 374 6 CONCLUSION The Complaint should be dismissed in its entirety as to Carlyle. Dated: Louisville, KY October 14, 2016 Respectfully submitted, /s/ Michael T. Leigh Michael T. Leigh Stites & Harbison PLLC 400 W. Market Street, Suite 1800 Louisville, Kentucky 40202 Tel: (502) 681-0583 Fax (502) 779-9859 mleigh@stites.com Counsel to The Carlyle Group L.P. Case 3:15-cv-00692-CRS-CHL Document 48-1 Filed 10/14/16 Page 6 of 7 PageID #: 375 CERTIFICATE OF SERVICE I hereby certify that on October 14, 2016, the foregoing was electronically filed with the clerk of the court using the CM/ECF system, which will send notice of said filing to all counsel of record. I further certify that a copy of the foregoing was mailed, first class mail, on the same date to the following: Randolph Wieck, 13013 Nightingale Lane, Goshen, KY 40026; Betsey Bell, 2030 Murray Ave, Louisville, KY 40205; Jane Norman, 1909 Emerson Ave, Louisville, KY 40205. /s/ Michael T. Leigh Counsel to The Carlyle Group L.P. Case 3:15-cv-00692-CRS-CHL Document 48-1 Filed 10/14/16 Page 7 of 7 PageID #: 376 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF KENTUCKY LOUISVILLE DIVISION RANDOLPH WIECK ET AL., Plaintiffs v. BOARD OF TRUSTEES OF THE KENTUCKY TEACHERS RETIREMENT SYSTEM ET AL., Defendants. CASE NO. 3:15-CV-00692-CRS-CHL PROPOSED ORDER Upon motion by Defendant The Carlyle Group L.P., and the Court being sufficiently advised: IT HEREBY IS ORDERED that Defendant The Carlyle Group L.P.’s Motion to Dismiss is GRANTED, and Plaintiffs’ Complaint is DISMISSED as to The Carlyle Group L.P. __________________________________ U.S. District Judge Charles R. Simpson Dated: ____________________________ Case 3:15-cv-00692-CRS-CHL Document 48-2 Filed 10/14/16 Page 1 of 3 PageID #: 377 Tendered by: /s/ Michael T. Leigh Counsel for The Carlyle Group L.P. Case 3:15-cv-00692-CRS-CHL Document 48-2 Filed 10/14/16 Page 2 of 3 PageID #: 378 CERTIFICATE OF SERVICE I hereby certify that on October 14, 2016, the foregoing was electronically filed with the clerk of the court using the CM/ECF system, which will send notice of said filing to all counsel of record. I further certify that a copy of the foregoing was mailed, first class mail, on the same date to the following: Randolph Wieck, 13013 Nightingale Lane, Goshen, KY 40026; Betsey Bell, 2030 Murray Ave, Louisville, KY 40205; Jane Norman, 1909 Emerson Ave, Louisville, KY 40205. /s/ Michael T. Leigh Counsel to The Carlyle Group L.P. Case 3:15-cv-00692-CRS-CHL Document 48-2 Filed 10/14/16 Page 3 of 3 PageID #: 379