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Danielle Santomenno, For the Use and Benefit of the John v. John Hancock Life Ins. Co. (U.S.A.)

May 23, 2011

DANIELLE SANTOMENNO, FOR THE USE AND BENEFIT OF THE JOHN HANCOCK TRUST AND JOHN HANCOCK FUNDS II, ET AL.,
PLAINTIFFS,
v.
JOHN HANCOCK LIFE INS. CO. (U.S.A.), ET AL.,
DEFENDANTS.



The opinion of the court was delivered by: Hon. William J. Martini

OPINION

OPINION

I. INTRODUCTION

Plaintiffs are beneficiaries or participants in employer-sponsored 401(k) retirement plans. The trustees of these plans made contracts with Defendants to supply a variety of investment services to the plans. The gravamen of the Plaintiffs‟ Second Amended Complaint is that Defendants purportedly charged the plans excessive fees for investment services. Counts I through VII are brought under the Employment Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq., and relate to Defendants‟ operation of their group annuity accounts. Count VIII is brought under Section 36(b) of the Investment Companies Act (ICA), Pub. L. No. 76-768, 54 Stat. 841 (1940), and count IX is brought under Section 47(b) of the ICA. Counts VIII and IX relate to Defendants‟ operation of both their group and individual annuity accounts. Defendants have moved to dismiss. For the reasons elaborated below, the Court will GRANT the motion.

II. FACTUAL BACKGROUND ALLEGED IN THE COMPLAINT

Defendant John Hancock Life Insurance Company (U.S.A.) (JHUSA), a Michigan corporation, operates 401(k) plans through group annuity contracts (GACs). JHUSA establishes a GAC by selecting a menu of investment options or funds. The options may be affiliated with JHUSA or independent of JHUSA. JHUSA provides the menu of options to the employer who then selects a subset of the funds. Generally, the investment options are drawn from three John Hancock Series Trusts (JH Trusts), including: John Hancock Trust (JHT), John Hancock Funds II (JHFII), and John Hancock Funds III (JHFIII). Each trust contains a portfolio of funds. Defendant John Hancock Investment Management Services, LLC (JHIMS), a Delaware limited liability company, provides investment advice to the JH Trusts and to the funds within them. Defendants John Hancock Distributors, LLC (JHD) and John Hancock Funds, LLC (JHF), Delaware limited liability companies and affiliates of JHIMS, make distributions from the JH Trusts‟ individual funds or portfolios to participants or beneficiaries. Participants in a portfolio offered by JHUSA direct their monies into their own separate sub-accounts, where they are allocated into particular funds within the portfolio. JHUSA charges plan sponsors (a contract level fee) and charges plan participants fees for their investment in the sub-accounts.

Plaintiff Danielle Santomenno invested assets in two JHT Funds: a sub-account of the Money Market Portfolio, and a sub-account of the Small Cap Growth Portfolio. She also invested assets in a single JHFII Fund: a sub-account of the Blue Chip Growth Portfolio. Plaintiff Karen Poley invested assets in a JHFII Fund: a sub-account of the Lifestyle Fund-Balanced Portfolio. Plaintiff Barbara Poley also invested assets in JHFII Funds: a sub-account of the Lifestyle Fund-Balanced Portfolio, a sub-account of the Lifestyle Fund-Aggressive Portfolio, and a sub-account of the Lifestyle Fund-Growth Portfolio.

Count I alleges that Defendant JHUSA‟s sales and service is excessive and in violation of ERISA. In regard to Count I, the purchased funds are John Hancock funds. Count II differs from Count I in that the funds purchased are independent funds.

Counts III alleges that Defendants JHUSA, JHIMS, JHD, and JHF allowed payment of 12b-1 fees in violation of ERISA. Count IV makes a similar allegation, but here the 12b-1 fees were tied to independent funds.

Count V alleges that JHUSA wrongfully allowed JHIMS to charge Plaintiffs an advisory fee in violation of ERISA.

Count VI alleges that JHUSA wrongfully received revenue sharing payments from Plaintiffs‟ investments into sub-accounts in violation of ERISA.

Count VII alleges that JHUSA wrongfully selected JHT Money Market Trust as an investment option notwithstanding poor performance, high fees, and wrongfully retained JHIMS as an advisor, notwithstanding that it had been disciplined by the SEC, all purportedly in violation of ERISA. In regard to Counts I through VII, Plaintiffs assert that the Defendants were ERISA fiduciaries (or otherwise knowingly participated in a breach of duty by a fiduciary).

Count VIII seeks recovery of purportedly excessive investment management fees charged by JHIMS under ICA ยง 36(b). Count IX seeks relief for unjust ...


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