Given the continuing wave of ERISA litigation, this article has become a mainstay of The Speed Reader. Cases that were recently filed or decided are outlined below. Please note, however, that this list is not exhaustive.
- Wilcox v. Georgetown University (decided on January 8, 2019 by the U.S. District Court for the District of Columbia): This case represents another victory for employers, which appears to be a developing trend in these types of ERISA cases. The plaintiffs in this typical ERISA class action case are participants in the defendant plan sponsor’s 403(b) plans. After stating that “This type of lawsuit seems to have taken higher education by storm, with suits brought all over the country,” the court first concluded that the participants lacked standing to assert their claim that certain less-expensive share classes of funds should have been included in the plans. That is because the plaintiffs did not invest in those funds. The court then turned to the plaintiffs’ claim that an investment fund underperformed other available options. Here, the court stated that “ERISA does not provide a cause of action for “underperforming funds,” and “a fiduciary is not required to select the best performing fund…but instead to discharge their duties with care, skill, prudence, and diligence under the circumstances then prevailing when they make decisions.” As for the plaintiffs’ claim that the plans’ recordkeeping expenses were unreasonably high, the court opined that the plaintiffs “provide no factual support at all for their assertion that the Plans should pay only $35/year per participant in recordkeeping fees.” Therefore, the court granted the defendants’ motion to dismiss the case.
- Acosta v. Kirkeide (agreement reached on January 23, 2019 in the U.S. District Court for the Southern District of Florida): This case resulted from a DOL investigation regarding executives of two 401(k) plan sponsors, who also served as fiduciaries of the two entities’ 401(k) plans. The DOL found that the defendants withheld “tens of thousands of dollars” from employees’ paychecks but failed to forward those contributions to the plans in a timely manner. Also, the defendants failed to remit required employer contributions to the plans. Finally, the defendants failed to administer the plans, which left participants unable to obtain information about their investment selections or gain access to their plan accounts. Under the agreement, the defendants are barred from acting as a fiduciary, trustee, agent or representative in any capacity to any ERISA plan. (They have already paid $538,248 in restitution to the plans as a result of their conduct involved in this case.)
- Wildman v. American Century Services, LLC (decided on January 23, 2019 by the U.S. District Court for the Western District of Missouri): In one of only a handful of recent ERISA cases of this type to proceed to trial, the plaintiffs here were participants in the defendant plan sponsor’s 401(k) plan, and other defendants included the plan’s committee. The plaintiffs first claimed that because the plan’s investment lineup consisted mainly of American Century funds, the defendants breached their fiduciary duty of loyalty in that they selected that investment lineup based on their motivation to drive revenues to American Century. The court stated, however, that the plaintiffs failed to establish “a single instance” in which the defendants placed American Century’s interests over plan participants’ interests, and “it is not disloyal as a matter of law to offer only proprietary funds.” Next, the plaintiffs claimed that the defendants breached their duty of prudence by including so many American Century funds. However, the court opined that “a fiduciary of a plan sponsored by an asset manager is not required to consider competitors’ funds if the proprietary funds chosen in the Plan are prudent options,” and the defendants prudently selected and monitored the funds. In addition, in rejecting the plaintiffs’ assertion that the defendants imprudently retained too many funds in the plan, the court stated that the defendants “thoroughly discussed the composition of the Plan’s lineup to ensure it covered the entire risk/reward spectrum without duplication,” and the fund lineup was prudent in light of the “sophisticated investor base of the Plan participants.” The plaintiffs also contended that the defendants retained funds with excessive fees in the plan. In rejecting that contention, the court stated that “the Plan’s fees ranged from 4 to 158 basis points, similar to those approved of by other courts, which suggests the fees were not excessive.” Also in that regard, the plan’s diverse selection of funds contradicts the plaintiffs’ claim that the defendants acted imprudently, because “cheaper funds were available.” Therefore, the court ruled in the defendants’ favor on all counts.
- Davis v. Stadion Money Management, LLC (complaint filed on January 25, 2019 in the U.S. District Court for the Middle District of North Carolina): In this proposed class action lawsuit, the plaintiffs (participants in a 401(k) plan serviced by the defendants) state that defendant Stadion acts as a fiduciary by providing a managed account service to participants in 401k) plans. Also, defendant United of Omaha sells to plan sponsors a group annuity product and offers Stadion’s managed accounts as an add-on service to its clients. Under that arrangement, Stadion receives a fee from participating employees and shares that fee with United of Omaha. The plaintiffs assert that Stadion conferred unjust benefits on United of Omaha by selecting certain investment options over others for participants, which violated ERISA because the defendants allegedly put their own interests ahead of clients’ retirement plan participants. More specifically, Stadion allegedly directed participants’ accounts into Stadion-affiliated and United of Omaha-affiliated investment options, “despite the availability of lower-cost, higher-performing investment options within the plan that would have better met the needs of participants.” Also, United of Omaha allegedly improperly retained revenue resulting from Stadion’s improper conduct, despite knowledge of Stadion’s “compromised loyalty and imprudence.” The plaintiffs contend that the defendants’ acts “cost participants millions of dollars in losses due to excess fees and investment underperformance.” Based on that alleged conduct, the plaintiffs seek several remedies (e.g., a court order requiring the defendants to “make good all losses incurred as a result of the breaches of fiduciary duty” and to pay for the plaintiffs’ attorneys’ fees).