18th Annual Workplace Class Action Report - 2022 Edition

Annual Workplace Class Action Litigation Report: 2022 Edition 329 could not infer imprudence merely because the Plan’s recordkeeping fees were at the amounts alleged. The Court therefore dismissed the recordkeeping claim. Plaintiff also asserted that Defendants breached their fiduciary duties when they did not retain the least costly share class of each fund fare. However, the Court ruled that Plaintiff’s preference for different share classes of certain investments was not enough to state a plausible claim for breach of fiduciary duty. Plaintiff further alleged that Defendants breached their fiduciary duties by retaining high-cost actively managed investments. Id . at *21. However, the Court determined that Plaintiff’s allegations that the Plan offered certain actively managed options did not establish that Defendants acted imprudently. As to the theory that Defendants breached their duty to monitor, the Court explained that the breach of the duty to monitor claim was derivative of the breach of fiduciary duty claim, and because Plaintiff failed to state a claim for breach of fiduciary duty, his breach of the duty to monitor claim must be dismissed. For these reasons, the Court granted Defendants’ motion to dismiss. Cutrone, et al. v. Allstate Corp., 2021 U.S. Dist. LEXIS 185430 (N.D. Ill. Sept. 28, 2021). Plaintiffs, a group of participants in Defendants’ retirement plan, filed a class action alleging that the plan fiduciaries made and failed to remove imprudent investments, charged the plan excessive fees, and caused the plan to make prohibited transactions in violation of the ERISA. Defendants moved to dismiss for lack of standing under Rule 12(b)(1), and for failure to state a claim under Rule 12(b)(6). The Court denied the motion. Plaintiffs claimed that they invested in six poorly performing Northern Trust funds and that Defendants’ process for selecting the Northern Trust funds was deficient. Plaintiffs further alleged that Defendant Allstate allowed Financial Engines and Alight to charge unreasonable investment advisory fees to the proposed class. Plaintiffs sought relief on behalf of the plan and two putative classes of participants, including: (i) those who invested in one or more Northern Trust fund from October 30, 2014 through the date of judgment; and (ii) those who paid fees for Financial Engines or Alight’s investment advisory services from January 4, 2015 through the date of judgment. Id . at *11. The Court found that Plaintiffs sufficiently alleged Article III standing, as they all claimed injuries in the form of lost retirement savings because Defendants breached their fiduciary duties, either by selecting and retaining the suite of Northern Trust funds or by causing the plan to pay excessive fees. Id . at *12. The Court also determined that Plaintiffs sufficiently alleged that Defendants violated their fiduciary and co-fiduciary duties with respect to the Northern Trust investments, the Financial Engines and the Alight fees, and the prohibited transactions. Id . at *23. For these reasons, the Court denied Defendants’ motion to dismiss. Davis, et al. v. Magna International Of America , 2021 U.S. Dist. LEXIS 62106 (E.D. Mich. March 31, 2021). Plaintiffs, a group of participants in Defendants’ 401(k) contribution plan, filed a class action alleging breach of fiduciary duty with respect to the plan in violation of the ERISA. Defendants filed a motion to dismiss pursuant to Rule 12(b)(1) for lack of standing and Rule 12(b)(6) for failure to state a claim. The Court denied the motion. Plaintiffs alleged that Defendants acted as fiduciaries of the plan, and breached their duties they owed to the plan, to Plaintiffs, and to other participants in the plan by: (i) failing to objectively and adequately review the Plan’s investment portfolio with due care to ensure that each investment option was prudent in terms of cost; and (ii) maintaining certain funds in the Plan despite the availability of identical or similar investment options with lower costs and/or better performance histories as required by the plan’s investment policy. Id . at *11. The Court found that Plaintiffs satisfied the requirements of Article III standing because they alleged actual injury to their own plan accounts and they alleged the injury-in-fact was causally related to the conduct they challenged on behalf of the plan. Id . at *13. The Court reasoned that Plaintiffs asserted allegations that the "funds in the plan have stayed relatively unchanged since 2014" and that the majority of the identified funds had expense ratios that were more expensive that comparable funds in similarly sized plans with over $1 billion in assets. Id . at *18. Plaintiffs asserted that given the availability of other less costly passively-managed investments not selected by Defendants, they plausibly plead that Defendants failed in their fiduciary duties to consider the power of the plan to "obtain favorable investment products.” Id . at *18. The Court held that Plaintiffs’ allegations, coupled with suggested comparisons, permitted it to reasonably infer imprudence by the fiduciaries. Id . Plaintiffs also alleged that the Investment Committee breached its duty of prudence by failing to observe the fees paid to the record- keeper and for not taking “corrective action." Id . at *24. Plaintiffs also contended that Defendants’ failure to monitor and control recordkeeping compensation cost the plan millions of dollars per year and “constituted separate and independent breaches of the duties of loyalty and prudence.” Id . at *31. The Court ruled that Plaintiffs’ complaint sufficiently stated a claim for breach of fiduciary duty and that dismissal would be inappropriate. Id . at *32. Finally, Plaintiffs asserted that Defendants selected high-cost investments with revenue