18th Annual Workplace Class Action Report - 2022 Edition

Annual Workplace Class Action Litigation Report: 2022 Edition 339 behalf of the Plan against the two committees that oversaw the Plan (collectively with Schneider Electric, “Schneider”) and Aon Hewitt Investment Consulting, Inc. (“AHIC”), the Plan’s investment manager (collectively, “Defendants”) alleging a variety of claims under the ERISA. Plaintiffs’ claims arose out of alleged improper investment decisions that resulted in losses to participants’ retirement savings and excessive administrative fees. Defendants Schneider and AHIC each moved to dismiss Plaintiffs’ complaint pursuant to Rule 12(b)(6), and the Court granted the motions in part and denied the motions in part. As to Count I, alleging breach of fiduciary duties arising from the selection of the Aon Trusts, Plaintiffs alleged that Defendants breached their fiduciary duties of loyalty and prudence by removing Vanguard funds from the Plan’s investments and replacing them with Aon funds that had insufficient performance histories. The Court denied Defendants’ motions on the grounds that Plaintiffs had raised a plausible inference that the process for selecting or monitoring the Aon Trusts was deficient and that Defendants had breached their duties of prudence. As to the disloyalty claim, the Court concluded that Plaintiffs’ allegation that Schneider breached its duty of loyalty by allowing the Plan to invest in the Aon Trusts in exchange for reduced fees for its other corporate benefit plans was entirely speculative and unsupported by factual allegations. With respect to AHIC, however, the Court determined that Plaintiffs plausibly alleged that AHIC breached its duty of loyalty by selecting its own funds for the Plan’s investment lineup. Accordingly, the Court dismissed the disloyalty claim in Count I as to Schneider but not as to AHIC. Likewise, with respect to Count II, the Court concluded that Plaintiffs stated a plausible claim of a breach of the duty of prudence, but not the duty of loyalty arising from unreasonable investment management fees. As to the breach of fiduciary duties claims in Counts III and IV arising from excessive recordkeeping and managed account fees, Plaintiffs alleged that Schneider breached its fiduciary duties by causing the Plan to incur unreasonably large fees for Vanguard’s recordkeeping and managed account services. The Court opined that Plaintiffs had not adequately pled a breach of the duty of loyalty with respect to administrative expenses and dismissed the duty of loyalty claims in Counts III and IV. With respect to Count III, the Court ruled the allegations that Schneider had acted imprudently by failing to conduct a competitive bidding process for the Plan’s recordkeeping services were sufficient to state a claim that Schneider breached its duty of prudence regarding Vanguard’s recordkeeping fees. As to Count IV, the Court likewise found that Plaintiffs had stated a claim that Schneider breached its duty of prudence in that it did not solicit competitive bids for managed account services and subsequently failed to monitor and control the fees for such services. Because the duty to monitor claim against Schneider in Count V was a derivative of Plaintiffs’ other fiduciary duty claims, the Court ruled that to the extent that Plaintiffs had plausibly alleged that Defendants breached their fiduciary duties directly, Plaintiffs had also plausibly alleged that Defendants had breached their duty to monitor. Finally, as to Counts VI and VII alleging prohibited transactions against Schneider and AHIC, the Court dismissed these claims partially because Plaintiffs cited no authority to demonstrate that § 1108(b)(8) of the ERISA proscribed the transaction at issue here, i.e. , using Plan assets to compensate AHIC and promote the Aon Trusts. For these reasons, the Court granted in part and denied in part Defendants’ motion to dismiss. Wehner, et al. v. Genentech, Inc., 2021 U.S. Dist. LEXIS 26227 (N.D. Cal. Feb. 9, 2021). Plaintiff, a former employee who participated in Defendants’ U.S. Roche 401(k) Savings Plan (“the Plan”), filed a class action alleging that Defendants breached their fiduciary duties of loyalty and prudence in violation of the ERISA. Specifically, Plaintiff claimed that Defendants breached their fiduciary duties by: (i) imposing excessive recordkeeping and administrative fees; (ii) imposing excessive investment management fees; and (iii) retaining Roche target date funds (“Roche TDFs”) and Roche U.S. Small and Mid-Cap Equity funds, which allegedly underperformed and charged excessive fees. Id. at *4-6. Defendants filed a motion to dismiss on the grounds that Plaintiff failed to state a claim, and the Court granted the motion. With respect to the Plan’s administrative fees, Plaintiff claimed that these fees ranged from $57 to $85 per participant, while significantly smaller plans charged only $35 in administrative fees. Plaintiff highlighted the fact that the Plan’s assets totaled over $7.6 billion, “‘placing it in the top 0.1% of defined contribution plans by plan size.’” Id. at *3. Defendants responded that Plaintiff failed to account for audit and investment fees when calculating the Plan’s administrative fees and that Plaintiff’s source for market comparisons – the 401(k) Averages Book – was inadequate as a comparator. The Court agreed with Defendants. It found that Plaintiff did not demonstrate why the market comparators from the 401(k) Average Book were accurate comparisons to the fees charged by Defendants’ Plan. In terms of the Plan’s investment management fees, the Court similarly concluded that Plaintiff failed to provide adequate benchmarks against to compare Defendants’ Plan. According to the Court, Plaintiff’s bare references to “comparable plans” was insufficient to show a breach of fiduciary duty under the ERISA. Regarding the Plan’s