18th Annual Workplace Class Action Report - 2022 Edition

340 Annual Workplace Class Action Litigation Report: 2022 Edition inclusion of certain investment funds, Plaintiff pointed to the Vanguard and Fidelity TDFs as comparators, and Defendants countered that these retail funds were an improper “apples-to-oranges” comparison to Defendants’ custom-designed TDFs. Plaintiff asserted that these funds were comparable because they were all TDFs, but the Court rejected this argument as insufficient and conclusory. For purposes of establishing the Plan’s alleged underperformance, Plaintiff also attempted to compare the Roche U.S. Small and Mid-Cap Equity funds, which were actively-managed funds, to the BlackRock index fund, a passively-managed fund. However, the Court again found this “apple-to-oranges” comparison to be inadequate because an actively-managed fund operates in a different manner than a passively-managed fund. Therefore, the Court granted Defendants’ motion to dismiss with leave to amend. Wehner, et al. v. Genentech, Inc., 2021 U.S. Dist. LEXIS 111341 (N.D. Cal. June 14, 2021). Plaintiff, a participating employee of the U.S. Roche 401(k) Savings Plan (the "Plan" or "Roche Plan") filed a class action against Defendants Genentech, Inc. ("Genentech") and the U.S. Roche DC Fiduciary Committee ("Committee") for breach of their fiduciary duties in violation of the ERISA. Defendants filed a motion to dismiss, and the Court granted in part and denied in part the motion. Plaintiff asserted two causes of action, including: (i) Defendants’ breach of the duties of prudence and loyalty; and (ii) a derivative claim alleging Genentech’s failure to monitor fiduciaries and co-fiduciary breaches. Under the first cause of action, Plaintiff alleged that Defendants breached their fiduciary duty of prudence to the Plan: (i) by imposing unreasonable recordkeeping and administrative fees that were directly deducted from the Plan participants’ accounts and by an undisclosed indirect fee charged as a result of the Master Trust structure; and (ii) by retaining an allegedly under-performing investment fund, the Roche TDFs, and selecting Russell to manage those funds despite its poor reputation and performance. Id . at *2. As to the excessive fees claim, the Court held that Plaintiff sufficiently alleged that another Plan, the Danaher Corporation & Subsidiaries Savings Plan ("Danaher Plan"), established an apples-to-apples comparison to the Roche Plan, as they both used the same record-keeper to perform the same services to roughly the same amount of plan participants, and the Danaher Plan deducted significantly less in fess compared to the Roche Plan. Id . The Court held that these allegations were sufficiently to raise a plausible inference that Defendants breached their fiduciary duty of prudence by charging excessive recordkeeping and administrative fees. Id . at *3. However, the Court ruled that Plaintiff’s conclusory allegations regarding Defendants’ retention of target date funds and choice of investment manager for the fund were insufficient to establish a claim for imprudence. The Court further held that Plaintiff’s claim based on Defendants’ use of a master trust structure was also insufficiently pled. Finally, the Court opined that Plaintiff’s duty to monitor claim was derivative of the underlying breaches and thus only survived dismissal as to the excessive fees claim. For these reasons, the Court granted in part and denied in part Defendants’ motion to dismiss. Williams, et al. v. Centerra Group, LLC , 2021 U.S. Dist. LEXIS 176411 (D.S.C. Sept. 16, 2021). Plaintiffs, a group of participants in Defendants’ 401(k) plan, filed a class action alleging that Defendants made improper investment decisions that resulted in losses to participants’ retirement savings and charged excessive administrative fees in violation of the ERISA. Defendants Aon Hewitt Investment Consulting Inc. ("AHIC") and Centerra moved to dismiss, and the Court granted in part and denied in part the motion. Plaintiffs alleged that Defendants breached the fiduciary duties imposed by the ERISA by selecting and retaining the a trust that had a banking affiliate that retailed a small amount of compensation for its service as the trustee. The Court held that these allegations were sufficient to plausibly allege a breach of the duty of loyalty. Further, the Court ruled that Plaintiffs sufficiently alleged that Defendants’ imprudence enabled a breach, which type of conduct was excluded from the statutory safe harbor by 29 U.S.C. § 1105(a)(3). However, the Court reasoned that Plaintiffs failed to plausibly allege a breach of the duty of loyalty against Defendants because they all related to prudence, not loyalty. Plaintiffs contended that the Centerra Defendants breached their fiduciary duties by causing the Plan to pay unreasonable recordkeeping fees to the Plan’s record-keeper. In addition, Plaintiffs alleged that the Centerra Defendants caused the Plan to pay excessive recordkeeping and administrative fees because they failed to follow prudent practices used by similarly-situated fiduciaries. Id . at *26. The Court determined that Plaintiffs’ allegations were sufficient to state a viable claim for breach of the duty of prudence related to the recordkeeping fees. Id . at *28. The Court opined, however, that Plaintiffs did not state a claim that the Centerra Defendants breached their duty of loyalty by paying allegedly excessive recordkeeping and administration fees. Id . Plaintiffs also contended that the Centerra Defendants breached their duty to monitor the conduct of AHIC. The Court rejected this argument. It reasoned that the duty to monitor did not include an obligation to examine