18th Annual Workplace Class Action Report - 2022 Edition

Annual Workplace Class Action Litigation Report: 2022 Edition 349 continuing to offer the underperforming funds despite those funds failing to meet the benchmarks selected by the Plan’s managers. The Court found that, because Plaintiffs identified specific benchmarks and supported their allegations with several reasons why Defendants’ retention of these funds was imprudent, Plaintiffs stated a plausible claim for relief. Defendants alternatively argued that Plaintiffs improperly compared the actively- managed Fidelity Freedom Fund to a passively-managed index suite, but the Court held that such a question over appropriate benchmarks could not be properly determined at the motion to dismiss stage. Consequently, because the Court reasoned that Plaintiffs offered a plausible breach of fiduciary duty claim, it also concluded that Plaintiffs’ allegations in the breach of fiduciary duty count were sufficient to support the monitoring claim as well. Finally, Defendants asserted that pertinent Fourth Circuit case law did not recognize claims for knowing breach of trust. The Court rejected this argument. It held that dismissing this claim at the motion to dismiss stage would be premature because certain Fourth Circuit case law also suggested that the jurisdiction may recognize knowing breach of trust claims. Therefore, the Court denied Defendants’ motion to dismiss. Kendall, et al. v. Pharmaceutical Product Development, LLC 2021 U.S. Dist. LEXIS 25119 (E.D. Tenn. Jan. 31, 2021). Plaintiffs, a group of former employees of Pharmaceutical Product Development, LLC ("PPD"), brought a putative class action against PPD, the Board of Directors of PPD (the "Board"), the Benefits Administrative Committee (the "Committee"), and John Does 1-30 (collectively, “Defendants") relating to Defendants’ selection and maintenance of investment options in the PPD Retirement Savings Plan (the "Plan"). Plaintiffs alleged that the Committee breached its fiduciary duties of loyalty and prudence under § 404(a) of the ERISA and that PPD and the Board breached their duty to monitor the Committee. Defendants moved to dismiss pursuant to Rule 12(b)(1) and (b)(6). The Court granted in part and denied in part Defendants’ motion to dismiss. It dismissed a portion of Plaintiffs’ claims as well as Plaintiffs’ request for injunctive relief. The Court also granted Defendants’ motion to dismiss with respect to Plaintiffs ‘claim that the Benefits Administrative Committee failed to investigate adequately the availability of lower cost options because the ERISA does not impose a duty to offer alternatives to mutual funds. Because the availability of lower-cost alternatives is not enough to state a claim for a breach of the duty of prudence, especially where the challenged plan offers diversified investment options, the Court ruled that Plaintiffs failed to state a claim concerning the alleged breach of the duty of prudence arising from the alleged high costs of the investment fund options. Further, the Court concluded that even if the ERISA imposed a duty to investigate alternatives, Plaintiffs admitted that the plan did offer a collective trust option, which, by definition, the Committee investigated the option and offered the option of a collective investment trust. Thus, the Court concluded that Plaintiffs failed to state a claim as, at most, they had alleged a possible breach, but had not alleged facts supporting a reasonable inference that the Committee failed to investigate the availability of lower cost options including collective investment trusts or separate accounts. Plaintiffs also claimed that the Committee breached its duty of prudence by failing to use lower cost share classes available during the class period. Plaintiffs alleged that lower cost share classes were available for several of the fund options and that the higher cost shares did not offer additional benefits to off-set the higher costs. As to this claim, the Court ruled that Plaintiffs had plausibly alleged that the Committee’s selection of higher cost share classes breached its duty of prudence. Finally, as to Plaintiffs’ request for injunctive relief, the Court found that as former plan participants, Plaintiffs did not have standing to seek injunctive relief because they were not realistically threatened by Defendant’s future breaches of fiduciary duties. Accordingly, the Court granted Defendants’ motion to dismiss Plaintiffs’ claims for injunctive relief. For these reasons, the Court granted in part and denied in part Defendants’ motion to dismiss. Sacerdote, et al. v. New York University, 2021 U.S. App. Unpub. LEXIS 24252 (2d Cir. Aug. 16, 2021). Plaintiffs, a group of participants in retirement plans administered by New York University (“NYU”) and the NYU School of Medicine, filed a class action against NYU in its capacity as the fiduciary of Plaintiffs’ retirement plans (“the Plans”), alleging a number of breaches of NYU’s fiduciary duties under the ERISA. Plaintiffs’ seven-count complaint alleged that NYU breached its fiduciary duties of loyalty and prudence and engaged in prohibited transactions, which caused the Plans to incur excessive costs and unreasonable performance losses. After a bench trial, the District Court entered judgment in favor of Defendant. On appeal, Plaintiffs challenged, among other things: (i) the dismissal of their claim that NYU breached its duty of prudence by offering particular share classes of mutual funds in the retirement plans (Count V); and (ii) the denial of leave to amend their complaint to name additional Defendants. The Second Circuit found merit in these challenges, but none in Plaintiffs’ other issues raised on appeal. Accordingly, the Second Circuit affirmed in part, and vacated in part the District Court’s