Duane Morris ERISA Class Action Review – 2024

resolution of which would depend on closer evaluation of the merits. Id. at *29. In Waldner, et al. v. Natixis Investment Managers, L.P ., 2023 U.S. Dist. LEXIS 86177 (D. Mass. Mar. 24, 2023), the court likewise considered and endorsed the Magistrate Judge ’ s similar “totality of circumstances” approach in denying the defendants’ motion to dismiss the plaintiffs’ duty of prudence and loyalty claims. Id. at *7. There, the plaintiffs’ “seven sets of factual allegations,” alleging self-dealing evidenced by (i) the products available, (ii) the products newly added, (iii) the fact that the allegedly self- dealing product options were not selected by many other ERISA plans, (iv) some of the allegedly self- dealing products had unusually high expense ratios, (v) some of the allegedly self-dealing products underperformed, (vi) there was evidence of outflows of the allegedly self-dealing products in the market at- large, and (vii) three of the offered products showed negative returns. Id. at 8. 4. Other Interpretations Of Hughes v. Northwestern Other rulings post- Hughes have taken a more skeptical approach. In Probst, et al. v. Eli Lilly and Co. , 2023 WL 1782611 (S.D. Ind. Feb. 3, 2023), the court dismissed the plaintiffs’ claim of a breach of the duty of prudence based on excessive recordkeeping fees as implausible under the Supreme Court ’ s decision in Hughes and Seventh Circuit precedent despite thirteen different factual allegations against the defendants. The court found that the plaintiffs’ allegations failed to address the recordkeeping fees’ cost relative to the services rendered and that the plaintiffs’ comparator plans were not sufficiently similar to the plan at issue. Id. at *33-35. The court also examined the plaintiffs’ descriptions of comparator plans, finding that their reliance on publicly available information was problematic because “the comparator plans received services other than recordkeeping, but all services are lumped into one sum.” Id. at 38-39. Ultimately, the court found the plaintiffs’ allegations conclusory and relied on Seventh Circuit precedent to dismiss the claim based on a lack of “specific facts showing that the recordkeeping fees were ‘ excessive relative to the services rendered. ’ ” Id. at *41. In fact, the court in Probst was dismissive of the Supreme Court ’ s guidance to employ a plausibility standard in motions to dismiss claims of breaches of the duty of prudence, instead relying on the Seventh Circuit ’ s reasoning that “ Hughes did not ‘ have any bearing on the analysis of [recordkeeping fees] claims. ’ ” Id. at *29. While Probst was decided before the Seventh Circuit heard Hughes on remand and it is therefore unclear how it would apply the Court of Appeals’ directive to employ the Hughes standard on a recordkeeping fees claim, it is clear that courts have taken different approaches to fill the analytical vacuum. The court in Lard, et al. v. Marmon Holdings, Inc., 2023 U.S. Dist. LEXIS 169206 (N.D. Ill. Sept. 22, 2023), as in Probst , granted the defendant ’ s motion to dismiss, applying both the Supreme Court ’ s Hughes decision and the Seventh Circuit ’ s further discussion of that decision on remand. The plaintiffs alleged that the defendants breached their fiduciary duty of prudence by allowing the Plan to pay excessive recordkeeping fees and by retaining underperforming retirement funds in violation of the ERISA. Id. at *2. The defendants filed a motion to dismiss, and the court granted the motion without prejudice. Id. at *14-15. The plaintiffs asserted that the Plan charged excessive recordkeeping and administrative fees and consisted of underperforming custom retirement funds. Id. at *2. The plaintiffs generally argued that all national record-keepers could provide the same services at a lower cost. Id. at *8. The court, however, found that the plaintiffs did not acknowledge all of the services provided by the record-keepers when outlining the plan ’ s comparators and therefore failed to meet the pleading standard set forth in the Seventh Circuit ’ s Hughes decision on remand. Id. at *11. Concerning investment returns, the plaintiffs argued that certain funds underperformed other available alternatives. Id. However, the court determined that the plaintiffs’ return comparisons likewise failed to demonstrate that their proposed comparators were sufficiently similar to the plan ’ s funds. Id. at *12-13. The court did not cite Hughes directly in explaining its finding with regards to the investment returns, but explained that the plaintiffs did not provide “ ‘ meaningful benchmarks ’ ” to guide the court ’ s inferences. Id. at *13.

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