Duane Morris ERISA Class Action Review – 2024

Other courts have applied the Supreme Court ’ s decision in Hughes and the Seventh Circuit ’ s decision on remand to find some claims to be plausible and others to implausible in the same case. For example, in Seibert, et al. v. Nokia Of America Corp ., 2023 U.S. Dist. LEXIS 137621 (D.N.J. Aug. 8, 2023), the court found the plaintiffs plausibly alleged that the defendant breached its duty of prudence through excessive recordkeeping fees, but did not plausibly allege a breach of the same through failure to ascertain that each investment was prudent. Id. at *21-43. The court found that, in light of the Hughes decisions, the plaintiffs successfully pleaded that the defendants breached the duty of prudence through excessive recordkeeping fees because they alleged a combination of facts indicating imprudence, including increases in fees and unfavorable comparisons to the marketplace. Id. at 25-26. Notably, the court did not require that the plaintiffs provide information about the specific comparators demonstrating the methodology used to lower recordkeeping costs that the plaintiffs in Hughes provided, reasoning that the additional context provided was sufficient to survive a motion to dismiss. Id. 26 n. 6. Still, the court applied Hughes ’ context-specific plausibility standard to dismiss the plaintiffs’ claim of a breach of the duty of prudence based on failure to ascertain each investment was prudent without prejudice. Id. at 21. The court found that the plaintiffs offered insufficient comparisons to their plan, merely alleged that there are cheaper alternatives in the marketplace, and failed to allege anything about the performance of the challenged funds. Id. at 11-21. However, the court left open the opportunity for the plaintiffs to plausibly allege the facts required to make out a claim of maintenance of imprudent investments. Id. at 21. 5. Other Cases Citing Hughes, et al. v. Northwestern Given the failure of Hughes to clarify the pleading standards in these cases, most courts have instead relied on it for basic principles applicable in evaluating 12(b)(6) challenges to ERISA breach of fiduciary duty claims. In most of these cases, courts have focused on whether the plaintiffs had alleged enough detail about the recordkeeping services offered to or investment offerings made by alleged comparator plans to establish those comparators as appropriate benchmarks for judging the defendants’ conduct. In Sigetich, et al. v. Kroger Co ., 2023 U.S. Dist. LEXIS 40359 (S.D. Ohio Mar. 9, 2023), for example, the court cited the Supreme Court ’ s decision in Hughes to establish the basic premise that ERISA fiduciaries face difficult tradeoffs. Id. at *20. The plaintiffs, participants in the defendants’ retirement plan, filed a class action alleging that the defendants charged excessive recordkeeping fees for the plan in violation of ERISA ’ s duty of prudence. The plaintiffs contended that the plan paid excessive fees when compared to other 401(k) plans with a similar number of participants, and brought claims alleging: (i) breach of the duty of prudence related to recordkeeping fees against the defendants; and (ii) failure to adequately monitor other fiduciaries related to recordkeeping fees against the defendants. Id. at *10-11. The defendants brought a motion to dismiss. In granting the motion, the court opined that the plaintiffs failed to plead a duty of prudence claim because they failed to allege that the plan ’ s recordkeeping fees were excessive when compared to services rendered. Id. at *23. The court stated that the fees from the plaintiffs’ cited “comparable plans” from other providers were not actually comparable plans. The court determined that the plaintiff failed to provide the necessary information to show that the defendants were imprudent when choosing a record-keeper. As such, the plaintiffs’ claim of a breach of the duty of prudence was implausible. The court also found that the claim that defendants breached their duty to monitor other fiduciaries responsible for the plan ’ s recordkeeping fees depended on the sufficiency of the plaintiff ’ s breach of prudence claims and therefore dismissed that claim as well. In Locascio, et al. v. Fluor Corp., 2023 U.S. Dist. LEXIS 9162 (N.D. Tex. Jan. 18, 2023), the court relied on the Supreme Court ’ s decision in Hughes for the same principle as Sigitech , i.e., that ERISA fiduciaries face difficult tradeoffs that courts must consider in their evaluations of motions to dismiss claims of breaches of the duty of prudence . Id. at *13-14. The plaintiffs filed a class action alleging the defendants breached their fiduciary duty of prudence in violation of the ERISA. The defendants filed a motion to dismiss pursuant to Rule 12(b)(6), and the court granted the motion. The court found that the plaintiffs failed to provide sufficient evidence to plausibly allege a breach of fiduciary duty because they did not include meaningful comparisons in their pleadings to demonstrate that the selected funds were sufficiently similar

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