Duane Morris ERISA Class Action Review – 2024

benchmarks. Id. at 18. In Matney, et al. v. Barrick Gold Of North America, 80 F.4th 1136 (10th Cir. 2023), the Tenth Circuit employed the Supreme Court ’ s decision in Hughes to establish several basic principles, including that (i) analysis of duty of prudence claims is context specific, and (ii) the Twombly and Iqbal “plausibility” standards apply with equal force in ERISA duty of prudence cases. In Matney , the plaintiffs alleged a breach of the duty of prudence due to the “offering of high-cost funds and charging [of] high fees.” Id. at 1141. The Tenth Circuit affirmed the district court ’ s dismissal of the claims. Id. The Tenth Circuit combined the high-cost fund and high fees issues and determined that the plaintiffs’ suggested comparator plans were not sufficiently comparable to the plan to establish a plausible claim. Id. at 1148-49. The Tenth Circuit outlined some similarities between the relevant plan and comparator plans that might make a claim of imprudence based on the offering of high-cost funds plausible, listing “similar investment strategies, similar investment objectives, or similar risk profiles.” Id. at 1148. Furthermore, it cited aspects of comparator plans that could support a plausible claim of imprudence based on excessive recordkeeping fees by describing comparators that render similar services to the relevant plan. Id. Based on these benchmarks, the Tenth Circuit determined that the plaintiffs’ allegations did not demonstrate sufficient similarity to the relevant plan and upheld the district court ’ s dismissal of their claims. Meanwhile, in Miller, et al. v. Packaging Corp. Of America Inc. , 2023 U.S. Dist. LEXIS 55337 (W.D. Mich. Mar. 30, 2023), the court used the Supreme Court ’ s opinion in Hughes to establish that the evaluation of claims of breaches of the duty of prudence are context-specific. Id. at *21. The plaintiffs alleged that the presence of high-cost investment options amounted to a breach of the fiduciary duty of prudence. Id. at *22. The court took a context-specific approach in evaluating whether the defendant breached its duty of prudence by failing to “select initial investment options with care, to monitor plan investments, and to remove imprudent ones.” Id. at *20. The court determined the plaintiffs made out a plausible claim of a breach of the duty of prudence in the defendant ’ s selection and monitoring of funds, a claim of breach that the court found was inextricable from the defendant ’ s potentially imprudent process. Id. at 30. The court reasoned that the plaintiffs successfully made out these claims by citing comparator funds that offered lower investment fees than the defendant ’ s managed funds. Id. at *22. At the same time, the court dismissed the plaintiffs’ claim of a breach of the duty of prudence based on excessive recordkeeping fees because the allegations on which it was based were conclusory. The noted that the plaintiffs did not provide factual allegations that the defendant ’ s selection process for recordkeeping services was imprudent under the ERISA merely by providing insufficient comparators that varied in what services they provided and arguing that a competitive bidding process was the only way to prudently select a record- keeper. Id. Similarly, the court in Singh, et al. v. Deloitte LLP, 2023 U.S. Dist. LEXIS 6910 (S.D.N.Y. Jan. 13, 2023) , used the Supreme Court ’ s Hughes decision to establish that the determination of whether a fiduciary has breached the duty of prudence is context-specific. The defendants filed a motion to dismiss pursuant to Rule 12(b)(6), and the court granted the motion. The plaintiffs claimed that one of the defendants breached its fiduciary duty to ensure that the investment options for both plans were appropriate, reasonably priced, and performed well compared to their peers. Id. at *1-6. The plaintiffs alleged that the recordkeeping fees for the Plans were higher than those of comparable plans, and the costs depended on the number of participants rather than the assets under management. Id. at *4. The plaintiffs contended that prudent fiduciaries would negotiate fixed annual compensation for recordkeeping based on a per-participant rate rather than as a percentage of assets, and that the defendants acted imprudently by failing to do so. Id. at *6. Additionally, the plaintiffs argued that certain funds offered by the Plans had excessively high expense ratios compared to industry medians and averages and that given the high costs, combined with the recordkeeping fees, the defendants acted imprudently in managing the Plans. Id. The court found that the plaintiffs’ comparisons to other plans’ fees and industry averages did not consider the specific services provided by the record-keeper or the funds’ performance relative to their costs. Id. at *14. Therefore, the court dismissed the plaintiffs’ claims for a breach of fiduciary duty, as they failed to provide sufficient evidence that the defendants had acted imprudently. Id. at *20.

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