Duane Morris ERISA Class Action Review – 2024

In England, et al. v. Denso International America, Inc., 2023 U.S. Dist. LEXIS 131386 (E.D. Mich. July 28, 2023), the court relied on the Supreme Court ’ s guidance in Hughes to establish that the evaluation of claims of breaches of the duty of prudence is context-specific. In England , the plaintiffs, a group of current and former employees of one of the defendants and participants in the defendants’ 401(k) plan, filed a class action alleging that the defendants breached their fiduciary duty of prudence under the ERISA. The plaintiffs specifically asserted that the defendants breached their fiduciary duty of prudence to plan participants by failing to ensure that the plan ’ s recordkeeping fees were objectively reasonable. Id. The court found that the plaintiffs failed to demonstrate that the fees charged were excessive relative to services rendered because they used improper comparators of differing numbers of participants and amounts of assets, thereby failing to fulfill the context-specific plausibility standard for claims of breach of the duty of prudence. Id. at *13. Additionally, the plaintiffs claimed that the defendant ’ s offer of higher cost class share funds constituted a breach of the duty of prudence. Id. The court concluded that because a prudent ERISA fiduciary might choose an investment option based on revenue sharing, such conduct is not required under the ERISA. Id. at *18-19. Additionally, in Ruilova, et al. v. Yale-New Haven Hospital, Inc., 2023 U.S. Dist. LEXIS 33791 (D. Conn. Mar. 1, 2023), the court referred to the Supreme Court ’ s decision in Hughes to establish the need to evaluate the ERISA fiduciary ’ s specific circumstances in determining whether it made reasonable decisions. The plaintiffs alleged that their retirement accounts were not appropriately managed due to breaches of the duty of prudence, which resulted in poor investment decisions and excessive fees in violation of the ERISA. Id. at *6. The defendants filed a motion to dismiss, which the court denied in part. The court denied the motion to dismiss as to the claim alleging that the Plan incurred excessive recordkeeping and granted the motion to dismiss with regards to the allegation that the defendant breached its fiduciary duty based on the total plan cost. Id. The court reasoned that the plaintiffs plausibly alleged that the defendant breached its duty of prudence through excessive recordkeeping fees by providing appropriate comparator plans that offered similar or better services, served a similar number of participants, and controlled similar asset values. Id. at *57-58. On the other hand, the court found the plaintiffs’ comparators with regard to total plan cost did not provide a “basis from which to infer” that they offered “funds similar to those in the Plan.” Id. at *66. The court reasoned that the plaintiffs’ proposed comparators merely provided data for similarly sized funds without providing any evidence that those plans offered funds similar to those offered by the plan at issue. Therefore, the court differentiated between insufficient and sufficient comparators, permitting the claim that employed comparators of similarly sized plans and denying that which reused the same plans’ data, asserting no more than excessive recordkeeping fees. Id. at *63-64. In Krutchen, et al. v. Ricoh USA, Inc. , 2023 U.S. Dist. LEXIS 68942 (E.D. Pa. Apr. 20, 2023), the court relied on the Supreme Court ’ s decision in Hughes to establish that the inquiry into an alleged breach of the duty of prudence is context-specific and to detail allegations that can plausibly state such a claim, including “multiple examples of circumstantial imprudence, including paying significantly higher fees than others for the same services, engaging multiple record-keepers providing duplicative services, and retaining poorly performing investment options.” Id. at *4. The court dismissed the plaintiffs’ claims with prejudice after their third attempt to state a plausible claim of a breach of the duty of prudence based on excessive recordkeeping fees for want of “meaningful benchmarks by which the court can assess the prudency of Defendants’ actions.” (quoting the court ’ s prior opinion in Krutchen, et al. v. Ricoh USA, Inc. , 2022 U.S. Dist. LEXIS 206792, at *10 (E.D. Pa. Nov. 15, 2022)). In granting the first motion to dismiss, the court found allegations of a breach of fiduciary duty inadequate based on the plaintiffs’ provisions of comparators without demonstrating similarities in the services provided by the comparators and by the plan at issue. After the plaintiffs amended their complaint, the court found that their allegations still failed to state plausible claims because their comparisons between the relevant plan and other plans were limited to the difference between the total prices of the plans, excluding comparisons of substantive aspects of the plans, such as the services offered. The court found that such a limited comparison failed to make out a plausible claim in context as required by the Supreme Court in Hughes .

Made with FlippingBook - professional solution for displaying marketing and sales documents online