Duane Morris ERISA Class Action Review – 2024

While the overall influence of Hughes on the pleading standards governing motions to dismiss ERISA fiduciary duty claims is unclear, at least one emerging trend is the increased emphasis that courts have placed on the specificity of allegations concerning the comparator plans and investment options upon which plaintiffs base their claims. Courts have relied on Hughes to emphasize fact-specific context on a case-by-case basis and appear less inclined to accept generalized comparisons between the defendant ’ s plan and other plans as the basis for stating a plausible claim. As a result, defense of such claims necessitates a careful analysis of the substantive allegations supporting any such comparators, and use of publicly available information to push back on oversimplified comparisons where possible. 6. Other Rule 12(b)(6) Rulings In ERISA Class Actions In other cases, courts have not addressed Hughes at all. In Jones, et al. v. DishNetwork Corp. , 2023 U.S. Dist. LEXIS 51823 (D. Colo. Mar. 27, 2023), the court adopted the Magistrate Judge ’ s recommendation that the plaintiffs’ claims be dismissed without prejudice without reference to Hughes , despite the plaintiffs’ claim of a breach of the duty of prudence. Instead, the court adopted the Magistrate Judge ’ s recommendation that the plaintiffs failed to plausibly allege a breach of the duty of prudence based on excessive recordkeeping fees because their comparators were insufficient. Id. at 14-15. The plaintiffs merely compared the fees of other plans over the course of one year with the average fees of the plan at issue over five years; as a result, the court found these proposed comparisons were not “meaningful benchmarks” on which to base a claim of excessive recordkeeping fees. Id. at *16-17. Similarly, in Beldock, et al. v. Microsoft Corp. , Case No. 22-CV-1082 (W.D. Wash. Apr. 24, 2023), the plaintiffs argued that the defendant breached its duty of prudence in selecting, failing to monitor, and retaining certain funds. Id. at 7. The plaintiffs included factual allegations in the form of evidence of poor fund performance in terms of comparator indices that outperformed the funds at issue. Id. These comparisons spanned a brief time period, and the plaintiffs did not offer additional context beyond simple comparisons between indices. As a result, the court found such allegations to be mere claims of “underperformance relative to other investment vehicles.” Id. Therefore, the court determined the claim must be dismissed because it did not rise “above the level of speculation and into plausibility.” Id. at 8. Courts also reviewed ERISA class actions outside of the retirement fund context over the past year. For example, in Lites, et al. v. Amazon.Com Services, 2023 U.S. Dist. LEXIS 11106 (S.D. Fla. Jan. 20, 2023), the court denied a motion to dismiss a claim alleging insufficient notice of the option to continue healthcare benefits after termination under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). Specifically, the plaintiff alleged that the defendant ’ s COBRA notice was unclear for the average plan participant to understand, contained an erroneous warning about criminal and civil penalties for providing false or incomplete information, and included an unnecessary warning about IRS penalties for failing to provide accurate tax identification numbers. Id. at *5. Additionally, the plaintiff contended that the COBRA notice failed to identify the Plan Administrator, as required by the regulations. Id. at 4. The defendant moved to dismiss for failure to state a claim pursuant to Rule 12(b)(6), and the court granted in part and denied in part the motion. Id. at *19. The defendant argued that the plaintiff failed to state a claim because the plaintiff did not plausibly allege that the COBRA notice could not be “understood by the average plan participant,” as required by 29 C.F.R. § 2590.606-4(b)(4), and because the defendant was not required to name the plan administrator in the notice. Id. at *4-5. The court ruled that the plaintiff plausibly pled her claim that the COBRA notice violated 29 C.F.R. § 2590.606-4(b)(4) due to the inaccurate penalties’ description and thereby denied the motion to dismiss that claim. Id. at *12. However, the court determined that the plaintiff failed to plausibly plead her claim that the COBRA notice violated 29 C.F.R. § 2590.606- 4(b)(4)(i) because it failed to identify the plan administrator, and granted the motion to dismiss as to this part of the claim. Id. at *20. Another such non-retirement fund case heard this past year was Cope, et al. v. Hudson’s Bay Co. Severance Pay Plan, 2023 U.S. Dist. LEXIS 5668 (E.D. Penn. Jan. 12, 2023). The court considered severance benefits under the ERISA. The plaintiff, a former employee, filed a class action alleging that the

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