18th Annual Workplace Class Action Report - 2022 Edition

334 Annual Workplace Class Action Litigation Report: 2022 Edition was not a fiduciary owing duties to Plaintiffs under the ERISA. Plaintiffs appealed, and the First Circuit affirmed the dismissal of their claims. The First Circuit initially noted that the key issue on appeal was whether Plaintiffs’ complaint plausibly alleged that Defendant was a fiduciary for the plans with respect to the collection of infrastructure fees. Id. at *5-6. To that end, Plaintiffs contended that, by charging infrastructure fees to mutual funds, Defendant increased its own compensation from the plans and thus should be treated as a fiduciary. The First Circuit reasoned, however, that a series of independent decisions led to the agreement of the fees charged by Defendant, and that Defendant effectively acted “like a supermarket that charges a vendor a fee in return for favorable shelf space.” Id. at *9-10. Since Plaintiffs overlooked the significant of the other parties involved in this process and identified no pertinent case law in which a series of independent decisions led to a fund manager being labeled a fiduciary, the First Circuit rejected Plaintiffs’ argument. Plaintiffs further asserted that Defendant acted as a fiduciary by determining which mutual funds were included in its FundsNetwork, but the First Circuit rejected this contention. The First Circuit outlined relevant case law and concluded that the “case law almost directly on point” flatly rejected Plaintiffs’ notion that Defendant acted “as a fiduciary in selecting funds for its FundsNetwork.” Id. at *13-14. For these reasons, the First Circuit affirmed the District Court’s order granting Defendant’s motion to dismiss. In Re Omnicom ERISA Litigation, 2021 U.S. Dist. LEXIS 144054 (S.D.N.Y. Aug. 2, 2021). Plaintiffs, a group of current and former participants in Omnicom’s 401(k) Group Retirement Savings Plan ("the Plan"), brought a putative class action pursuant to the ERISA. Plaintiffs complaint alleged: (i) breach of fiduciary duty under § § 404(a)(1)(A), (B), and (D) of the ERISA; (ii) failure to monitor fiduciaries and co-fiduciaries; and (iii) in the alternative, liability for a knowing breach of trust. Defendants moved to dismiss pursuant to Rules 12(b)(1) and 12(b)(6), and the Court granted the motion in part and denied it in part. At the outset, the Court opined that the breach-of-fiduciary-duty claim was the most important because the other two claims were entirely dependent on that claim. Plaintiffs asserted four types of allegations, including: (i) imprudent management due to prolonged inclusion of the Fidelity Freedom Active funds in the Plan’s investment menu; (ii) imprudent management due to prolonged inclusion of the Neuberger Berman and Morgan Stanley funds; (iii) maintaining excessive recordkeeping and administrative fees; and (iv) maintaining an unreasonably expensive investment menu. Plaintiffs invested in five of the Plan’s target-date funds during the relevant class period, including the Fidelity Freedom 2015 K, 2030 K, 2045 K, 2050 K, and 2055 K targeted-date funds. These funds were all part of the Active Suite, and it was undisputed that Plaintiffs were all participants in the Plan during the class period. Further, Defendants conceded that Plaintiffs did have standing to sue as to any alleged injuries to the Plan incurred by virtue of the Plan’s investment in the Active Suite. Although Plaintiffs did not invest in all of the Active Suite’s 13 funds, they did invest in the product line, which gave them standing to sue on behalf of the Plan. The Court addressed whether the named Plaintiffs had standing to sue on behalf of injuries suffered by the Plan as a result of its investment in product lines in which they did not personally invest. The parties did not dispute that Plaintiffs had not invested in either the Neuberger Berman or Morgan Stanley funds during the class period. As such, Defendants argued that Plaintiffs lacked standing to sue for injuries resulting to investors who had money in funds in which they did not personally invest. The Court agreed with Defendants and concluded that because Plaintiffs could not have been harmed by any mismanagement of funds in which they did not invest by their own choice, they had not suffered any cognizable injury-in-fact that would have conferred Article III standing as to those claims. For that reason, the Court dismissed Plaintiffs’ allegations related to the Plan’s offering of the Neuberger Berman and Morgan Stanley funds. For these reasons, the Court denied Defendants’ Rule 12(b)(6) motion to dismiss in its entirety as to Counts I, II, and III because Plaintiffs’ allegations were sufficient to state a claim for each count. In Re Prime Healthcare ERISA Litigation, 2021 U.S. Dist. LEXIS 138132 (C.D. Cal. July 16, 2021) . Plaintiffs, a group of current and former participants in the Prime Healthcare Services, Inc. 401(k) Plan (the "Plan"), filed a class action against Defendants Prime Healthcare Services, Inc. ("Prime Healthcare") and the Administrative Committee of the Prime Healthcare Services, Inc. 401(k) Plan ("Administrative Committee"), for breach of their fiduciary duties under the ERISA. Id . at *1. Plaintiffs alleged that Defendants breached their fiduciary duty to manage and monitor the Plan by: (i) maintaining consistently underperforming investment options; (ii) charging excessive recordkeeping costs; and (iii) charging excessive management fees. Id . at *2. Defendant filed a motion to dismiss, which the Court granted in part and denied in part. Defendants argued that Plaintiffs failed to adequately plead their claims. Plaintiffs contended that Defendants breached their fiduciary duty of prudence by