18th Annual Workplace Class Action Report - 2022 Edition

Annual Workplace Class Action Litigation Report: 2022 Edition 335 offering Fidelity’s Active suite, which primarily consisted of actively-managed mutual funds, instead of the Index suite, which were made up of passively-managed funds that only tracked market indices. Id . at *11. Plaintiffs asserted that the Active suite funds were less lucrative over their respective lifetimes and had a significantly higher expense ratio than the Index suite, despite consistently underperforming the Index suite. Id . Despite the Active suite’s underperformance, Defendants maintained the Active suite as its default investment option. The Court held that reading the allegations in the light most favorable to Plaintiffs, their allegations were sufficient to plausibly allege that Defendants failed to act “with the care, skill, prudence and diligence” that a prudent person “acting in a like capacity and familiar with such matters” would use. Id . at *12. The Court noted that Plaintiffs further alleged that Defendants breached their fiduciary duties under the ERISA by failing to monitor the performance and processes of their co-fiduciaries. Id . at *18. Defendants argued that the claim must fail because: (i) it was derivative of their first claim for breach of fiduciary duty, which Plaintiffs failed to adequately plead; and (ii) Plaintiffs alleged no facts as to how the monitoring process was allegedly deficient. Id . at *23. The Court determined that Plaintiffs’ allegations were sufficient to plausibly allege a claim for failure to monitor. Id . Finally, Plaintiffs alleged that Defendants were liable for participating "in a knowing breach of trust." Id . As to this claim, the Court ruled that Plaintiffs failed to allege that the damages sought could be traced to "particular funds or property in the defendant’s possession." Id . at *23-24. For these reasons, the Court granted in part and denied in part Defendants’ motion to dismiss. In Re Quest Diagnostics Inc. ERISA Litigation, 2021 U.S. Dist. LEXIS 85722 (D.N.J. May 4, 2021). Plaintiffs, a group of fare "participants and beneficiaries" in Quest Diagnostics Inc.’s Profit Sharing Plan (the "Plan"), filed a class action alleging that Defendants breached their fiduciary duties by mismanaging the Plan. Defendants filed a motion to dismiss pursuant to Rule 12(b)(1) and Rule 12(b)(6), which the Court denied. As a threshold matter, the Court determined that Plaintiffs had standing to bring their claims, and therefore it denied the motion pursuant to Rule 12(b)(1). As for failure to state a claim, the Court held that Plaintiffs sufficiently asserted claims for breach of fiduciary duty. For the breach of fiduciary duty claim, Plaintiffs alleged that Defendants overpaid management fees, the Plan failed to use its size and presumed negotiating power to reduce costs, and Defendant Fidelity was incentivized to promote its own high-fee investment products. The Court ruled that based on the allegations in the complaint and the cost comparisons to other products, Plaintiffs’ allegations were sufficient to survive a motion to dismiss. Plaintiffs also brought a claim for failure to monitor, and alleged that Defendants failed to "monitor," "evaluate," and "remove" appointees, which allowed the Plan to "suffer enormous losses as a result" of those "imprudent actions." Id . at *13. Plaintiffs further alleged that Defendants failed to monitor the Plan’s investments by "offering and maintaining" the Active suite, although the Index suite outperformed it. Id . The Court opined that Plaintiffs’ allegations were sufficient to raise an inference that Defendants‘ action may have implicated a duty to monitor. Finally, the Court found that Plaintiffs’ claim for breach of trust was adequate, as they alleged Defendants "possessed the requisite knowledge and information to avoid the fiduciary breaches at issue" and knowingly "permitted the Plan to offer" a poor Investment Menu." Id . Hence, the Court ruled that Plaintiffs stated a claim for breach of trust. For these reasons, the Court denied Defendants’ motion in its entirety. Jones, et al. v. Coca-Cola Consolidated, 2021 U.S. Dist. LEXIS 62003 (W.D.N.C. March 31, 2021). Plaintiffs, a group of participants in Defendants’ 401(k) plan, filed a class action alleging breach of fiduciary duty, failure to monitor fiduciaries and a co-fiduciary, and liability for knowing breach of trust in violation of the ERISA. Defendants filed a motion to dismiss pursuant to Rule 12(b)(6), which the Court denied. Defendants asserted that Plaintiffs lacked standing because they failed to allege an injury-in-fact. The Court disagreed. It noted that Plaintiffs specifically alleged injury to their individual 401(k) accounts in the form of excessive recordkeeping and administrative costs as well as an expensive overall investment menu endured by each Plan participant. Id . at *9. As to Plaintiffs’ breach of fiduciary claim, Plaintiffs alleged Defendants breached their fiduciary duties by: (i) maintaining an investment with imprudent costs; (ii) maintaining imprudent recordkeeping and administrative fees; and (iii) offering imprudent funds. The Court held that Plaintiff sufficiently alleged that Defendants failed to utilize cheaper investment options when possible, even though the underlying investments were identical. Accordingly, the Court denied Defendants’ motion to dismiss the breach of fiduciary duty claim. As to the failure to monitor claim, Plaintiffs alleged that Defendant Coca-Cola failed to adequately monitor the Administrative Committee. Id . at *12. Defendants contended that a failure-to-monitor claim was not an independent ground for relief and depended upon an underlying breach of fiduciary duty claim. The Court rejected this argument, as it