18th Annual Workplace Class Action Report - 2022 Edition

336 Annual Workplace Class Action Litigation Report: 2022 Edition already had concluded that Plaintiffs stated a claim for breach of fiduciary duty. Defendants further argued that Plaintiffs had not alleged facts sufficient to make a threshold showing that the monitoring fiduciary failed to "review the performance of its appointees at reasonable intervals in such manner as may be reasonably expected to ensure compliance with the terms of the plan and statutory standards." Id . at *13. The Court disagreed, finding that Plaintiffs’ allegations asserted exactly that theory. The Court thus denied Defendants’ motion to dismiss the failure to monitor claim. Finally, as to the knowing breach of trust claim, Plaintiffs asserted that Defendants’ roles and relationships would place them in a position to know of malfeasance of the others. Id . at *14. The Court determined that Plaintiffs sufficiently stated a claim for a knowing breach of trust. For these reasons, the Court denied Defendants’ motion to dismiss. Khan, et al. v. PTC, Inc. , 2021 U.S. Dist. LEXIS 76605 (D. Mass. April 20, 2021). Plaintiffs, a group of participants in Defendant’s 401(k) defined-contribution plan (the "Plan"), filed a class action alleging breaches of fiduciary duty in violation of the ERISA. Defendant filed a motion to dismiss for lack of subject-matter jurisdiction and the Court denied the motion. Plaintiffs asserted that PTC, Inc., the Investment Committee, the Board of Directors, and John Does 1-30 (collectively, "PTC"), failed to act in their best interest because they: (i) failed "objectively and adequately to review the Plan’s investment portfolio with due care to ensure that each investment option was prudent, in terms of cost," and (ii) "maintained certain funds in the Plan despite the availability of identical or similar investment options with lower costs and/or better performance histories." Id . at *4. Defendants argued that Plaintiffs failed to establish Article III standing because they did not adequately plead injury and redressability stemming from the alleged mismanagement of the specific funds in which they invested. The Court disagreed. It found that Plaintiffs adequately pled that while acting in a fiduciary capacity, Defendants failed to investigate and select lower-cost alternative funds, failed to utilize lower-cost share classes, failed to utilize lower-cost passively managed and actively managed funds, and failed to monitor and control the Plan’s recordkeeping expenses. Id . at *9. Plaintiffs asserted that this led to millions of dollars of losses to the Plan. The Court determined that Plaintiffs’ allegations were sufficient to plead that participants in the Plan suffered an injury-in-fact to confer standing. Additionally, the Court ruled that Plaintiffs established redressability, since "to restore to the Plan all losses caused by" PTC’s alleged mismanagement, Plaintiffs brought the action on behalf of the defined-contribution Plan. Thus, the Court held that Plaintiffs’ allegations were sufficient to plead a redressable injury to the Plan. For these reasons, the Court denied Defendants’ motion to dismiss. Kurtz, et al. v. Vail Corp. , 2021 U.S. Dist. LEXIS 1715 (D. Colo. Jan. 6, 2021). Plaintiff, a former employee of Defendant, filed a class action asserting violations of the ERISA. Specifically, Plaintiff claimed that Defendant’s 401(k) Retirement Plan (“the Plan”) paid excessively high administrative fees for unsatisfactory investments and failed to offer Plan participants the option to join passively monitored, lower cost investment funds. The Plan offered participants share classes from 27 different investments, and Plaintiff’s claims focused on 15 of the funds that allegedly did not yield satisfactory returns while also charging higher fees than other comparable investment options that Defendant could have selected for its Plan. Id. at *5-6. Defendant filed a motion to dismiss on the grounds that: (i) Plaintiff lacked Article III standing with respect to the funds in which she did not invest; and (ii) Plaintiff failed to state a viable claim under the ERISA. Id. at *10. The Court granted Defendant’s motion to dismiss with prejudice. The Court rejected Defendant’s standing argument because “Plaintiff’s non- investment in certain funds is a class certification question, not a standing one.” Id. at *14. The Court also noted that other federal case law authorities had consistently struck down Defendant’s contention regarding plan participants who do not invest in every available investment option. With respect to Defendant’s argument under Rule 12(b)(6), the Court split its analysis between the duty of prudence and the duty of loyalty. The Court observed that to successfully assert a claim for breach of the duty of prudence, Plaintiff must offer claims concerning an entity’s investment selection process and how the entity could have avoided the alleged harm to plan participants. In this instance, however, the Court determined that Plaintiff’s complaint failed to provide any facts regarding Defendant’s process of “selecting or retaining fund options, monitoring expenses, or managing the overall Plan.” Id. at *26. The Court further held that “it is not sufficient to simply allege that an investment did poorly, and, therefore, Plaintiff was harmed,” as relative underperformance was “insufficient to state a claim.” Id . at *24. Additionally, in terms of the duty of loyalty, the Court found that Plaintiff failed to offer any facts suggesting that Defendant, in selecting its Plan investments, sought to primarily benefit itself over Plan participants. Therefore, the Court granted Defendant’s motion to dismiss with prejudice.