In Krutchen v. Ricoh USA, No. 22-cv-678, 2022 U.S. Dist. LEXIS 206792 (E.D. Pa. Nov. 15, 2022), a Pennsylvania district court dismissed an ERISA excessive fee complaint for failing to provide enough information about alleged comparator plans that allegedly paid less for recordkeeping services. The decision is notable for delivering defendants a victory in the Third Circuit, which previously allowed excessive recordkeeping claims to survive dismissal in Sweda v. U. Pennsylvania (we discussed here), and for citing favorably to recent defendant-friendly opinions from the Sixth, Seventh, and Eighth Circuits.

Background

The plaintiffs in Krutchen are former employees of the plan sponsor defendant who participated in its 401(k) plan. The plaintiffs brought claims for breach of the fiduciary duty of prudence and failure to monitor in connection with their allegation that the plan paid excessive recordkeeping fees. In support of their claims, the plaintiffs compared the plan’s expenses to twelve other plans’ recordkeeping expenses, cited a survey of nationwide recordkeeping expenses, and cited case law addressing recordkeeping expenses of other plans.

The District Court’s Decision

The court dismissed plaintiffs’ claims in their entirety but permitted plaintiffs to refile their complaint. In its ruling, the court explained that fiduciaries may select diverse services from bundled offerings or additional a la carte services, as the plan did here. The court recognized that price tag to price tag comparisons without sufficient detail about the services actually being performed are too generalized and speculative to support a plausible inference that defendants breached their fiduciary duties by overpaying for services.

The court faulted plaintiffs for failing to include information regarding the specific services used by the plan, the comparator plans, and the plans reviewed in cited case law. The plaintiffs listed services that all national recordkeepers have the capability to provide and merely alleged that the plan’s selected services “fell within the broad range” of those available. The court found that this did not provide enough information to know whether the fee comparisons were valid or if they were “apples to oranges” comparisons. The court distinguished Sweda, where plaintiffs used “specific comparisons” showing that the “practices of similarly situated fiduciaries” differed from those of the allegedly imprudent plan. The court also found support for its analysis from out-of-circuit decisions in Albert v. Oshkosh Corp., 47 F.4th 570 (7th Cir. 2022) (discussed here); Smith v. CommonSpirit Health, 37 F.4th 1160 (6th Cir. 2022) (discussed here); and Matousek v. MidAmerican Energy Co., 51 F.4th 274 (8th Cir. 2022) (discussed here). Finally, because the duty to monitor claim was derivative of the breach of duty of prudence claim, it was also dismissed.

Proskauer’s Perspective

The decision is a positive development for plan sponsors because it shows that district courts outside of the Sixth, Seventh, and Eighth Circuits seem to be taking to requirements for alleging factual information sufficient to support the validity of comparisons between different plans. Notably, this is the second district court ruling in the Third Circuit in 2022 dismissing recordkeeping claims despite Sweda.

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Photo of Myron Rumeld Myron Rumeld

Myron D. Rumeld has over thirty-five years of experience handling all aspects of ERISA litigation at both the trial and appellate level. His broad experience includes numerous representations of 401(k) plan fiduciaries defending class action employer stock and excessive fee claims, and representations…

Myron D. Rumeld has over thirty-five years of experience handling all aspects of ERISA litigation at both the trial and appellate level. His broad experience includes numerous representations of 401(k) plan fiduciaries defending class action employer stock and excessive fee claims, and representations of large multiemployer pension and health fund trustees in the defense of a large assortment of fiduciary breach lawsuits. He has defended class action suits against Charles Schwab, Barnabas Health, Inc., Neuberger Berman, and the American Federation of Musicians Pension Fund, among many other clients; and he has tried cases for The Renco Group and Foot Locker, Inc., among others.

Chambers USA cites Myron as a “brilliant” and “sensational litigator,” who is “sharp, articulate, clever, and deeply committed to the work he does.” Similarly, The Legal 500 United States has called Myron an “outstanding ERISA lawyer.”

Myron is presently co-chair of Proskauer’s ERISA Litigation Group.  He previously served as co-chair of Proskauer’s nationally renowned Employee Benefits & Executive Compensation Group. He also served as the past co-chairman of the Board of Editors for the American Bar Association publication, Employee Benefits Law (BBNA).

Photo of Tulio Chirinos Tulio Chirinos

Tulio D. Chirinos is an associate in the Labor & Employment Law Department and a member of the Employee Benefits & Executive Compensation Group and the Workplace Investigations Practice Group.

Tulio works on a wide variety of ERISA and non-ERISA plan litigation matters…

Tulio D. Chirinos is an associate in the Labor & Employment Law Department and a member of the Employee Benefits & Executive Compensation Group and the Workplace Investigations Practice Group.

Tulio works on a wide variety of ERISA and non-ERISA plan litigation matters, including fee and investment litigation cases, breach of fiduciary duty claims and benefits claims. He also represents management in workplace investigations and litigation of employment-related matters, including claims of unlawful discrimination, harassment and retaliation. Tulio focuses his pro bono efforts on immigration matters where he has represented several juveniles from Central America in their asylum petitions and special immigrant juvenile status (SIJ) petitions.

Tulio is the author of several ERISA-related articles, including several focusing on ERISA fee and investment litigation that appeared in the Benefits Law Journal (2016-2023), Bloomberg BNA, and Law360. He is a contributing author to Chapter 10 (Fiduciary Responsibility) of BNA’s Employee Benefits Law treatise. He is also the co-editor and a frequent contributor to Proskauer’s Employee Benefits & Executive Compensation Blog.

Prior to joining Proskauer, Tulio clerked for the Federal Public Defender’s office for the Middle District of Florida. Tulio is a retired Lieutenant Colonel in the Army National Guard and served three tours of duty in Iraq, Kuwait, and Jordan.

Photo of Daniel Wesson Daniel Wesson

Daniel Wesson is an associate in the Labor Department and a member of the ERISA Litigation Group.