A federal district court judge in the Eastern District of Kentucky has enforced an ESOP’s arbitration clause, sending P.L. Marketing Inc. employees’ breach of fiduciary duty claims on behalf of a putative class to individual arbitration. The case is Merrow et al. v. Horizon Bank et al., No. 2:22-cv-123, 2023 WL 7003231, at *1 (E.D. Ky. Oct. 24, 2023).

Plaintiffs, participants in P.L. Marketing, Inc.’s ESOP, sued the plan’s trustee, Horizon Bank, alleging that Horizon violated ERISA’s fiduciary duties and prohibited transaction rules by causing the ESOP to overpay for company stock. The ESOP plan document included a mandatory arbitration clause as well as a waiver of class arbitration. Defendants moved to dismiss the complaint, arguing in part that the district court lacked jurisdiction to hear the claims because they fell within the scope of the ESOP’s arbitration clause.

A recent Ninth Circuit decision has generated considerable controversy amongst employee benefits practitioners by holding that plan fiduciaries engaged in prohibited transactions when they amended the plan’s existing recordkeeping contract to add brokerage and investment advisory services. In so ruling, the Court remanded the case to the district court to consider whether the transactions fell within the exemption for reasonable service agreements and, independently, whether it was imprudent for plan fiduciaries not to consider third-party compensation earned by the plan’s recordkeeper. The case is Bugielski v. AT&T Services, Inc., 76 F. 4th 894 (9th Cir. 2023).

Participants in AT&T’s 401(k) plan sued the plan administrator and the plan’s investment committee, alleging that defendants engaged in prohibited transactions and breached their duty of prudence by failing to investigate and evaluate all compensation earned by the plan’s longtime recordkeeper. The claims apparently were prompted by amendments to AT&T’s contract with its recordkeeper, which gave plan participants access to the recordkeeper’s brokerage account platform and to investment advisory services through a third-party advisor. Under these arrangements, the recordkeeper received revenue-sharing fees from the mutual funds available to participants via the brokerage account platform; and, through its own agreement with the investment advisor, the recordkeeper received a portion of the fees that the investment advisor earned from managing participant accounts.

Two District Courts have reached conflicting decisions on the same day when ruling on substantially similar allegations that plan fiduciaries violated ERISA by paying too much for recordkeeping services, with one court dismissing the claims and the other court allowing the claims to move forward into the (often expensive) discovery phase of litigation.  The cases

On remand from the U.S. Supreme Court, the Seventh Circuit issued its opinion in Hughes v. Northwestern University, concluding that participants in two Northwestern 403(b) plans plausibly pled fiduciary-breach claims based on allegations of excessive recordkeeping and investment management fees, but dismissed their claim that too many investment options caused them “decision paralysis.”  In

A district court in the Southern District of Ohio and one in the Western District of Wisconsin reached opposite conclusions on motions to dismiss claims for fiduciary breach based on allegations that recordkeeping fees were unreasonably high.  Dismissal was granted in Sigetich v. The Kroger Co., No. 21-cv-697, 2023 WL 2431667 (S.D. Oh. Mar.

In a striking reversal of approach beginning in the summer of 2022, the District Court for the Eastern District of Wisconsin went from denying, in whole or in part, virtually every motion to dismiss ERISA lawsuits targeting plan recordkeeping fees and investment fund selections to granting all of them.  This nearly 180 degree pivot comes

A district court in New York recently dismissed a putative class action challenging retirement plan recordkeeping and investment management fees.  The case is Singh v. Deloitte LLP, No. 21-cv-8458, 2023 WL 186679 (S.D.N.Y. Jan. 13, 2023).  The court’s decision adds to the growing number of Second Circuit district courts relying on out-of-circuit appellate decisions

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

In Matousek v. MidAmerican Energy Co., 2022 WL 6880771, __ F.4th __ (8th Cir. 2022), the Eighth Circuit joined the Sixth and Seventh Circuits in affirming dismissal of ERISA breach of fiduciary duty claims alleging that the plan fiduciaries allowed the plan to pay excessive recordkeeping and administrative fees and offered imprudent investment options.

Two recent district court decisions add to the growing number of courts granting motions to dismiss putative ERISA class actions challenging defined contribution plan fees and investment performance.  These decisions from the Eastern District of New York and the Eastern District of Wisconsin are the latest victories for defendants at the motion to dismiss stage