The U.S. District Court for the Middle District of Florida has issued a ruling against the defense’s dismissal motion in an Employee Retirement Income Security Act (ERISA) lawsuit filed against TriNet HR.
Similar to a host of other lawsuits that have been filed against large employers and plan sponsors across the U.S., at a high level, the plaintiffs allege that the defendants failed to objectively and adequately review their defined contribution (DC) retirement plan’s investment portfolios with due care to ensure that each investment option was prudent, in terms of cost. They also allege that the plan’s fiduciaries inappropriately maintained certain funds in the plans despite the availability of identical or materially similar investment options with lower costs and/or better performance histories.
The plaintiffs in this case are represented by a law firm known as Capozzi Adler, which has gained a reputation in the retirement plan services space as a serial filer of similar proposed class action lawsuits. Using language repeated verbatim in many other Capozzi Adler lawsuits, the complaint against TriHealth states that one indication of the defendants’ alleged failure to prudently monitor the plan’s funds is that the plan has retained several actively managed funds despite the fact that these funds charged “grossly excessive fees compared with comparable or superior alternatives.”
The lawsuit, like the others, also suggests that TriNet has failed to use the lowest-cost share classes available to the plan. In addition to their allegations regarding the selected investments’ costs and performance, the plaintiffs also allege that defendants failed to monitor or control the plan’s recordkeeping expenses.
One distinguishing factor in this case is that the plan being challenged is a multiple employer plan (MEP).
In considering the defense’s dismissal motion, the District Court engages in a substantial discussion regarding the fiduciaries’ duties prescribed by ERISA, as well as the various precedents that have been set in such matters in the relevant federal court circuit and by the U.S. Supreme Court—particularly those that speak to motions to dismiss pursuant to the Federal Rule of Civil Procedure 12(b)(6). Much of this discussion is centered on the idea that the act of approving or denying dismissal at this stage in the legal proceedings has relatively little bearing on the court’s view of the potential ultimate outcome in the case.
“The defendants have not pointed this court to any breach-of-fiduciary-duty ERISA case in which a matter was terminated on a motion to dismiss based only upon the record developed in administrative proceedings,” the ruling states. “The cases that advocate for a deferential standard in such breach-of-fiduciary-duty cases were decided on a later procedural posture.”
Important to the ruling against the motion to dismiss, the court declines to take judicial notice of nearly 1,000 pages of submitted documents. It explains its rational as follows: “Courts may take judicial notice of documents when the facts therein are not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned. Here, many of the documents submitted by the defendants are precisely the sort of evidence that might be submitted at summary judgment or at trial and subject to the typical rules for admission. For example, the defendants submit letters of engagement with third parties, presentations on the recordkeeper [request for proposals] process, agreements and service fee schedules with the plans’ recordkeepers, and performance information on various investment funds, all in an effort to undercut the plaintiffs’ factual allegations.”
Ultimately, the ruling concludes that the only question before the court is whether the plaintiffs have pleaded sufficient facts, taken as true, that meet the requisite pleading standard.
“The plaintiffs have met that burden here,” the ruling states. “Other courts have found similar factual allegations sufficient to allege ERISA breach of fiduciary duties claims.”
The full text of the ruling is available here.