Vail Resorts Wins Dismissal of ERISA Fiduciary Breach Lawsuit

The Vail Corp. has skied past a fiduciary breach lawsuit, which was dismissed with prejudice in a detailed ruling.

A new ruling out of the U.S. District Court for the District of Colorado grants the dismissal motion filed by the defense in an Employee Retirement Income Security Act (ERISA) lawsuit known as Kurtz v. Vail Corp.

The underlying lawsuit accuses the Vail Corp. of permitting excessive fees in the Vail Resorts 401(k) Retirement Plan. According to the complaint, for at least 18 of the 27 mutual fund share classes available within the plan, the same issuer offered a different share class from that selected by the plan that charged lower fees, and consistently achieved higher returns. The plaintiff says the plan “inexplicably failed to select these lower fee-charging and better-return producing share classes.”

The complaint also alleges that the administrative fees charged to Vail plan participants are greater than more than 90% of its comparator fees when calculated on a cost-per-participant basis, or as a percent of total assets, without the provider delivering commensurate value. Finally, the complaint suggests the defense imprudently failed to provide a sufficient number of passively managed investment options.

In ruling against these allegations and granting Vail’s dismissal motion, the District Court echoes some of the same points made in the recent dismissal ruling filed in favor of Salesforce. Central to the dismissal is the consideration of several issues of standing.

As the text of the Vail ruling recounts, the defendants argue that the lead plaintiff only invested in five of the many plan options that she challenges. As a result, the defendants contend, the lead plaintiff has no standing to challenge the remaining options, because she has not alleged a “concrete and particularized” injury in fact. In response, the ruling recounts, the plaintiff asserts that she does not bring independent claims for each of the challenged funds, but instead brings a single claim for mismanagement of the entire plan.

“There is no 10th Circuit authority on point for this issue,” the judge states. “After my own review of the case, I conclude that this case is more similar to ones in which courts have found standing to exist even without plaintiff investing in each individual option. … I conclude that plaintiff has both statutory and constitutional standing to bring this suit against the defendant for alleged breach of fiduciary duties under ERISA. However, because I find below that her claim fails under Rule 12(b)(6), this issue is ultimately irrelevant.”

Turning to the standing issues under the Federal Rule of Civil Procedure 12(b)(6), the ruling recalls that the defense argues that the lead plaintiff fails to allege facts sufficient to constitute a breach of fiduciary duties under ERISA.

“A plaintiff must show that a more prudent plan management process would have avoided the alleged harm, which necessarily requires a plausible allegation explaining how no reasonable fiduciary could conclude that removing such investments would not be likely to do more harm than good to the plan and its participants,” the ruling states. “In essence, this requires alleging facts that plausibly establish that no reasonable fiduciary would have retained a set of investments had the fiduciary engaged in proper monitoring, and that abandoning the investments could have presented the plan’s losses. It is not sufficient to simply allege that an investment did poorly, and, therefore, a plaintiff was harmed—relative underperformance is insufficient to state a claim.”

The ruling goes on to state that much of plaintiff’s complaint is taken up by statements explaining what ERISA requires, or providing generic background about performance of different types of investment funds.

“The deceptively long complaint can thus be boiled down to a few factual allegations,” the ruling states. “The defendant’s motion asserts that plaintiff has failed to plead sufficient facts to surpass the 12(b)(6) standard. I agree. While certainly specific, plaintiff’s allegations are insufficient to support a claim for breach of fiduciary duty. Nowhere in the complaint does plaintiff allege anything imprudent about defendant’s process. In fact, it does not address at all Vail’s process for selecting or retaining fund options, monitoring expenses, or managing the overall plan. Nor does it provide any factual allegations regarding whether the defendant employed the appropriate methods to investigate and determine the merits of any investments.”

The suit was dismissed with prejudice, which means it can’t be brought back to court.

The full text of the dismissal ruling is available here.