A plaintiffs' class action law firm in St. Louis made national headlines last August when it filed a series of breach of fiduciary duty lawsuits under ERISA, the federal employee benefits law, against the fiduciaries of "jumbo" 401(k) and 403(b) retirement plans maintained by large universities. The lawsuits allege, among other things, that the university fiduciaries have breached their fiduciary duties under ERISA by allowing excessive investment management and recordkeeping fees to be charged to participant 401(k) and 403(b) accounts, and by offering underperforming investment options in the plans.

On Wednesday, the U.S. District Court for the Northern District of Georgia issued the highly anticipated first ruling in the university breach of fiduciary duty cases. In Henderson v. Emory University, the court ruled that, for most of the claims asserted, the plaintiffs had properly stated a claim that survives the defendants' motion to dismiss. In doing so, the court assumed that all facts alleged by the plaintiffs were true, and construed those facts in the light most favorable to the plaintiffs. The case will now proceed to discovery and, potentially, trial.

Among other things in the 26-page opinion, the court noted that:

• The plaintiffs alleged that Emory's 403(b) plan offered more than 100 mutual funds with higher costs than identical mutual funds that could have been offered by the plan, which was sufficient for plaintiffs to state a claim that choosing retail share classes over institutional share classes was imprudent.

• The plaintiffs alleged that the fiduciaries did not negotiate with the plan record keeper to replace certain underperforming funds that were included in the record keeper's platform, which was sufficient for plaintiffs to state a claim that the fiduciary's process for choosing fund options was flawed.

• The fiduciaries can be held accountable for failing to monitor revenue-sharing fees charged by the plan record keeper.

• The plaintiffs' allegation that the use of multiple record keepers was inefficient and costly was sufficient to state a claim for relief for a breach of fiduciary duty based on excessive fees.

• The plaintiffs' allegation that the lack of competitive bidding caused the plan to pay fees far in excess of what was reasonable was sufficient to state a claim for relief.

Interestingly, the court granted the defendant fiduciaries' motion to dismiss the claim that it was imprudent for the plan to offer 111 investment options. The court disagreed with the plaintiffs and explained that having too many investment options does not hurt participants, but rather provides them with additional opportunities to choose investments they prefer.

Universities and other 401(k) and 403(b) retirement plans sponsors around the country have been carefully monitoring these cases to see how courts will handle the asserted claims for breach of fiduciary duty. With the first case surviving a motion to dismiss, employers and plan fiduciaries should carefully assess their fiduciary processes.