Recently, the United States District Court for the Eastern District of Wisconsin granted a Motion to Dismiss, dismissing ERISA breach of fiduciary duty claims, failure to monitor claims, and prohibited transaction claims in a putative class action involving Oshkosh Corporation’s 401(k) Plan. The plaintiff supported those claims with allegations of excessive recordkeeping fees, excessive share class fees, imprudent high-cost fund options, failure to fully disclose plan fees, and excessive provider fees. The district court relied heavily on Seventh Circuit precedent to dismiss the complaint, with prejudice, holding that it was not possible to plausibly infer violations of ERISA’s duties, under Federal Rule of Civil Procedure 12(b)(6).

Plaintiff alleged that, between 2014 and 2018, the Plan on average paid $87 per participant in recordkeeping fees which reflected a lack of prudence and poor management of the Plan. Throughout Plaintiff’s complaint, he compared the Plan’s average annual recordkeeping fee and other investment and service fees to plans for which Plaintiff alleged were of similar size and with similar amounts of money under management. Specifically, Plaintiff alleged Defendants should have paid around $40 per participant in recordkeeping fees. The Court dismissed the recordkeeping fee claim because “Plaintiff fail[ed] to state why the fee is unreasonable.” Moreover, the Court stated, “[t]he mere existence of purportedly lower fees paid by other plans says nothing about the reasonableness of the Plan’s fee, and it does not make it plausible that another recordkeeper would have offered to provide the Plan with services at a lower cost.”

Plaintiff further alleged that Defendants breached their fiduciary duties when they did not retain the share class for each fund that gives plan participants access to portfolio managers at the “lowest net fee.” Although the court acknowledged that the “net investment expense” theory is a “novel concept,” the court reasoned that Plaintiff’s claims were tantamount to an argument that Defendants were imprudent simply because they did not retain the least costly share class, a claim which the Seventh Circuit had previously rejected in another case.

Next, Plaintiff alleged that Defendants breached their fiduciary duties by retaining higher-cost actively managed investments over the less-expensive passively managed investments. Again relying on Seventh Circuit precedent, the court dismissed the claim when Plaintiff conceded he had no knowledge of Defendants’ investment selection and monitoring process and thus the court was not required to accept “unsupported conclusory factual allegations,” especially in light of the precedent that “plans may generally offer a wide range of investment options and fees without breaching any fiduciary duty.”

The Court quickly shot down Plaintiff’s claims that Defendants failed to fully disclose fees charged or credited to the Plan investments because Seventh Circuit precedent does not require a plan fiduciary to disclose information about revenue-sharing arrangements.

In addition, Plaintiff claimed that the fees paid by the Plan to its service provider were excessive and unreasonable in relation to the services provided and that Defendants did not solicit competitive bids from other service providers. The court dismissed the claim, holding that the existence of a lower-cost alternative service provider “says nothing” about Defendants’ prudence and does not make it plausible that another service provider would offer the same service at a lower cost.

The failure to monitor claims were summarily dismissed as derivative and dependent upon Plaintiff’s breach of fiduciary duty claims, which had already been dismissed. The court also dismissed Plaintiff’s prohibited transaction claims as “circular” and cited other district courts that dismissed similar claims.

The case is Albert v. Oshkosh Corporation, No. 1:20-cv-00901-WCG (E.D. Wis. Sep. 2, 2021).

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