ERISA Litigation Update

Key Takeaway: The Eighth Circuit affirmed a district court’s dismissal, holding that the plaintiffs did not cite meaningful benchmarks to support their claim that the at-issue plan paid excessive fees.

On August 29, 2024, the Eighth Circuit affirmed a Western District of Missouri decision dismissing claims regarding the O’Reilly Automotive 401(k) plan. The complaint alleged that the plan’s fiduciaries breached their duties of prudence by causing the plan to pay excessive recordkeeping and investment fees. The U.S. District Court for the Western District of Missouri granted the defendants’ motion to dismiss in May 2023. The plaintiffs appealed.

On appeal, the Eighth Circuit affirmed dismissal of the plaintiffs’ claims. To support their allegations that the plan’s recordkeeping fees were excessive, the plaintiffs cited Form 5500s for allegedly similar plans, dividing the total costs in those forms by the number of participants in the other plans to attempt to show that the per-participant fees the O’Reilly Automotive plan charged were substantially higher than the fees the purported comparator plans charged. The Eighth Circuit found this was not an adequate comparison because the service codes listed in the Form 5500s also showed that the purported comparator plans paid for different services than the at-issue plan did. The Eighth Circuit also held that plaintiffs failed to plausibly allege that the plan’s total costs, including recordkeeping and investment fees, were excessive. The plaintiff compared the plan’s total costs to average total costs of other plans in data compiled by the Investment Company Institute. The court held that these data did not compose a meaningful benchmark for the O’Reilly Automotive 401(k) plan absent information regarding what plans’ data were included in the Investment Company Institute study.

The case is Barrett v. O’Reilly Automotive, Inc., No. 23-2501, in the Eighth Circuit Court of Appeals and is available here.

Key Takeaway: The Eleventh Circuit affirmed a district court’s grant of summary judgment to defendants on the grounds that the plaintiffs failed to meet their burden to demonstrate that the alleged fiduciary breaches caused losses.

On August 2, 2024, the Eleventh Circuit Court of Appeals affirmed a grant of summary judgment in a case regarding Home Depot’s 401(k) plan. The complaint alleged that the plan’s fiduciaries breached the Employee Retirement Income Security Act’s (ERISA’s) duty of prudence by offering managed account services with excessive professional management fees and offering underperforming investments in the plan. The U.S. District Court for the Northern District of Georgia granted the defendants’ motion for summary judgment in September 2022. The plaintiffs appealed.

On appeal, the Eleventh Circuit affirmed the grant of summary judgment for the defendants. It first addressed the question of which party bears the burden to prove loss causation in an ERISA fiduciary breach case and held that the plaintiffs bear it. The Eleventh Circuit then assessed whether the plaintiffs had met their burden and agreed with the district court that they had not. With respect to the plan’s managed account fees, the court held that the plaintiffs’ attempt to show that other account providers allegedly charged lower fees was not enough to prove loss causation. Further, the court noted that the defendants showed that the managed account provider the plan used was the most popular service provider for similar plans, offered unique and preexisting integration with the plan’s recordkeeper, and charged fees that were lower than that of most comparable plans—all of which showed that its fees were objectively prudent. With respect to the challenged investments, the court held that several years of below-median returns based on three- or five-year snapshots were not a meaningful way to evaluate the success of long-term investment vehicles and therefore could not establish loss causation or objective imprudence. The court further noted that certain funds offered in the plan were frequently offered in comparable plans and performed well relative to their specific or custom benchmarks, which were evidence of objective prudence.

The appeal was captioned Pizarro et al. v. Home Depot, Inc., No. 22-13643, in the Eleventh Circuit Court of Appeals. The decision is available here.

Key Takeaway: The Third Circuit reversed a district court’s dismissal of claims concerning allegedly excessive recordkeeping fees.

On July 24, 2024, the Third Circuit Court of Appeals issued an opinion and order reversing the dismissal of a case regarding Ricoh USA, Inc.’s 401(k) plan. The complaint alleged that the plan’s fiduciaries breached their duties of prudence by failing to ensure that the plan paid reasonable recordkeeping fees. The defendants moved to dismiss the plaintiffs’ claims, and in November 2022, the U.S. District Court for the Eastern District of Pennsylvania granted their motion and dismissed the case with prejudice. The plaintiffs appealed.

On appeal, the Third Circuit reversed the dismissal of the plaintiffs’ claims. The Third Circuit reasoned that the plaintiffs plausibly alleged that the defendants had failed to prudently manage the Ricoh USA plan through their allegations that the plan’s annual recordkeeping fees were excessive compared to those charged to a dozen purported comparator plans. Specifically, the court found that the comparator plans—which were alleged to have similar numbers of participants as the Ricoh USA plan and to have also been kept by a leading recordkeeper—constituted the requisite meaningful benchmark to plausibly allege that the plan’s fees were excessive. Moreover, the court credited the complaint’s allegations that the recordkeeping services market is commodified, rejecting the defendants’ argument that the complaint failed to plausibly allege that the comparator plans received a similar level and quality of services as the Ricoh USA plan.

The appeal was captioned Kruchten v. Ricoh USA, Inc. No. 23-1928, in the Third Circuit Court of Appeals. The decision is available here. As a result of the Third Circuit’s reversal, the case has been remanded back to the U.S. District Court for the Eastern District of Pennsylvania, No. 22-678.

Key Takeaway: The defendants prevailed on all claims following a trial, with the court ruling that their processes to monitor investments and fees were prudent.

On August 22, 2024, the U.S. District Court for the Central District of California entered judgment on all counts for Prime Healthcare Services, Inc. and the committee responsible for their 401(k) plan after an approximately one-week trial. The complaint broadly alleged that the plan’s fiduciaries breached ERISA’s duties of prudence in connection with their monitoring of the plan’s investments and recordkeeping fees. The plaintiffs argued that the fiduciaries had not prudently monitored the plan’s investments for several reasons, including that the fiduciaries did not adequately document their monitoring, deferred too much to the plan’s independent consultant, and failed to monitor specific investments. Regarding the plan’s recordkeeping fees, the plaintiffs argued that the fiduciaries should have conducted a request for proposal, among other things.

The district court found in favor of the defendants on all counts. The district court found that the plan’s fiduciaries prudently monitored the plan’s investments: the fiduciaries met regularly, were assisted by a qualified third-party investment consultant, reviewed adequate information about the investments, and actively engaged with that information. Although the plaintiffs claimed that the process the fiduciaries followed was imprudent in several respects, the district court rejected these claims as inconsistent with the evidence. The district court also found that the fiduciaries prudently monitored the plan’s recordkeeping fees through regular requests for information and vendor-fee benchmarking, rejecting the plaintiffs’ theory that a request for proposal was required.

The case is In re Prime Healthcare ERISA Litigation, No. 20-1529, in the Central District of California and is available here.

Speaking Engagement: Women, Influence & Power in Law 2024 (September 23 – 25, 2024)

Christina Hennecken, Goodwin partner, spoke at Women, Influence & Power in Law 2024 on the panel “The Regulators are Coming: Gearing Up to Respond to the Next Wave of Enforcement” about emerging trends and best practices for mitigating risks and responding to enforcement actions in the evolving regulatory landscape.

Goodwin’s ERISA Litigation practice was recognized by The Best Lawyers in America 2025. Congratulations to Jamie Fleckner, John Cleary, Natascha George, Patrick Menasco, Jaime Santos, Rachel Faye Smith, and Scott Webster on being recognized as Best Lawyers and to Regina Couto, Morgan Frisoli, Eric Graffeo, Bibek Pandey, Ben Reilly, Matt Riffee, Dave Rosenberg, and George Schneider as Ones to Watch.