Trader Joe\u2019s successfully beat back a class action lawsuit and it confirms what I have been saying over the abundance of 401(k) excessive fee cases in federal courts. <\/p>\n\n\n\n
Trader Joe\u2019s was a prime target of ERISA litigators has it has over $1 billion in plan assets and over 40,000 participants. The problem with this case, as with many other recent cases were the pleadings.<\/p>\n\n\n\n
The judge in this California federal court case was that merely theorizing that Trader Joe\u2019s had high recordkeeping fees wasn\u2019t enough. \u201cIt is Plaintiffs\u2019 obligation to plead facts that create more than a \u2018sheer possibility that [the Plan fiduciaries] ha[ve] acted unlawfully\u2019 to make a plausible claim for relief and to survive a motion to dismiss.\u201d Judge Percy Anderson wrote, He also noted that the \u201cPlaintiffs\u2019 guess that the Plan pays $140 per participant for recordkeeping fees has \u2018no factual basis,\u2019 and Plaintiffs admit they do not actually know how much the recordkeeping fees are.\u201d<\/p>\n\n\n\n
As for Trader Joe\u2019s not benchmarking recordkeeping fees by bidding the plan out, the Judge noted that ERISA doesn\u2019t require periodic competitive bidding. Judge Anderson noted that \u201c\u2026.Plaintiffs do not allege any facts suggesting a competitive bid would have benefitted the Plan or the Plan participants,\u201d as Plaintiffs \u201cdo not allege any facts from which one could infer that the same services were available for less on the market.\u201d<\/p>\n\n\n\n
As for not using cheaper institutional share classes, the Judge issued another smackdown, the Judge ruled that merely alleging that a plan offered retail rather than institutional share classes is insufficient to carry a claim for fiduciary breach. He also ruled that the Plaintiffs alleged no specific facts to suggest Trader Joe\u2019s breached its fiduciary duty of prudence by allegedly failing to offer institutional class shares as opposed to investor class shares.<\/p>\n\n\n\n
In a nutshell, citing that a plan is expensive in a civil complaint isn\u2019t going to be enough for a Federal court these days. Plaintiffs are going to have show that excessive fees were an actual breach of fiduciary duty and be more concrete in facts as it pertains to recordkeeping and investment fees. Like Clara Peller said about hamburgers in a Wendy\u2019s ad, ERISA litigators are going to have to show the beef.<\/p>\n
<\/span><\/p>","protected":false},"excerpt":{"rendered":" Trader Joe\u2019s successfully beat back a class action lawsuit and it confirms what I have been saying over the abundance of 401(k) excessive fee cases in federal courts. Trader Joe\u2019s was a prime target of ERISA litigators has it has … Continue reading