ERISA Fees Complaint Dismissed in Pennsylvania District Court, Favorable Trend Continues – Employee Benefits and Compensation

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in the Krutchen vs. Ricoh USA, No. 22-cv-678, 2022 US Dist. LEXIS 206792 (ED Pa. Nov. 15, 2022), a Pennsylvania district court, dismissed an ERISA overcharging claim for failing to provide sufficient information about alleged settlement plans that allegedly paid less for recording services. The decision is notable because it gave the defendants a victory in the Third Circuit that previously allowed record-breaking claims to survive the dismissal Sweda vs. U. Pennsylvania(we discussed here) and for citing positively recent pro-defendant opinions from the sixth, seventh, and eighth districts.

background

The plaintiffs a crumbs are former employees of the defendant plan sponsor who participated in its 401(k) plan. The plaintiffs brought claims of breach of fiduciary duty of care and lack of supervision related to their allegation that the plan paid excessive recording fees. In support of their claims, the plaintiffs compared the cost of the plan to the cost of recording of twelve other plans, cited a survey of statewide cost of record and cited case law on the cost of record of other plans.

The District Court’s decision

The court dismissed the plaintiffs’ claims in their entirety, but allowed the plaintiffs to reinstate their claims. In its decision, the court stated that trustees, as provided here, can select various services from bundle offers or additional à la carte services. The court recognized that price tag-to-price tag comparisons without sufficient information about the services actually rendered are too general and speculative to support a plausible conclusion that the defendants breached their fiduciary duties by overpaying for services to have.

The court accused the plaintiffs of failing to include information about the specific services used by the plan, the settlement plans and the plans reviewed in the cited case law. The plaintiffs listed services that all national data administrators can provide, claiming only that the plan’s selected services fell “in the broad spectrum” of those available. The court found that this did not provide enough information to determine whether the fee comparisons were valid or whether they were apples-and-oranges comparisons. The court differed
Swede, where the plaintiffs used “specific comparisons” showing that the “practices of similarly situated trustees” differed from those of the allegedly imprudent plan. The court also found support for its analysis through out-of-circuit rulings in Albert v. Oshkosh Corp.47 F.4th 570 (7 Cir. 2022) (discussed here); Smith vs. CommonSpirit Health, 37 F.4th 1160 (6. Cir. 2022) (discussed here); and Matousek v MidAmerican Energy Co., 51 F.4th 274 (8th Cir. 2022) (discussed here). Finally, the demand to monitor the duty, which was derived from the claim for breach of the duty of care, was dismissed.

Proskauer’s perspective

The decision is a positive development for plan sponsors because it shows that district courts outside of the sixth, seventh and eighth districts appear to meet requirements for asserting factual information sufficient to support the validity of comparisons between different plans. Specifically, this is the second ruling by the Third Circuit District Court in 2022 to nonetheless dismiss records retention claims Swede.

ERISA Fees Complaint Dismissed by Pennsylvania District Court, Positive Trend Continues

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