Key Takeaway: The defendant successfully moved to dismiss an excessive fees lawsuit where the plaintiffs had failed to plead sufficient facts to demonstrate that the comparators that the plaintiffs chose for the plan’s investments were appropriate comparators for those investments.
On January 21, 2021, the Northern District of California granted, with leave to amend, Intel’s motion to dismiss a complaint challenging the investment options made available to two Intel defined contribution plans. This is the latest development in a case that has already been heard by the Supreme Court. In 2020, the Supreme Court affirmed the Ninth Circuit’s decision overruling the district court’s grant of summary judgment, ruling that the case was not time-barred under ERISA’s statute of limitations and remanding the case to the district court to evaluate other arguments raised by Intel in its motion to dismiss. Plaintiffs in the case are former employees of Intel who participated in the two plans at issue. They principally alleged that the defendants breached ERISA’s duty of loyalty and prudence in selecting, monitoring, and managing the investments made available in the plans, which the plaintiffs had alleged improperly included target date portfolios that invested in significant amounts in hedge funds and private equity investments, along with other ancillary or derivative claims. Plaintiffs filed an amended complaint on March 22, 2021.
The district court found that the plaintiffs’ claims failed because the plaintiffs did not plead sufficient factual allegations to establish that the plaintiffs had compared the at-issue funds to appropriate benchmarks. For example, although the plaintiffs alleged that the funds in the Intel plans had poor performance or high fees compared to investments identified by the plaintiffs as alternative investments, the court found these allegations deficient where the plaintiffs had failed to provide adequate information to support their argument that the comparators chosen were adequate benchmarks for the at-issue funds. In addition, the district court rejected the plaintiffs’ arguments that it was imprudent or disloyal for Intel to offer investment options not commonly made available in 401(k) plans, ruling that ERISA does not require fiduciaries to all make the same decisions. Finally, the district court rejected the plaintiffs’ arguments of disloyal or self-interested conduct as conclusory.
This case is Sulyma v. Intel Corp. Inv. Policy Comm., No. 19-4618, in the Northern District of California. The decision is available here.