Key Takeaway: The defendant successfully moved to dismiss a lawsuit alleging excessive recordkeeping fees, among other allegations, where the plaintiff had compared the plan’s fees to industry averages that did not take into account differences in recordkeeping services provided in exchange for the fees.
On February 9, 2021, the Northern District of California granted Genentech, Inc.’s motion to dismiss, with leave to amend, in a case challenging the administrative fees paid and investment options made available in Genentech’s 401(k) plan. The plaintiff asserted that the defendants breached their ERISA duties of loyalty and prudence by imposing excessive administrative fees and investment management fees on plan participants, as well as by selecting certain allegedly underperforming and excessively expensive investments. The plaintiff filed an amended complaint on March 1, 2021.
The Genentech decision is notable because the court found that the plaintiff’s comparison of the plan’s fees and investments to industry averages — a common trend that we have seen in many complaints filed in 2020 and 2021 — was insufficient to show a breach of fiduciary duty with respect to the plan at issue. Specifically, the court held that the plaintiff’s comparison of the plan’s recordkeeping fees and investment management fees to industry averages was invalid because they were apples-to-oranges comparisons. For example, the court rejected the plaintiff’s comparison of the plan’s administrative fees to average administrative fees published in an industry publication because the cited fees did not speak to the value of the specific services provided to the plan at issue. Similarly, although the plaintiff alleged that the plan’s total costs exceeded an average plan cost cited by the plaintiff, the district court found those allegations deficient because the plaintiff failed to compare the plan’s costs to that of any specific comparable plans. Finally, the court rejected the allegations that the defendants breached their duties with respect to the selection of certain investments, ruling that the plaintiff failed to compare the at-issue investments to appropriate comparators.
This case is Wehner v. Genentech, Inc., No. 20-6894, in the Northern District of California. The decision is available here.