Motion to Dismiss Granted in Case Brought by Participating Employer in Multi-Employer Plan

Key Takeaway: A participating employer in a multi-employer plan lacked standing to sue regarding alleged fiduciary breaches by the plan’s administrator where it failed to sufficiently allege that it was a fiduciary of the plan, in a ruling that may affect companies’ decisions to join multi-employer plans.

On March 31, 2022, the District of New Jersey granted a motion to dismiss, without prejudice, by the defendants in connection with claims brought by McCaffree Financial Corporation. McCaffree participates in a multi-employer 401(k) plan along with approximately 5,000 other employers, and for which ADP, Inc. has been appointed the agent of each participating employer for purposes of interfacing with the plan’s trustee and plan administrator. ADP also appoints the members of the committee that serves as the plan administrator and named fiduciary. McCaffree brought suit against ADP and that committee, alleging that the defendants had breached their duties to the plan by causing the plan to pay excessive costs and by permitting the plan to include imprudent investment options. 

The district court ruled that McCaffree lacked statutory standing to sue under ERISA. Only participants, beneficiaries, fiduciaries, or the United States Secretary of Labor may bring civil actions under ERISA. McCaffree alleged that it had standing to sue as a fiduciary of the plan. However, the court found that McCaffree had failed to sufficiently allege that it is a plan fiduciary because it did not allege that it had any authority or control over plan assets, and did not allege that the plan document conferred authority to it over the plan’s named fiduciary, plan administrator, or trustee. McCaffree argued that it was a fiduciary because of its decision to join the plan or due to contributions it made to the plan, but the court found these to be settlor acts and not fiduciary ones. McCaffree further pointed to a preamble to a Department of Labor regulation that suggested that employers participating in a multi-employer plan had a fiduciary duty to ensure that the plan was operating well, but the court ruled that the preamble is not entitled to deference. 

 The case is McCaffree Fin. Corp. v. ADP, Inc., No. 20-05492, in the United States District Court for the District of New Jersey, and the decision is available here. The plaintiffs have since amended their complaint and the defendants have moved to dismiss that amended complaint.