Key Takeaway: In one of the first appellate opinions since the U.S. Supreme Court’s Hughes v. Northwestern University decision, the Seventh Circuit interpreted Hughes narrowly and affirmed the district court’s order granting the motion to dismiss.
On August 29, 2022, the U.S. Court of Appeals for the Seventh Circuit affirmed the district court’s dismissal of a lawsuit filed against Oshkosh Corporation (Oshkosh). The complaint alleged that the fiduciaries of the Oshkosh 401(k) plan allowed the plan to pay excessive recordkeeping, investment advisor, and investment management fees; engaged in prohibited transactions; and failed to disclose how the plan calculated revenue sharing fees. In broad strokes, the district court ruled that the plaintiff’s chosen comparisons for recordkeeping and investment fees were insufficient to plausibly infer that Oshkosh acted imprudently.
The Seventh Circuit affirmed. In doing so, it narrowly construed the Supreme Court’s Hughes decision, holding that Hughes only stands for the proposition that there is no “categorical rule” that including low-cost investment options in the at-issue plan always mitigates concerns about the plan’s inclusion of higher-cost investments (Goodwin’s analysis of the Hughes decision can be found here). In affirming dismissal, the court relied on prior Seventh Circuit decisions, which the court held were not impacted by the Hughes decision. Specifically, the court dismissed the challenge to the plan’s recordkeeping fees because the plaintiff did not allege whether the plan could obtain comparable recordkeeping services for a lower price. The court also dismissed the plaintiff’s prohibited transaction claim, holding that ERISA’s prohibited transaction provisions do not exclude the use of plan assets to pay routine plan expenses. Finally, the court dismissed the plaintiff’s claim that Oshkosh failed to disclose the plan’s revenue sharing calculation, finding that the Department of Labor regulation cited by the plaintiff does not require disclosures of that kind.
The decision is Albert v. Oshkosh et al., No. 21-2789, in the Seventh Circuit Court of Appeals, and is available here.