District Court Grants Summary Judgment for Defendants

Key Takeaway: A 401(k) plan sponsor and plan fiduciaries recently won summary judgment on claims that they breached ERISA fiduciary duties because plaintiffs failed to demonstrate that the purported fiduciary breaches caused a loss to plan participants.

On September 30, 2022, the U.S. District Court for the Northern District of Georgia granted summary judgment for Home Depot and certain plan fiduciaries in connection with claims concerning the company’s 401(k) plan. Plaintiffs had alleged that the defendants breached their ERISA fiduciary duties by: (1) failing to monitor the investment advisory services provided by a third-party managed account service provider, resulting in excessive managed account fees; and (2) failing to monitor and remove certain plan investment options that plaintiffs alleged performed poorly during the class period. The parties filed cross-motions for summary judgment in July 2021.

The court granted summary judgment for defendants on all claims, and denied plaintiffs’ motion for summary judgment, ruling that plaintiffs could not meet their burden to prove that any breaches caused losses. With respect to Plaintiffs’ allegations regarding expensive or underperforming managed account services, the court found that plaintiffs failed to adduce sufficient evidence to show that the plan paid excessive fees relative to other clients, as it was undisputed that the plan’s participants actually paid lower fees for services than almost all other plans serviced by the managed account provider. With respect to the challenged funds, the court held that plaintiffs failed to provide material evidence demonstrating that no prudent fiduciary would have concluded that the performance of those funds would improve in the future. For example, the court explained that the fact that other funds identified by plaintiffs posted better returns at certain points in time did not establish that they were superior to the challenged funds or appropriate for the plan.

The case is Pizarro v. Home Depot, Inc., No. 18-01566, in the United States District Court for the Northern District of Georgia, and the decision is available here. Plaintiffs have yet to indicate whether they intend to appeal the order to the U.S. Court of Appeals for the Eleventh Circuit.