Opinion
CIVIL ACTION NO. 22-10912-WGY
2022-12-27
Connie SELLERS and Sean Cooper, Individually and as the Representatives of a Class of Similarly Situated Persons, and on Behalf of the Boston College 401(k) Retirement Plan I and the Boston College 401(k) Retirement Plan II, Plaintiffs, v. TRUSTEES OF Boston COLLEGE; Plan Investment Committee, and John and Jane Does 1-10 Defendant.
Stephen S. Churchill, Osvaldo Vazquez, Fair Work, P.C., Boston, MA, for Plaintiffs. Christina L. Hennecken, Pro Hac Vice, Goodwin Procter LLP, Washington, DC, James O. Fleckner, Goodwin Procter, LLP, Boston, MA, for Defendants Trustees of Boston College, Plan Investment Committee.
Stephen S. Churchill, Osvaldo Vazquez, Fair Work, P.C., Boston, MA, for Plaintiffs. Christina L. Hennecken, Pro Hac Vice, Goodwin Procter LLP, Washington, DC, James O. Fleckner, Goodwin Procter, LLP, Boston, MA, for Defendants Trustees of Boston College, Plan Investment Committee.
MEMORANDUM OF DECISION
This is how my predecessor, Peleg Sprague (D. Mass. 1841-1865), would sign official documents. Now that I'm a Senior District Judge I adopt this format in honor of all the judicial colleagues, state and federal, with whom I have had the privilege to serve over the past 44 years.
I. INTRODUCTION
In this ERISA litigation, two former employees of Boston College who participate in two retirement plans administered by the college bring a complaint on behalf of themselves, the retirement plans, and a proposed class of all others similarly situated (collectively, the "Plan Participants") against the trustees of Boston College (the "Trustees"), its investment committee (the "Committee"), and ten John and Jane Does (collectively, "Boston College"). Class Action Compl. ("Compl."), ECF No. 1, 1, ¶¶ 1-18. Plan Participants allege that Boston College has breached its fiduciary duties under ERISA—first and foremost, the duty of prudence and the duty to comply with plan documents in violation of ERISA Sections 409 and 502, 29 U.S.C. § 1104(a)(1)(B) and (D) (count one). Id. ¶ 1. Plan Participants also allege that the trustees failed to properly monitor the Committee and the ten John and Jane Does (count two). Ibid.
While each of Plan Participants' allegations taken individually are likely insufficient to survive a motion to dismiss, the totality of the pleaded facts raise a plausible--not merely conceivable--inference that Boston College breached their fiduciary duties under ERISA: specifically the duty of prudence, the duty to comply with plan documents, and the duty to monitor fiduciaries. Thus, for the reasons articulated more fully below, this Court DENIED Boston College's Motion to Dismiss, ECF No. 12, and allows Plan Participants to proceed to discovery on both the breach of the duty of prudence and the failure to monitor claims.
A. Facts and Procedural History
In considering a motion to dismiss for failure to state a claim, this Court "take[s] the complaint's well-pleaded facts as true." Flinn v. Minn. Life Ins. Co., 353 F. Supp. 3d 110, 114 (D. Mass. 2018) (citing Barchock v. CVS Health Corp., 886 F.3d 43, 48 (1st Cir. 2018)); see Ruivo v. Wells Fargo Bank, N.A., 766 F.3d 87, 90 (1st Cir. 2014) ("We examine whether the operative complaint states a claim for which relief can be granted, construing the well-pleaded facts in the light most favorable to the plaintiff, . . . accepting their truth and drawing all reasonable inferences in plaintiff's favor . . . .") (internal citations omitted).
On June 10, 2022, plaintiffs Connie Sellers ("Sellers") and Sean Cooper ("Cooper"), individually and as the representatives of a class of similarly situated persons, and on behalf of the two Boston College 401(k) retirement plans, filed a class action complaint against Boston College. Compl. 1, ¶¶ 16-18. The class action complaint alleges one count against all Boston College defendants (Count One: Breach of Fiduciary Duty of Prudence and Fiduciary Duty to Comply with Plan Documents) and one count against only the Trustees, for failing to monitor the Committee and the ten John and Jane Does (Count Two: Failure to Monitor Fiduciaries). Id. ¶¶ 116-35.
On August 15, 2022, pursuant to Federal Rule of Civil Procedure 12(b)(6), Boston College moved to dismiss both counts of Plan Participants' complaint, see Defs.' Mot. Dismiss Compl. ("Defs.' Mot."), ECF No. 12, and the issues have been fully briefed, see Defs.' Mem. Law Support Mot. Dismiss Compl. ("Defs.' Mem."), ECF No. 13; Pl.'s Opp'n Defs.' Mot. Dismiss Compl. ("Pl.'s Opp'n"), ECF No. 19; Reply Support Defs.' Mot. Dismiss Compl. ("Defs.' Reply"), ECF No. 20.
Sellers and Cooper are two former Boston College employees who participate in two defined contribution retirement plans administered by Boston College via the Trustees, the Committee, and, without limitation, John and Jane Does 1-10. Compl. 1, ¶¶ 16-18. The putative class that Plan Participants seek to certify is defined as follows: "[a]ll persons, except Defendants and their immediate family members, who were participants in, or beneficiaries of the Plans, at any time between June 10, 2016 through the date of judgment . . . ." Id. ¶ 106.
The Trustees is the legal entity responsible for overseeing Boston College--a private, Catholic educational institution in Middlesex and Suffolk Counties, Massachusetts. Id. ¶ 20.
The Committee is charged with oversight of the investment policies for the two retirement plans, and the Investment Policy Statement acknowledges that "[m]embers of the Committee are 'fiduciaries' as defined by ERISA." Id. ¶ 23.
Unknown "John Doe" Defendants 1-10 include, but are not limited to, Boston College officers, employees, board members, administrators, and/or contractors who are/were fiduciaries of the Plans within the meaning of ERISA Section 3(21)(A), 29 U.S.C. § 1002(21)(A) during the Class Period. Id. ¶ 27.
1. The Retirement Plans
Boston College sponsors two retirement plans in which the class plaintiffs participate, The Boston College 401(k) Retirement Plan I ("Plan I") and The Boston College 401(k) Retirement Plan II ("Plan II") (collectively, the "Plans"). Compl. ¶ 7. The Plans are each defined contribution or individual account plans that include a cash or deferred arrangement, meaning that "[r]etirement benefits provided by each Plan are based solely on the amounts contributed to a participant account, and any income or gains (or losses) on such contributions, less any expense that may be allocated to such participant's account." Compl. ¶ 34 (citing Summary Plan Description, Boston College 401(k) Retirement Plans I & II, dated January 1, 2015 at 6).
Both Plan I and Plan II are "employee pension benefit plan[s]" within the meaning of ERISA Section 3(2)(A), 29 U.S.C. § 1002(2)(A) and "defined contribution plan[s]" within the meaning of ERISA Section 3(34), 29 U.S.C. § 1002(34), covering eligible current and former Boston College employees, including each of the Plan Participants. Id. ¶ 28. Each Plan is a qualified plan under 26 U.S.C. § 401, commonly referred to as a "401(k) plan." Ibid. Boston College is the plan sponsor and plan administrator for both plans. Id. ¶¶ 31-32 (citing Summary Plan Description, Boston College 401(k) Retirement Plans I & II, dated January 1, 2015 at 18.).
As of December 31, 2020, Plan I had 3,631 "participants with account balances as of the end of the plan year" 2020. Id. ¶ 107 (citing Form 5500—Plan I, at 2). As of December 31, 2020, Plan II had 3,147 "participants with account balances as of the end of the plan year." Ibid.
Employees can participate in both plans and thus these figures may include some double counting. Compl. ¶ 29 n. 17.
In each Plan, the majority of investment options are TIAA or Fidelity funds, with four or fewer options from outside fund families available in each Plan. Id. ¶ 43. The retirement plans are governed by The Investment Policy Statement, which requires the Plans' fiduciaries to, among other things, ensure that the investment options made available to participants "charge fees that are reasonable for the asset class and investment style." Id. ¶ 120.
II. ANALYSIS
Under count one, Plan Participants' pleaded facts showing Boston College's alleged breach of their duty of prudence fall into two main categories. Compl. ¶¶ 12, 57-105. First, Participants allege that the retirement plans were subject to excessive fees in the form of higher-than-average recordkeeping fees and investment management fees. Id. ¶¶ 8-9, 65-67. Second, Participants allege that the investment options offered within the funds-- offerings from TIAA, CREF, and Fidelity specifically--were themselves imprudent investments and that Boston College should have removed them. Id. ¶¶ 83-105. Plan Participants also allege that Boston College failed to comply with documents and instruments governing the Plans. Id. ¶¶ 116-27. As to count two, Plan Participants assert that the Trustees breached their duty to monitor the investment committee and Jane and John Does 1-10. Id. ¶¶ 128-135.
Upon reviewing the totality of the pleaded facts and drawing all inferences in favor of Plan Participants, this Court DENIES Boston College's motion to dismiss, acknowledging that the complaint sets forth sufficient evidence of a potential breach of ERISA's fiduciary duties as to allow Plan Participants to proceed to discovery on both counts of the complaint.
A. Standard of Review
To withstand a motion to dismiss, a complaint must "state a claim upon which relief can be granted . . . ." Fed. R. Civ. P. 12(b)(6). The complaint must include sufficient factual allegations that, accepted as true, "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 1974, 167 L. Ed. 2d 929 (2007). Courts "draw every reasonable inference" in favor of the plaintiff, Berezin v. Regency Sav. Bank, 234 F.3d 68, 70 (1st Cir. 2000), but they disregard statements that "merely offer legal conclusions couched as fact or threadbare recitals of the elements of a cause of action," Ocasio-Hernández v. Fortuño-Burset, 640 F.3d 1, 12 (1st Cir. 2011) (brackets, ellipsis, and quotations omitted).
On one hand, it is well established that a motion to dismiss for failure to state a claim in the ERISA context is an "important mechanism for weeding out meritless claims." Barchock v. CVS Health Corp., No. CV 16-061-ML, 2017 WL 1382517, at *4 (D.R.I. Apr. 18, 2017) (quoting Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. 409, 134 S.Ct. 2459, 2471, 189 L.Ed.2d 457 (2014)), aff'd, 886 F.3d 43 (1st Cir. 2018). A determination of whether an ERISA claim should be dismissed for failure to state a claim therefore "requires careful judicial consideration of whether the complaint states a claim that the defendant has acted imprudently." Ibid. (citing Fed. Rule Civ. Proc. 12(b)(6)).
On the other hand, as is especially relevant in ERISA cases, Courts are to provide "some latitude" in cases in which "a material part of the information" required is controlled by defendants. García-Catalán v. United States, 734 F.3d 100, 104 (1st Cir. 2013) (citing Menard v. CSX Transp. Inc., 698 F.3d 40, 45 (1st Cir. 2012)); see Lucey v. Prudential Ins. Co. of Am., 783 F. Supp. 2d 207, 211 (D. Mass. 2011) (Ponsor, J.) ("On a motion to dismiss, the Court must draw every reasonable inference in favor of the plaintiffs.").
B. Count 1 - Breach of Fiduciary Duty of Prudence and Fiduciary Duty to Comply with Plan Documents
Under count one, Plan Participants allege that Boston College breached its duty of prudence and duty to act in accordance with the documents and instruments governing the plan, in violation of ERISA Section 404(a)(1)(B), 29 U.S.C. § 1104(a)(1)(B), and ERISA Section 404(a)(1)(D), 29 U.S.C. § 1104(a)(1)(D). Compl. ¶¶ 1, 123. Under this count, Plan Participants first assert that Boston College caused them to incur unreasonable fees during the class period in the form of high recordkeeping expenses and excessive investment management fees. Id. ¶¶ 60-82. Second, Plan Participants allege that Boston College ignored public red flags about certain investment offerings from TIAA and Fidelity, and that the continued inclusion of such investment offerings was contrary to Plan Participants' interests. Id. ¶¶ 83-96. Plan Participants allege that Boston College's failure to act with respect to these investment offerings was not justified by the investments' performance. Id. ¶¶ 97-105.
The thrust of Plan Participants' allegations under count one can be summarized as follows:
Defendants failed to prudently and objectively monitor the Plans' investments to ensure that each of the investments was and remained appropriate for the Plans. Defendants also failed to comply with the Investment Policy Statement. Defendants failed to remove those investments that were no longer appropriate. Defendants retained imprudent funds as Plan investments despite the availability of superior alternative investments that would have cost Plan participants significantly less and performed significantly better. Defendants failed to remove TIAA and Fidelity funds, and to investigate alternatives to them as recordkeepers, despite multiple, public red flags associated with each company.Id. ¶ 121. Plan Participants allege that such behavior, along with allegations described elsewhere in the complaint, constitutes a failure to discharge duties with the skill, prudence, care and diligence under the circumstances then prevailing to a prudent person, in violation of ERISA Section 404(a)(1)(B), 29 U.S.C. § 1104(a)(1)(B). Id. ¶ 122. Plan Participants also allege that such conduct constitutes a breach of Defendants' duty to act in accordance with the documents and instruments governing the plan, requiring that all investments "charge fees that are reasonable for the asset class and investment style," in violation of ERISA Section 404(a)(1)(D), 29 U.S.C. § 1104(a)(1)(D). Id. ¶ 123.
In 1974, Congress enacted the Employee Retirement Income Security Act (ERISA). Pub.L. No. 93-406, 88 Stat. 829, codified as amended at 29 U.S.C. §§ 1001-1461; see Merrimon v. Unum Life Ins. Co. of Am., 758 F.3d 46, 50 (1st Cir. 2014). ERISA, a "comprehensive and reticulated statute," governs private employee benefit systems, including retirement plans. Tracey v. Massachusetts Inst. of Tech., No. CV 16-11620-NMG, 2017 WL 4453541, at *8 (D. Mass. Aug. 31, 2017) (Bowler, M.J.) (quoting Mertens v. Hewitt Assocs., 508 U.S. 248, 251, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993)), report and recommendation adopted in part, rejected in part, 2017 WL 4478239 (D. Mass. Oct. 4, 2017) (Gorton, J.). One of ERISA's principal goals is to afford appropriate protection to employees and their beneficiaries with respect to the administration of employee welfare benefit plans. Merrimon, 758 F.3d at 50 (citing Nachman Corp. v. Pension Benefit Guar. Corp., 446 U.S. 359, 361-62, 100 S.Ct. 1723, 64 L.Ed.2d 354 (1980)).
Section 404(a) of ERISA requires a fiduciary to "discharge [its] duties with respect to a plan solely in the interest of the participants and beneficiaries and . . . for the exclusive purpose of . . . providing benefits to participants and their beneficiaries." 29 U.S.C. § 1104(a)(1). An ERISA fiduciary is also obligated to follow the terms of the plan, so long as they do not conflict with the statute. Id. § 1104(a)(1)(D). The obligations imposed by ERISA, including the duties of loyalty and prudence, are among "the highest known to the law." Moitoso v. FMR LLC, 451 F. Supp. 3d 189, 204 (D. Mass. 2020) (quoting Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 598 (8th Cir. 2009) (quoting Donovan v. Bierwirth, 680 F.2d 263, 272 n.8 (2d Cir. 1982))).
In order to state a claim under this provision, plaintiffs must establish a prima facie showing: (1) that defendants acted as the Plan's fiduciary; (2) that defendants breached their fiduciary duties; and (3) that the breach caused a loss to the Plan. Tracey, 2017 WL 4453541, at *9 (citing Pegram v. Herdrich, 530 U.S. 211, 225-26, 120 S. Ct. 2143, 2152-53, 147 L. Ed. 2d 164 (2000); Braden, 588 F.3d at 594). The parties do not dispute that Boston College is a fiduciary and that Plans I and II qualify as ERISA plans. See Compl. ¶¶ 23, 117; see generally Def.'s Mem; Def.'s Reply.
As outlined in the following sections, Plan Participants have adduced several facts which demonstrate a plausible breach of the duty of prudence and the duty to comply with plan documents. The Court thus DENIES Boston College's motion to dismiss as to count one of Plan Participants' complaint.
1. Breach of Duty of Prudence (29 U.S.C. § 1104(a)(1)(B))
Plan Participants first assert that Boston College has breached their duty of prudence under ERISA. Compl. ¶ 121.
As outlined above, the duty of prudence requires that a fiduciary act "with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims." 29 U.S.C. § 1104(a)(1)(B); see 29 C.F.R. § 2550.404a-1 ("[T]he requirements of section 404(a)(1)(B) . . . are satisfied if the fiduciary: (i) Has given appropriate consideration to those facts and circumstances that, given the scope of such fiduciary's investment duties, the fiduciary knows or should know are relevant to the particular investment or investment course of action involved . . . ."). A fiduciary who breaches the duty of prudence must "make good" to the plan "any losses to the plan resulting from such breach." 29 U.S.C. § 1109(a).
When examining an alleged breach of the duty of prudence, the key question is "whether the fiduciary took into account all relevant information" in performing its duties under ERISA. Turner v. Schneider Electric Holdings, Inc., 530 F.Supp. 3d 127, 133 (D. Mass. 2021) (Gorton, J.) (citing Moitoso, 451 F. Supp. 3d at 204 (internal citations and quotation marks omitted)). "Importantly, the Supreme Court has explained that the content of the duty of prudence turns on the circumstances prevailing at the time the fiduciary acts." Barchock v. CVS Health Corp., 886 F.3d 43, 44 (1st Cir. 2018) (internal quotations marks omitted) (quoting Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. 409, 134 S. Ct. 2459, 2471, 189 L.Ed.2d 457 (2014) (quoting 29 U.S.C. § 1104(a)(1)(B))); see Estate of Smith v. Raytheon Co., 573 F. Supp. 3d 487, 510 (D. Mass. 2021) (Woodlock, J.). "Accordingly, with respect to whether a complaint states a claim of imprudence under ERISA, 'the appropriate inquiry will necessarily be context specific.' " Barchock, 886 F.3d at 44 (citing Fifth Third Bancorp, 134 S. Ct. at 2471; 29 U.S.C. § 1104(a)(1)(B)).
Therefore, to determine whether a fiduciary acted in accordance with its duty of prudence, a court will evaluate conduct under the "totality of the circumstances" and assess a fiduciary's procedures, methodology and thoroughness. Barchock, 886 F.3d at 44 (citing DiFelice v. U.S. Airways, Inc., 497 F.3d 410, 418 (4th Cir. 2007)); see Glass Dimensions, Inc., ex rel. Glass Dimensions, Inc. Profit Sharing Plan & Tr. v. State St. Bank & Tr. Co., 931 F.Supp.2d 296, 305 (D. Mass. 2013) (Tauro, J.). To prevail on a breach of the duty of prudence claim, a plaintiff must establish that the fiduciary failed to employ appropriate procedures and as a result the retirement plan suffered losses. See Barchock, 886 F.3d at 44.
a. Unreasonable fees
Plan Participants first allege that the Trustees, the Committee, and John and Jane Does 1-10--as fiduciaries of the plan--breached the duty of prudence by causing Sellers, Cooper, and the other plan participants to incur unreasonable fees during the class period. Compl. ¶¶ 57-59. Plan Participants set forth several factual allegations to demonstrate the potentially unreasonable fees and draw reasonable inferences from such demonstrations. This Court finds such factual allegations sufficient at this stage to state a plausible claim that Boston College failed to monitor and address unreasonable recordkeeping and investment management fees, potentially breaching their duty of prudence.
i. Recordkeeping expenses (TIAA and Fidelity)
The duty of prudence requires fiduciaries to "employ appropriate methods to investigate the merits of the investment." Turner, 530 F.Supp.3d at 133. Furthermore, it "involves a continuing duty to monitor investments and remove imprudent ones." Ibid. (citing Tibble v. Edison Int'l, 575 U.S. 523, 135 S.Ct. 1823, 191 L.Ed.2d 795 (2015)); see Beddall v. State St. Bank & Tr. Co., 137 F.3d 12, 18 (1st Cir. 1998). Plan Participants claim that in allowing the continuation of what they allege to be unreasonably high recordkeeping fees, Boston College breached its duty of prudence to properly monitor plans and remove traces of imprudent activity. Compl. ¶¶ 57-73.
Recordkeepers help retirement investment plans track the balances of individual accounts, provide regular account statements, and offer informational and accessibility services to participants. See, e.g., Hughes v. Northwestern University, 595 U.S. 170, 142 S.Ct. 737, 741, 211 L. Ed. 2d 558 (2022). Retirement plans pay fees for such recordkeeping services. Ibid. Recordkeeping fees may be calculated as a percentage of the assets for which the recordkeeper is responsible; alternatively, these fees may be charged at a flat rate per participant account. Ibid. Here, it is the plan fiduciaries who arrange the way the recordkeeping fees are assessed. Compl. ¶ 61. It is through investments within the individual plans or through payments to the plans directly that these recordkeeping fees are satisfied. Ibid. In this case, the fees were paid from plan assets and such payments occurred both directly in which such fees are visible to Plan Participants and also through the revenue sharing model where fees are less visible to Plan Participants. Ibid.
Plan Participants note that since the actual decision-making process as to fee allocation is only known to Boston College, they have drawn "reasonable inferences" based on the factual statements known to them. Compl. ¶¶ 58-59. Boston College believes that this alone is grounds for dismissal as they believe Plan Participants have failed to assert any concrete factual claims and have only made mere speculations. Def.'s Mem. 7. Boston College believes Plan Participants simply "anticipate that Plan I's total recordkeeping costs, once revealed through discovery, will similarly reflect imprudence by the fiduciaries" and go on to state that "the price of entry, even to discovery, is for the plaintiff to allege a factual predicate concrete enough to warrant further proceedings, which may be costly and burdensome." Id. 7-8 (citing DM Rsch., Inc. v. Coll. Of Am. Pathologists, 170 F.3d 53, 55 (1st Cir. 1999) (affirming dismissal); accord Jobs First Indep. Expenditure Pol. Action Comm. v. Coakley, No. 14-14338, 2016 WL 6661142, at *5 (D. Mass. Nov. 10, 2016) (Gorton, J.) (dismissing claim where plaintiffs "concede[d]" they could not "allege anything substantively and want[ed] to explore the claim through discovery")).
The case before this Court is not in the same posture as the cases Boston College cites to allege failure to state any plausible or substantive facts because those cases are not ERISA cases. Rather, in ERISA cases such as this one, a claim for a breach of fiduciary duty may survive a motion to dismiss, even absent any well-pleaded factual allegations relating directly to the methods employed by the ERISA fiduciary so long as the complaint "allege[s] facts that, if proved, would show that an adequate investigation would have revealed to a reasonable fiduciary that the investment at issue was improvident." See Pension Ben. Guar. Corp. ex rel. St. Vincent memorial Retirement Plan v. Morgan Stanley Investment Management Inc., 712 F.3d 705, 718 (2nd Cir. 2013). In Barchock v. CVS Health Corp., the District of Rhode Island stated that "in St. Vincent, the Second Circuit emphasized that discovery should be allowed to flow based on no more than an inference of imprudence despite the absence of facts that directly address the process by which the Plan was managed," so that ERISA plaintiffs can access inside information that they lack. No. CV 16-061-ML, 2017 WL 9324762, at *5, (citing St. Vincent, 712 F.3d at 718), report and recommendation adopted, No. CV 16-061-ML, 2017 WL 1382517 (D.R.I. Apr. 18, 2017), aff'd, 886 F.3d 43 (1st Cir. 2018). The court also emphasized that the inference must be anchored to "more than the mere possibility of misconduct." Ibid. (citing St. Vincent, 712 F.3d at 719). Therefore, Plan Participants are correct to state that they used factual inferences to demonstrate the breach of duty of prudence and are correct to explain could plausibly reveal, through discovery, the potential imprudence of the fiduciaries. See Compl. ¶ 68.
Plan Participants allege that they were paying above-market recordkeeping and administrative fees, but such were hidden from their view through the revenue sharing process. Id. ¶ 63. Plan Participants realize that alone, the practice of revenue sharing is not imprudent, however, they note it is recognized that revenue sharing may hide the true scope of the fees attached to the recordkeeping process. Id. ¶ 62 (citing Tussey v. ABB, Inc., 746 F. 3d 327, 336-37 (8th Cir. 2014)). Plan Participants demonstrate their allegations of imprudence as to both Plan I and Plan II. They do so by outlining the direct recordkeeping compensation fees on the Form 5500s for both Plan I and Plan II stating that Plan II, despite having slightly fewer participants and is nearly a third smaller by asset size, had direct compensation fees almost seven times higher than Plan I. Compl. ¶ 64. Plan Participants also cited a study done by NEPC, a consulting group, which recently published the results of a survey of defined contribution plans, reporting on factors such as the fees plans paid which found no plans in the survey paid above $70. Id. ¶¶ 66-67. By contrast, Plan II paid above $100 per participant, $124.92, which Plan Participants explain is more than double the rate that many comparable plans paid. Ibid. As for Plan I, the Form 5500 does not report such details, but the disclosures states TIAA receives a set percentage in revenue sharing for each investment as an "administrative fee," but no documents contain details about the total amount TIAA actually receives. Id. ¶ 68. It is for this reason that Plan Participants need discovery to access information which they do not currently have available to them as to Plan I and the indirect fees as to Plan II. Id. ¶ 67-68.
Plan Participants note Boston College also failed to look externally to the marketplace to determine what comparable plans are paying their service providers to help in determining a reasonable recordkeeping fee. Compl. ¶ 70. Boston College alleges that Plan Participants cannot utilize failure to issue Request for Proposal process ("RFPs"), which demonstrates a comparison of their plan to the marketplace, to buttress a breach of the duty of prudence since they believe Plan Participants have failed to demonstrate facts that support excessive fees. Def.'s Mem. 10. Boston College believes that failing to conduct RFPs does not support a breach of the duty of prudence for this reason, ibid.; however, as mentioned above, in ERISA cases, plaintiffs often lack access to all information needed to assert complete factual allegations and therefore, reasonable inferences from facts available to them are sufficient to state a claim. See Barchock, 2017 WL 9324762; St. Vincent, 712 F.3d at 718. In assessing whether failure to conduct RFPs does support a breach of the duty of prudence, Turner explains "as part of the 'prudent man standard' one would expect a fiduciary to obtain bids at some point[.]". Turner, 530 F.Supp.3d 127, 137 (quoting Tracey v. Massachusetts Inst. of Tech., No. 16-11620-NMG, 2017 WL 4478239, at *3 (October 4, 2017) (Gorton, J.)). Failure to conduct RFPs further demonstrates a plausible breach of the duty of prudence by Boston College. See Turner, 530 F.Supp.3d at 137; Tracey, 2017 WL 4478239, at *3.
Plan Participants also cite a joint investigation by the Securities and Exchange Commission and the New York Attorney General's Office related to the "marketing practices" of TIAA. Compl. ¶ 86. The investigation ultimately found that TIAA targeted participants in TIAA-administered retirement plans and used the "false and misleading" marketing tactics. Id. ¶ 89. Boston College argues that this investigation was not related to recordkeeping fees and was a wholly different entity than the one related to Plan I and although allegations related to the investigation were released during the class period, the settlements were not. Def.'s Mem. 7-8. The Court does not give much weight--if any at all--to this investigation since it is not entirely relevant to the facts and situation of this case.
Plan Participants also mention Peter Lynch, an associate trustee of Boston College, who is also the Vice Chairman of Fidelity Management & Research Company. Compl. ¶ 39. Plan Participants believe Lynch may be the reason why Boston College has failed to remove Fidelity as a recordkeeper and has failed to remove their investment offering. Ibid. This does not correlate the breach of the duty of prudence but rather to a breach of loyalty, however, Plan Participants do not assert a breach of loyalty here. Id. ¶ 105.
As mentioned above, in ERISA cases, it is recognized that plaintiffs often do not have access to certain information needed to make well-pleaded factual allegations, but such allegations are sufficient so long as they make "reasonable inferences" as Plan Participants here have likely done based on the information available to them. The factual assertions here--the high recordkeeping fees associated with the Plans and the failure to monitor and assess such fees through RFPs-- give rise to a plausible claim for the breach of the duty of prudence by Boston College and thus its motion to dismiss cannot be granted on this basis.
ii. Investment management fees (TIAA real estate fund)
Plan Participants also set forth allegations of excessive investment management fees for TIAA's real estate fund (this assertion relates specifically to Plan I participants). Compl. ¶ 74. Plan Participants allege that Boston College's failure to properly monitor, select, and manage the Plans' investment fees during the class period demonstrates a further breach of the duty of prudence. Id. ¶¶ 74-82. Plan Participants pleaded facts alleging excessive investment management fees, when combined with the other factual allegations in the compliant, are sufficient to support denial of the motion to dismiss.
In their complaint, Plan Participants list the various investment options made available to them by the Committee in both Plan I and Plan II. Compl. ¶¶ 76-77. Plan Participants explain that each fund has an associated "expense ratio," which reflects the fee which Plan Participants are charged for investment management and other services. Id. ¶ 79. The expense which results from the expense ratio will reduce a Plan Participant's return and the compounding effect of that return. Ibid. Plan Participants allege that each of the Plans have investment options with unreasonably high expense ratios but focus their attention of Plan I's TIAA Real Estate Account. Id. ¶ 80. The TIAA Real Estate Account is the sixth largest holding in Plan I and TIAA has disclosed that Plan Participants pay a 0.865% expense ratio for the privilege of investing in this account. Ibid. Plan Participants state that courts have noted that the Real Estate Account is structured in a way that inevitably leads to higher expenses which means that, while typical real estate funds available to retirement plan participants average expense ratios of 0.59% to 0.64%, Plan I's participants are paying almost a third higher given the Real Estate Account structure. Ibid.
Boston College relies on a case coming out of the Second Circuit, Young v. GM Inv. Mgmt. Corp., 325 F. App'x 31, 33 (2nd Cir. 2009), as grounds for dismissal. In Young, the Second Circuit stated that when plaintiffs "allege[d] no facts concerning other factors relevant to determining whether a fee is excessive under the circumstances" the court ought dismiss the challenge to investment option fees. 325 F. App'x at 33; see Def.'s Mem. 12. In In re Biogen, Inc. ERISA Litig., a case from this District, the court states: "showing that any given fund had cheaper alternatives or that it had unreasonably excessive fees . . . may allow a trier of fact to 'reasonably infer' . . . that the [defendants'] process was flawed." No. 20-CV-11325-DJC, 2021 WL 3116331, at *7 (D. Mass. July 22, 2021) (Casper, J.) (citing Leber v. Citigroup 401(k) Plan Inv. Comm., 323 F.R.D. 145, 157 (S.D.N.Y. 2017)). Such demonstration is not dispositive of "the ultimate question regarding the 'methods employed by the ERISA fiduciary' to investigate, select, or monitor investments." Ibid.
In this case, Plan Participants have only set forth potential factual allegations of excessive management fees in regard to the TIAA Real Estate account. Compl. ¶¶ 74-76. This alone is likely not sufficient to demonstrate imprudence, as "merely alleging that a plan offered retail rather than institutional share classes is insufficient to carry a claim for fiduciary breach." See In re Biogen, Inc. ERISA Litig., 2021 WL 3116331, at *8 (citing Marks v. Trader Joe's Co., No. 19-cv-10942 PA (JEMx), 2020 WL 2504333, at *7 (C.D. Cal. April 24, 2020)) (internal quotations omitted) (quoting White v. Chevron Corp., No. 16-cv-0793-PJH, 2017 WL 2352137, at *14 (N.D. Cal. May 13, 2017)); see also Hecker v. Deere & Co., 556 F.3d 575, 586 (7th Cir. 2009). Plan Participants argue that that each of the Plans have investment options with unreasonably high expense ratios but, as is common with ERISA cases, will need discovery to fully develop the factual basis for this claim. Compl. ¶ 80.
While a close call, taking these allegations of unreasonable and excessive investment management fees in connection with at least one account in combination with the unreasonable recordkeeping fees as true, Plan Participants have plead enough factual allegations based on the information available to them to state a plausible claim worthy of further investigation. Boston College's motion to dismiss as to count one thus cannot be granted on the basis of unreasonable recordkeeping or investment management fees.
b. Imprudent Investment Options
In addition to alleging that Boston College's actions caused Plan Participants to incur impermissibly high recordkeeping and investment management expenses, Plan Participants also allege that certain investment offerings contained in Plans I and II were themselves imprudent investment options and that Boston College breached its fiduciary duty of prudence by failing to remove such investments from the plan in violation of ERISA Sections 409 and 502, 29 U.S.C. §§ 1109 and 1132. Compl. ¶¶ 83-105. Specifically, Plan Participants allege that Boston College "ignored multiple red flags about TIAA and Fidelity, including court decisions concluding that specific investments in the Plans were imprudent," Compl. ¶ 83, and that Boston College's failure to act regarding the TIAA and Fidelity investments is not justified by the underperformance of such offerings, Compl. ¶¶ 97-105. This Court finds the factual allegations regarding imprudent investment offerings sufficient to nudge the Plan Participants' claims from merely conceivable to plausible and thus cannot grant Boston College's motion to dismiss count one on the basis of imprudent investment options.
As discussed above, under the prudent man rule, courts must assess a fiduciary's prudence based on the fiduciary's conduct, rather than "the result of performance," and viewed from the perspective of the time of the challenged decision. Barchock, 886 F.3d at 44 (quoting Bunch v. W.R. Grace & Co., 555 F.3d 1, 7 (1st Cir. 2009)); see, e.g., Glass Dimensions, Inc. v. State Street Bank & Trust Co., 931 F.Supp.2d 296, 305 (D. Mass. 2013). "[W]hether a fiduciary's actions are prudent cannot be measured in hindsight, whether this hindsight would accrue to the fiduciary's detriment or benefit." Bendaoud v. Hodgson, 578 F. Supp. 2d 257, 271 (D. Mass. 2008) (quoting DiFelice v. U.S. Airways, Inc., 497 F.3d 410, 424 (4th Cir. 2007)); see Ellis v. Fid. Mgmt. Tr. Co., 883 F.3d 1, 10 (1st Cir. 2018); Velazquez v. Mass. Fin. Servs. Co., 320 F. Supp. 3d 252, 259 (D. Mass. 2018) (Zobel, J.). In other words, the "prudent person" standard is an objective standard which focuses not on the results of an investment strategy but on the fiduciary's decision making process. See Tracey v. Massachusetts Inst. of Tech., 404 F.Supp.3d 356, 361 (D. Mass. 2019) (Gorton, J.).
Although there is no specific set of factors that fiduciaries must evaluate when considering investments, the duty of prudence requires them to "employ appropriate methods to investigate the merits of the investment." Turner, 530 F.Supp.3d at 133 (citing Moitoso, 451 F. Supp. 3d at 204-05). "Cost-conscious management is fundamental to prudence in the investment function." Tibble v. Edison Int'l, 843 F.3d 1187, 1197-98 (9th Cir. 2016) (quoting Restatement (Third) Of Trusts § 90, cmt. b). The "range of investment options and the characteristics of those included options" can be very pertinent, and "readily ascertainable facts against which the plausibility of claims challenging the overall composition of a plan's mix and range of investment options should be measured." Tracey, 2017 WL 4453541, at *10. The duty of prudence does not apply only when selecting investments; ERISA imposes "a continuing duty to monitor investments and remove imprudent ones." Turner, 530 F. Supp. 3d at 133 (citing Tibble v. Edison Int'l, 575 U.S. 523, 530, 135 S. Ct. 1823, 1829, 191 L. Ed. 2d 795 (2015)); see Moitoso, 451 F. Supp. 3d at 204-05.
The relevant inquiry in this case, therefore, is whether Boston College "took into account all relevant information in performing its fiduciary duty under ERISA" by selecting--and continuing to offer--the TIAA, CREF, and Fidelity investment options. See Bunch v. W.R. Grace & Co., 532 F. Supp. 2d 283, 288 (D. Mass. 2008), aff'd, 555 F.3d 1 (1st Cir. 2009).
i. TIAA Real Estate Account and CREF Stock Account
First, Plan Participants take issue with the TIAA Real Estate Account and the CREF Stock Account. Compl. ¶¶ 84-91. Over a quarter of Plan I participants' assets are invested in these two options alone. Id. ¶ 76; Pls.' Opp. at 15. Plan Participants allege that the CREF Stock Account has "continued to underperform lower-cost funds in the same category that measured their performance against the same benchmark index." Compl. ¶ 97. The Participants compare three other "actively managed, largecap funds with similar underlying asset allocations: The Vanguard Diversified Equity Fund (Investor Class) (VDEQX), the Vanguard PRIMECAP Fund (Admiral) (VPMAX), and the Vanguard Capital Opportunity Fund (Admiral) (VHCAX)," Compl. ¶ 70 (citing Short v. Brown Univ., No. 17-cv-00318-M-PAS (D.R.I. July 6, 2017)), and find that the CREF Stock Account underperformed all three alternatives, id. ¶¶ 98-104.
Plan Participants allege that Boston College should have been on notice that the TIAA Real Estate Account and CREF Stock Account were imprudent investment options due to two recent published court opinions that mentioned these funds. See Compl. ¶¶ 85, 91 (citing Sweda v. Univ. of Penn., 923 F.3d 320, 331 (3d Cir. 2019); Short v. Brown Univ., 320 F. Supp. 3d 363, 372 (D.R.I. 2018)). Plan Participants allege that "the long-term retention of a substantial number of underperforming funds at higher than comparable costs gives rise to a plausible inference of an objectively imprudent monitoring process." Pls.' Opp. 14 (citing Baker v. John Hancock Life Ins. Co. (U.S.A.), No. 1:20-CV-10397-GAO, 2020 WL 8575183, *1 (D. Mass. July 23, 2020) (Sterns, J.)).
Plan Participants also allege that Boston College should have been on notice of the imprudence of the TIAA and CREF offerings due to a joint investigation by the Securities and Exchange Commission and New York's Attorney General, which "brought to light disturbing information about a TIAA subsidiary's marketing practices." Compl. ¶ 86 (citing In re Investigation by Letitia James of TIAACREF Individual & Institutional Services, LLC, Assurance of Discontinuance at 1, 21-035 (July 13, 2021)). Despite the mention of these funds in the two published opinions and in the New York Attorney General's investigation, both options remained in Plan I and have been retained throughout the Class Period. Id.
Boston College counters as follows:
First, the Complaint provides undated data, only suggesting that the figures show "continued" underperformance, despite the fact that, as pled, the CREF Stock Account is currently outperforming two of the Vanguard funds on 1-year returns . . . .Defs.' Mem. 14-15. Boston College also emphasizes that with respect to the TIAA Real Estate Account available in Plan I, the complaint only compares a single data point for a variety of funds not limited to real estate, Defs.' Reply 7, and that "the performance of three Vanguard funds does not provide a meaningful benchmark to the CREF Stock Account," id. at 9.
Second, a single, undated snapshot of one-, three-, and five-year returns as compared with three other investment options is hardly a long enough period to show that the Defendants' selection and retention of this fund was imprudent . . . .
Third, two of the three Vanguard funds Plaintiffs prefer (the Vanguard Capital Opportunity Fund and the Vanguard PRIMECAP Fund) to the CREF Stock Account (Compl. ¶ 98) have been closed to new investors other than certain investors that utilize Vanguard services since at least 2015 . . . .
Despite Boston College's qualms, Plan Participants have alleged sufficient facts at this stage to state a plausible claim that the TIAA and CREF offerings were imprudent: disputes about the proper industry metric with which to evaluate the funds must be saved for subsequent proceedings; Plan Participants have put forward sufficient evidence to plausibly show consistent underperformance given the previous cases in this Circuit dealing with these funds; and Plan Participants have shown at least one viable alternative investment offering.
Boston College's first argument that Plan Participants have only set forth a single metric--an industry average for funds including non-real estate funds--with which to evaluate the TIAA funds is compelling; however, "[d]isputes over the appropriateness . . . of benchmarks . . . are inappropriate at the motion to dismiss stage." In re Biogen, Inc. ERISA Litig., 2021 WL 3116331, at *6 (citation omitted); see Short v. Brown Univ., 320 F. Supp. 3d 363, 372 (D.R.I. 2018) ("To the extent [Defendant] . . . presents different benchmarks to measure the Plans' performance, it raises factual issues that cannot be decided at the pleading stage.").
Second, as to whether the "single undated snapshot of one-, three-, and five-year returns alone is adequate to show the "consistent underperformance" required to create an inference of imprudence," it would seem that Plan Participants are not relying on the aforementioned data alone--these same funds were also called out as underperforming in an opinion in the District of Rhode Island, a court within the First Circuit. See Short, 320 F. Supp. 3d at 372 (citing Daugherty v. Univ. of Chi., No. 17C3736, 2017 WL 4227942, at *7-8 (N.D. Ill. Sept. 22, 2017)) ("[T]he CREF Stock Account and TIAA Real Estate Account underperformed for years compared to industry standards, and that Defendant failed to prudently evaluate, monitor, and remove those investment options.") In other words, Plan Participants' "duty of prudence claim does not rest solely on the performance of the [investment options] in hindsight." See Turner, 530 F.Supp.3d at 133. Plan Participants are not simply alleging that the TIAA and CREF investment offerings were imprudent because of their poor performance as shown in the snapshot in the complaint, but that Boston College has breached its duty by not being aware of the historical imprudence of such investments as detailed in recent published court opinions. See In re Biogen, Inc. ERISA Litig., 2021 WL 3116331, at *6 (citation omitted) ("Plaintiffs do not base their claim, however, in Defendants' initial investment in the [investment offering] or irregular performance alone . . . . Rather, their claim is rooted in Defendants' continued investment and failure to remove the [investment offering] following its consistent underperformance . . . .") (citation omitted); see also Baker v. John Hancock Life Ins. Co. (U.S.A.), No. 1:20-CV-10397-GAO, 2020 WL 8575183, at *1 (D. Mass. July 23, 2020) (Stearns, J.).
On the one hand, just as "nothing in ERISA requires every fiduciary to scour the market to find and offer the cheapest possible fund," Turner, 530 F.Supp.3d at 134 (quoting Hecker v. Deere & Co., 556 F.3d 575, 586 (7th Cir. 2009)), it would not be reasonable to impugn Boston College with the duty to scour every published court opinion for any mention of a fund included in their plan. On the other hand, the fact that the TIAA and CREF offerings made up such a large percentage of the investment offerings in Plan I--nearly one quarter--justifies heightening the burden imposed on Boston College regarding these specific investment offerings. See Compl. ¶ 43 ("In each Plan, the vast majority of investment options are TIAA or Fidelity funds, with four or fewer options from outside fund families available in each Plan"). In addition to the recent Brown decision in this Circuit, the N.Y. A.G.'s report provides additional notice of the potential imprudence using TIAA as a recordkeeper and continuing to retain the TIAA and CREF offerings. See id. ¶¶ 86-91. As Plan Participants have persuasively stated, "[t]he fact that Defendants ignored multiple warning signs," including the two published opinions and the New York A.G.'s report, when combined with the "repeated underperformance of these two highly significant offerings[,] supports a conclusion that Defendants' entire monitoring process was flawed." Pl.s' Opp. at 15.
Finally, Boston College's third argument--that two of the three funds Plan Participants identify as alternatives to the CREF account were unavailable during the class period--is compelling; however, it would seem logical that one viable alternative is sufficient. See In re Biogen, 2021 WL 3116331, at *6; Baker, 2020 WL 8575183, at *1.
While Plan Participant's evidence as to the imprudence of the TIAA offerings is certainly not overwhelming, there do seem to be sufficient factual allegations for it to be plausible that Boston College failed to take "into account all relevant information" when making the decisions to offer and continue to have the TIAA offerings in question make up such a large percentage of the plans' assets. See Bunch v. W.R. Grace & Co., 532 F. Supp. 2d 283, 288 (D. Mass. 2008), aff'd, 555 F.3d 1 (1st Cir. 2009); Waldner v. Natixis Inv. Managers, L.P., No. CV 21-10273-LTS, 2021 WL 9038411, at *5 (D. Mass. Dec. 20, 2021) (Sorokin, J.); Toomey v. DeMoulas Super Markets, Inc., No. CV 19-11633-LTS, 2020 WL 3412747, at *3 (D. Mass. Apr. 16, 2020). Boston College's basis for dismissal of claim one thus must be found elsewhere.
ii. Fidelity Investment Offerings
Second, Plan Participants allege that Boston College should have been on notice of the high fees and underperformance of certain Fidelity offerings, and that Boston College's failure to remove such offerings from Plan II was imprudent. Compl. ¶¶ 93-94. As with TIAA, Plan Participants point to court opinions that should have alerted Boston College to the potential imprudence of the Fidelity offerings. Ibid. (citing Tracey, 2017 WL 4478239; 404 F. Supp. 3d 356; Moitoso, 451 F. Supp. 3d at 218-19). Additionally, Plan Participants allege that Boston College "failed to move [assets in] Plan II into less expensive versions of options already in the Plan." Id. ¶ 95. Specifically, Plan II "was invested in the 'K' share class for different Fidelity options, including the Fidelity Growth Company Fund and Fidelity Contrafund, the two largest options in the Plan. As Fidelity's own materials show, the Plan qualified for K6 shares." Ibid.
Boston College first counters that the cases cited by Plan Participants to show the potential imprudence of the Fidelity investment options are merely allegations about Fidelity's investment and recordkeeping fees and that such cases have no bearing on the facts alleged here. Defs.' Mem. 17 n.5 (citing Sverdlov v. Eydinov, 555 F. Supp. 3d 1, 3 (D. Mass. 2021) (Zobel, J.)). Moreover, Boston College argues, one of the cases Plan Participants cite in support of this portion of their claim, Moitoso, involved a challenge to Fidelity's management of its own plan, including disloyalty allegations not relevant here. Ibid. (citing 451 F. Supp. 3d 189).
Second, regarding the availability of less expensive share classes, Boston College states--correctly--that Plan Participants "provide no facts regarding the availability of these investment options prior to that date and whether they were available to Plan II" and "do not plead any facts showing that these lower-cost share classes provided the same features as the classes actually offered in Plan II." Defs.' Mem. 16-17; see also Def.'s Reply 9-10 (Plan Participants need to allege more than a "speculative unpleaded supposition . . . .").
With regard to the availability of cheaper share classes, Plan Participants respond that there is evidence that the alternative investments were available at the relevant time, but that such a question is factual in nature and thus inappropriate at the motion to dismiss stage. Pls.' Opp. 18-19. In any event, Plan Participants claim that Boston College cannot challenge the point that "an allegation that plan fiduciaries failed to obtain identical lower-cost investment options is sufficient to state a cause of action at the pleading stage." Ibid. (citing Turner, 530 F. Supp. 3d at 135).
While the evidence put forward by Plan Participants with regard to the prudence of continuing to have the Fidelity offerings make up such a large percentage of Plan II is relatively thin, keeping in mind the information asymmetry at play at this stage of ERISA cases, Plan Participants likely have alleged sufficient facts to state a plausible claim that Boston College breached its duty of prudence with regard to the Fidelity offerings in Plan II, i.e., that Boston College's process of selecting, monitoring, and continuing to offer the Fidelity investment offerings in Plan II was flawed. See In re Biogen, Inc. ERISA Litigation, 2021 WL 3116331, at *10 (citing Velazquez v. Mass. Fin. Sevs. Co., 320 F. Supp. 3d 252, 259 (D. Mass. 2018) (Zobel, J.)).
First, as with the TIAA and CREF offerings in Plan I, the specific mention of these funds as suspect in two court opinions--this time both in the District of Massachusetts, the district in which Boston College sits--is a circumstance unusual enough to warrant, when combined with the significant percentage of Plan II's assets invested in Fidelity funds, an expectation that Boston College should have been on notice of the potential imprudence of such offerings. See Moitoso, 451 F. Supp. 3d at 218-19. Though these cases do not directly call out the Fidelity funds in question as imprudent as Brown and Sweda do the TIAA and CREF investments, it is plausible that Boston College nonetheless acted imprudently by failing to monitor these cases and adjust Plan II's investments based on the picture they painted of Fidelity funds. See ibid.
While Boston College is correct that Plan Participants "do not plead when [the alternative] share classes became available, nor do they plead that these cheaper share classes offered the same features as the versions available in the plan," see Def.'s Reply 10, Plan Participants are correct that they do not need to include such details at the pleading stage and that non-speculative allegations that cheaper share classes were available are sufficient--when combined with the notice of the potential imprudence of such investments to Boston College from court cases in this District--to survive a motion to dismiss. See Moitoso, 451 F. Supp. 3d 189 at 218-19.
While the relatively limited evidence put forward to show the imprudence each of the investment offerings in question (TIAA and CREF for Plan I; Fidelity for Plan II) is probably insufficient alone, when combined, Plan participants likely have put forward sufficient evidence to warrant an inference that Boston College plausibly breached their duty of prudence by continuing to have these investment options make up such a large percentage of the plans' offerings. See Bunch v. W.R. Grace & Co., 532 F. Supp. 2d 283, 288 (D. Mass. 2008), aff'd, 555 F.3d 1 (1st Cir. 2009); Waldner v. Natixis Inv. Managers, L.P., No. CV 21-10273-LTS, 2021 WL 9038411, at *5 (D. Mass. Dec. 20, 2021) (Sorokin, J.) ("Each of these allegations taken individually are not sufficient to plausibly state a claim . . . however, these facts taken together have "nudged [Plaintiffs'] claims across the line from conceivable to plausible" that Defendants selected and managed the funds in the Plan with imprudence and disloyalty.") (citation omitted); Toomey v. DeMoulas Super Markets, Inc., No. CV 19-11633-LTS, 2020 WL 3412747, at *3 (D. Mass. Apr. 16, 2020) ("[T]he Court is not determining that any single allegation or category of allegations suffices to allege imprudence or that, taken together, they establish imprudence, but only that Plaintiff has plausibly alleged the claim in light of the totality of the allegations.").
The fact that TIAA or CREF and Fidelity, respectively, make up a large percentage of the investment offerings in the two plans also weighs in favor of Plan Participants establishing a plausible breach of the duty of prudence. See id. at *11 (citing Braden v. Wal-Mart, 588 F.3d at 589, 596) ("[A] far narrower range of investment options like those presented posed a more plausible claim for imprudent management."); Moitoso, 451 F. Supp. 3d at 218-19. Taking into account the totality of the circumstances, it is plausible that Plan Participants have alleged sufficient facts to raise "a plausible inference that the process for selecting or monitoring the [investment offerings] was deficient," specifically that such a monitoring process did not take into account the recent published court opinions in this Circuit calling into question the prudence of the funds in question and the fact that Plan II's assets could have potentially been converted to less expensive share classes. See, e.g., Turner, 530 F. Supp. 3d at 134; Kenney v. State St. Corp., 694 F. Supp. 2d 67, 76 (D. Mass. 2010) (Saris, J.).
Therefore, Boston College's motion to dismiss cannot be granted on the basis of the alleged imprudent investment options, especially when keeping in mind that "[n]o matter how clever or diligent, ERISA plaintiffs generally lack the insider information necessary to make out their claims in detail unless and until discovery commences." See Tracey, 2017 WL 4478239, at *11 (citing Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 598 (8th Cir. 2009)).
Taking into account the totality of the circumstances, Plan Participants have plead sufficient factual allegations to state a plausible claim against Boston College for breach of the duty of prudence as a result of unreasonable fees and/or imprudent investment options. Boston College's motion to dismiss count one thus cannot be granted on these bases.
2. Breach of Duty to Comply with Plan Documents (29 U.S.C. § 1104(a)(1)(D))
Plan Participants also allege that Boston College's conduct constitutes a breach of their duty to act in accordance with the documents and instruments governing the plan, in violation of ERISA Section 404(a)(1)(D), 29 U.S.C. § 1104(a)(1)(D). Compl. ¶ 123. In demonstrating at least plausible factual allegations that Boston College breached its duty of prudence as to the Plans, Plan Participants have, de facto, proven that Boston College likewise breached their duty to act in accordance with the documents and instruments governing the plan.
As outlined in ERISA Section 404(a)(1)(D):
A fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and-- in accordance with the documents and instruments governing the plan insofar as such documents and instruments are consistent with the provisions of this subchapter and subchapter III.29 U.S.C. § 1104(a)(1)(D). According to Plan Participants, the Plans' Investment Policy Statement is a document and instrument governing the Plans within the meaning of ERISA Section 404. Compl. ¶ 119. The Investment Policy Statement requires the Plans' fiduciaries to, among other things, ensure that the investment options made available to participants "charge fees that are reasonable for the asset class and investment style." Ibid. The Investment Policy Statement also sets forth a procedure for the fiduciaries to monitor and if necessary, replace or eliminate investment options. Ibid. Plan Participants allege that Boston College breached their duty to act in accordance with their own policy which is considered a "document and instrument governing the plan" under ERISA Section 404, 29 U.S.C. § 1104. Id. ¶ 120.
In demonstrating a breach of the duty of prudence on the part of Boston College, Plan Participants laid out plausible, reasonable inferences based on the facts available to them to demonstrate that Boston College also, potentially, breached their own Plans' Investment policy statement. See Compl. ¶¶ 119-122. The claim of breach of the duty to act in accordance with the documents and instruments governing the plan is recognized by both Plan Participants and Boston College as being directly related and rather intertwined in the breach of the duty of prudence. See Pls.' Opp 19. Plan Participants again point to the fact that Boston College failed to remove investments that were no longer appropriate and retained imprudent funds despite the availability of superior alternative investments that would have cost less and performed better. Compl. ¶ 121. Plan participants also again point to Boston College's failure to remove TIAA and Fidelity funds, and to investigate alternatives to them as recordkeepers as breaches of the duty to comply with plan documents. Id.
Likewise, as with the breach of the duty of prudence, Boston College again argues that Plan Participants have failed to assert any factual claims that demonstrate a breach of their duty to act in accordance with the documents and instruments governing the plan. Defs.' Mem. 17.
So long as the facts that are alleged as to the duty of the breach of prudence are plausible, as they are here, the breach as of the duty to act in accordance with the documents and instruments governing the plan is therefore plausible as well. See Tracey, 2017 WL 4478239, at 4 ("Magistrate Judge Bowler correctly observes that, ordinarily, a duty to monitor other fiduciaries is derivative of plaintiffs' other claim"). Accordingly, given that Plan Participants have alleged sufficient facts supporting a claim for breach of the duty of prudence, they have likewise stated a plausible claim for breach of the duty to comply with plan documents. See ibid.
* * *
Given that Plan Participants have alleged sufficient facts to nudge their claims for the breach of the duty of prudence and breach of the duty to comply with plan documents from merely conceivable to plausible, Boston College's motion to dismiss is DENIED as to count one.
C. Count 2 - Failure to Monitor
Under count two, Plan Participants challenge the Trustees' failure to monitor fiduciaries and service providers to the Plans under ERISA Sections 409 and 502, 29 U.S.C. §§ 1109(a), 1132(a)(2), and 1132(a)(3). Compl. ¶ 1. Plan Participants allege that the Trustees breached their duty to monitor the other Defendants--the investment committee and Jane and John Does 1-10--in the following ways:
a) failing to monitor and evaluate the performance of the Plan Investment Committee and failing to have a system in place for doing so. The Trustees of Boston College did nothing as the Plans suffered significant losses as a result of the Committee's imprudent actions and omissions;Compl. ¶ 132. Plaintiffs claim that "ERISA Sections 409 and 502, 29 U.S.C. §§ 1109(a), 1132(a)(2), and 1132(a)(3), render the Trustees liable to restore to the Plans all losses suffered as a result of the fiduciary breaches that resulted from its failure to properly monitor its appointed fiduciaries on the Investment Committee." Id. ¶ 134. Plan Participants allege that the Trustees breached their fiduciary monitoring duties in numerous ways, including monitoring and evaluating the performance of the Committee and failing to have a system in place for doing so, failing to monitor the process for selecting investments, failing to remove Committee members whose performance was inadequate. Id. ¶¶ 131-32.
b) failing to monitor the processes by which those responsible selected and monitored Plan investments. The monitored fiduciaries actions and inactions would have alerted a prudent fiduciary to the breaches of fiduciary duties outlined above; and
c) failing to remove Investment Committee members whose performance was inadequate as demonstrated by their retaining imprudent, excessively costly, and poorly performing investments within the Plan to the detriment of the Plan and Plan participants' retirement savings.
As outlined above, ERISA Sections 409 and 502 require monitoring fiduciaries to ensure that fiduciaries are satisfying their obligations. 29 U.S.C. §§ 1109(a); 29 U.S.C. §§ 1132(a)(2), 1132(a)(3). These obligations include those with respect to investment selections, monitoring of service providers, and compliance with plan documents. 29 U.S.C. §§ 1109(a); 29 U.S.C. §§ 1132(a)(2), 1132(a)(3). Monitoring fiduciaries are required to act promptly to protect plans, participants, and beneficiaries when monitored fiduciaries breach their own obligations. Compl. ¶ 131.
In Tracey v. Massachusetts Inst. of Tech., the Court adopted the understanding that "plaintiffs' claims for failure to monitor [will] continue insofar as they derive from plaintiffs' other claims." No. CV 16-11620-NMG, 2017 WL 4478239, at *4 (D. Mass. Oct. 4, 2017) (Gorton, J.). To the extent that plaintiffs have plausibly alleged that defendants breached their fiduciary duties directly, plaintiffs have also plausibly alleged that defendants have breached their duty to monitor. Ibid. This Court agrees that so long as Plan Participants have alleged plausible facts to show that Boston College has potentially breached its duty of prudence, it has also stated a plausible claim for the potential failure to monitor on the part of the Trustees.
* * *
The Court thus DENIED Boston College's motion to dismiss as to count two.
III. CONCLUSION
For the foregoing reasons--specifically because Plan Participants have alleged sufficient facts to raise a plausible inference that (1) Boston College breached its duty of prudence and duty to comply with plan documents by subjecting the plans to excessive record keeping fees and by offering imprudent investment offerings and (2) that the Trustees breached their duty to monitor the Committee and the ten John and Jane Does-- this Court DENIES Boston College's Motion to Dismiss, ECF No. 12, and shall allow both counts of Plan Participants' complaint to proceed to discovery.