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Home > Blog > Blog > Fiduciaries > Eighth Circuit Upholds Dismissal of ERISA Lawsuit Alleging Excessive Recordkeeping Fees

Eighth Circuit Upholds Dismissal of ERISA Lawsuit Alleging Excessive Recordkeeping Fees

In Barrett v. O’Reilly Auto., Inc., No. 23-2501, __F.4th__, 2024 WL 3980839 (8th Cir. Aug. 29, 2024) (Before: Benton, Arnold, and Stras, Circuit Judges), the Eighth Circuit affirmed the district court’s dismissal of this case where retirement plan participants alleged that the plan’s fiduciaries breached their ERISA duty of prudence to monitor the plan’s allegedly excessive recordkeeping fees, investment management fees, and total plan assets. The court found that the complaint does not provide meaningful benchmarks to evaluate the claim and held that: (1) plaintiffs failed to plead a meaningful benchmark by which to compare recordkeeping fees; (2) plaintiffs failed to plead a meaningful benchmark by which to compare investment management fees and total plan costs; (3) the failure-to-monitor claim was a derivative claim that could not survive without a sufficiently-pled underlying theory; and (4) dismissal with prejudice, without leave to amend, was appropriate.

With respect to the benchmarks, plaintiffs relied on the cost figures from the plan’s Form 5500, which discloses the aggregate payments made to the plan’s recordkeeper, T. Rowe Price. They divided the total costs by the number of participants to obtain a per-participant fee, in the range of $47 to $88 annually. The complaint then drew an inference of mismanagement from the higher fees. The court found this problematic because the service codes in the Form 5500s show that O’Reilly’s plan paid T. Rowe Price for more than just recordkeeping. The comparator plans did not have extra services listed in their Form 5500s or included a different bundle. “What the plaintiffs are asking us to do is draw an inference of mismanagement from the differing costs of two grocery baskets with different items. We would not expect them to cost the same, so their approach just doesn’t work.”

The court explained that had the plaintiffs alleged that the services purchased were sufficiently similar to render the comparisons valid, their claims might have been plausible. The court also explained that the plaintiff’s other allegations rely on aggregate data from the Investment Company Institute, but this data does not identify the cost structure of individual plans, just the overall costs. This does not create a plausible inference of mismanagement. Because plaintiffs did not plausibly allege that the decision-making process was flawed, their failure-to-monitor claim against O’Reilly and its board of directors also fails. Lastly, the court found that the district court did not abuse its discretion in failing to give the plaintiffs a second chance to amend the complaint because they did not properly request leave to amend.

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*Please note that this blog is a summary of a reported legal decision and does not constitute legal advice. This blog has not been updated to note any subsequent change in status, including whether a decision is reconsidered or vacated. The case above was handled by other law firms, but if you have questions about how the developing law impacts your ERISA benefit claim, the attorneys at Roberts Disability Law, P.C. may be able to advise you so please contact us.

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