Seventh Circuit Upholds Dismissal of ERISA Claims Against Oshkosh Corporation for Alleged Mismanagement of Retirement Plan

Albert v. Oshkosh Corp., No. 21-2789, __F.4th__, 2022 WL 3714638 (7th Cir. Aug. 29, 2022) involves several ERISA claims brought by Andrew Albert against his former employer, a subsidiary of Oshkosh Corporation, for mismanaging their retirement plan. Albert alleged that “Defendants breached their fiduciary duties by authorizing the Plan to pay unreasonably high fees for recordkeeping and administration, failing to adequately review the Plan’s investment portfolio to ensure that each investment option was prudent, and unreasonably maintaining investment advisors and consultants for the Plan despite the availability of similar service providers with lower costs or better performance histories.” The district court dismissed all of Albert’s claims. While on appeal, the Supreme Court decided Hughes v. Northwestern University, ––– U.S. ––––, 142 S. Ct. 737, 211 L.Ed.2d 558 (2022), which vacated the Seventh Circuit’s decision in Divane v. Northwestern University, 953 F.3d 980 (7th Cir. 2020). Though Divane is still pending at the court, this panel affirmed the dismissal of all claims for failure to state a claim, finding that Hughes does not call for a different result.

First, on the issue of standing, the Seventh Circuit found that Albert has standing with respect to the claims which seemingly affect all participants in the Plan, such as excessive recordkeeping fees, excessive investment-advisor fees, breach of the duty of loyalty, failure to monitor, prohibited transactions, and breach of the duty to disclose. He also invested in at least some actively managed funds, so this is enough to conclude he has standing for his investment-management fee claims. This could change during discovery, however, and a plaintiff has a continuing obligation to maintain their personal interest in the dispute at all stages of litigation.

Second, on the duty of prudence claims, the court found that Albert’s comparison of recordkeeping fees paid by nine random plans from around the country is not enough to support the excessive recordkeeping fees claim. There are no allegations as to the quality or type of recordkeeping services the comparator plans provided. With respect to the investment-management fees claim, the court found that the Form 5500 on which Albert relies does not require plans to disclose where money from revenue sharing goes such that one cannot determine what the other plan participants actually pay for investment management. The court also rejected Albert’s “net-expense theory,” that is, the Plan should have offered higher-cost share classes of certain mutual funds because the “net expense” of the funds would be lower in light of revenue sharing. The court found no support for this theory and no court has said that ERISA requires a fiduciary to choose investment options on this basis. The court further rejected the “actively managed funds theory,” that is, that some of the actively managed funds were too expensive. There is no violation of the duty of prudence where a plan merely offers actively managed funds in its mix of investment options. Lastly, the court rejected Albert’s claim that the Plan paid its investment advisor fees that were excessive, and therefore, imprudent. The court found that Albert did not provide any basis for comparison between the fees the Plan paid and those paid to other service providers.

Third, on the duty of loyalty claims, the court agreed with Oshkosh that Albert’s allegations are insufficient to state a claim for breach of the duty of loyalty. The court found that Oshkosh did not violate its duty of loyalty when Fidelity encouraged the Plan to use SAI (a Fidelity subsidiary) as its investment advisor. There are no allegations that Oshkosh engaged in self-dealing at the expense of the Plan. And Fidelity is not a named defendant nor a fiduciary. Albert did not identify any comparator investment advisors which would show that its fees are unreasonable in light of available alternatives.

Lastly, the court dismissed the duty to monitor claims since it dismissed the fiduciary duty claims. The court also dismissed the claims that the Plan’s payments to Fidelity and SAI were prohibited transactions. Finally, the court found that Oshkosh was not required to disclose the method of calculating revenue-sharing fees.