Sixth Circuit Affirms Dismissal of ERISA Fiduciary Breach Claim in DENSO 401(k) Case

In England v. DENSO Int’l Am. Inc., No. 24-1360, —F.4th—-, 2025 WL 1300923 (6th Cir. May 6, 2025), the Sixth Circuit affirmed the dismissal of a putative class action alleging that DENSO’s 401(k) plan fiduciaries breached their duty of prudence under ERISA by overpaying for recordkeeping and administrative services. The plaintiffs argued that the plan, with over $1.7 billion in assets and 14,000 participants, should have leveraged its size to negotiate lower fees but instead paid double the market rate for comparable plans. The court dismissed the complaint for failing to provide “context-specific” facts necessary to establish a plausible claim, such as detailed comparisons of the services and quality provided to the DENSO plan versus other plans.

The plaintiffs alleged that between 2016 and 2020, the plan paid approximately $71 per participant annually to Empower, the recordkeeper, for bundled recordkeeping and administrative (RKA) services. This amount was claimed to be over double the market rate for comparable services based on a set of 15 similar-sized plans, which paid fees ranging from $25 to $39 per participant. The plaintiffs argued that the excessive fees resulted in lower net returns for plan participants, breaching ERISA’s prudence obligations.

The District Court dismissed the complaint, ruling that the plaintiffs failed to provide the necessary “context-specific” facts that would make their claims plausible, such as detailing the types and quality of services provided. The Sixth Circuit affirmed this decision, emphasizing the requirement for plaintiffs to allege facts that allow the court to reasonably infer a breach of fiduciary duty.

Under Federal Rule of Civil Procedure 12(b)(6), a complaint must contain sufficient factual matter to state a claim that is plausible on its face. The court highlighted the need for a “context-sensitive” approach, which involves identifying the alleged problematic financial metric and comparing it to a “meaningful benchmark.” For claims of excessive recordkeeping fees, plaintiffs must demonstrate that the fees were excessive relative to the services rendered, or show other relevant factors determining whether a fee is excessive.

The Sixth Circuit found the plaintiffs’ comparison to other plans insufficient because the complaint lacked specifics about the services and quality provided to the DENSO plan versus the comparator plans. The court noted that variations in service levels, which the plaintiffs dismissed as immaterial, were crucial for assessing plausibility. As such, the complaint failed to establish a meaningful benchmark for comparison, leaving the court unable to determine whether the fees were excessive under the circumstances.

The court cited similar conclusions from other circuits, where complaints were dismissed for failing to provide substantial allegations about the specific services or quality involved. It distinguished this case from others where plaintiffs successfully alleged excessive fees by providing detailed context about services and demonstrating actual cost differences justified by market comparisons.

The Sixth Circuit also rejected the plaintiffs’ reliance on a generalized assertion that mega plans could negotiate lower fees based on economies of scale without presenting specific allegations about the disparity in services. The court underscored the necessity of detailing the services offered and whether they justified the cost, reaffirming the principle that fiduciary duty claims under ERISA must be grounded in specific, contextual facts.

Ultimately, the court concluded that the plaintiffs’ allegations were too generic to survive a motion to dismiss and affirmed the district court’s judgment in favor of the defendants. This decision reinforces the stringent pleading standards required for ERISA fiduciary breach claims, emphasizing the necessity of providing detailed, context-specific allegations to establish the plausibility of claims regarding excessive fees.