Tenth Circuit Adopts Eighth Circuit Pleading Standard for ERISA Breach of Fiduciary Cases Alleging Imprudent Investments

In Matney v. Barrick Gold of N. Am., No. 22-4045, __F.4th__, 2023 WL 5731996 (10th Cir. Sept. 6, 2023), a putative class action against Barrick Gold of North America, its Board, and Benefits Committee for breach of fiduciary duty and failure to monitor fiduciaries under ERISA §§ 409 and 502, the Tenth Circuit affirmed the district court’s dismissal of the first amended complaint for failing to plausibly allege any breach of fiduciary duty based on the Committee’s offering of high-cost funds and recordkeeping fees. In a matter of first impression in this Circuit, the court adopted the Eighth Circuit’s pleading standard in these ERISA cases where a plaintiff is alleging imprudent investments and recordkeeping fees based on comparatively cheaper options in the marketplace.

Barrick Gold is a company with gold and copper mining operations and projects in multiple countries. It offers a defined-contribution benefit plan for eligible employees. The plan offers mutual funds and collective trusts as investment options. Barrick Gold appointed the Committee as the Plan administrator and fiduciary to select and monitor the performance of the trustees, record keepers and investment managers and advisors. The Committee retained Fidelity Management Trust Company to provide recordkeeping services for the Plan.

Plaintiff alleges that the Committee breached its fiduciary duty of prudence by charging too-high investment management fees and recordkeeping fees. The complaint compared the costs of the Plan’s investment options against comparable alternatives and compared the Plan’s recordkeeping fees against the average fees charged by smaller plans. Plaintiff alleged that the disparity in fees raised a reasonable inference that the Committee breached its fiduciary duty of prudence. The district court disagreed with Plaintiff and dismissed the complaint on the basis that Plaintiff’s allegations failed to raise an inference “that a prudent fiduciary in the same circumstances would have acted differently.” The district court also found wanting any facts supporting a breach of the duty of loyalty. Because the duty to monitor claim depended on a plausible allegation of the breach of other fiduciary duties, the court found that claim failed as well.

On appeal, the Tenth Circuit considered three primary issues: (1) whether the complaint plausibly alleged the Committee’s imprudence based on the Plan’s higher-cost offerings when cheaper comparable investment alternatives were available; (2) whether the complaint plausibly alleged a duty to monitor claim against Barrick Gold and its Board; and (3) whether the district court wrongly denied his Rule 59(e) motion to allow him to amend his complaint a second time.

On the first two issues, the court noted that this Circuit has yet to consider a plaintiff’s pleading burden in the specific context alleged here, so it looked to decisions from its sister circuits for guidance, including Meiners v. Wells Fargo & Company, 898 F.3d 820 (8th Cir. 2018) (concluding that a plaintiff must provide a meaningful benchmark against which to compare a fiduciary’s actions); Sweda v. University of Pennsylvania, 923 F.3d 320 (3d Cir. 2019) (finding plaintiffs met their burden at the motion to dismiss stage with allegations showing that the defendant selected and retained identically managed but higher cost retail class shares when lower cost institutional class shares were available); Smith v. CommonSpirit Health, 37 F.4th 1160 (6th Cir. 2022) (concluding that a meaningful comparison offered in support of imprudence must take into account the separate goals and risk profiles of the funds at issue); and Albert v. Oshkosh Corp., 47 F.4th 570 (7th Cir. 2022) (finding complaint contained insufficient factual allegations about the recordkeeping services). The court adopted the Meiners approach. For a plaintiff to raise an inference of imprudence through price disparity, a plaintiff has the burden to allege a “meaningful benchmark.” Applying the Meiners principles to this case, the court concluded that the complaint failed to state a plausible claim for breach of the duty of prudence. The court agreed with the district court that “the FAC failed to plausibly state a breach of the duty of prudence based on the allegedly higher investment management fees because (1) the FAC ‘misstate[d] expense ratios of Plan funds’ and (2) the FAC ‘ma[de] ‘apples to oranges’ comparisons that d[id] not plausibly [permit the court to] infer a flawed monitoring and decisionmaking process.’” Because this claim fails, the duty to monitor claim also fails.

Plaintiff filed his Rule 59(e) motion on May 19, 2022, a day before he filed his notice of appeal from the order granting the motion to dismiss but he did not amend his notice or file a new appeal after the district court denied the motion. The court determined that Plaintiff failed to appeal the district court’s order denying his motion and the court lacks jurisdiction to consider his argument on appeal.