A suit alleging that a provider presented plan trustees with an imprudently expensive fund menu overweighted with proprietary choices has been dismissed.
The plaintiff in this case — Craig M. Walker, a former Clifford Chance US LLC litigator who represented himself — had alleged that Merrill Lynch failed to provide a sufficient number of low-fee funds on the roster of funds provided to plan trustees, included its own high-fee funds and collective trusts in that roster, and orchestrated a fee sharing arrangement by which it “reaped kickbacks from fees Plan participants paid to the funds.”
The plaintiff had argued that Merrill Lynch became an ERISA fiduciary through its actions in selecting the roster of investment funds for the Clifford Chance 401(k) plan, but the judge disagreed, noting that courts (including the Hecker v. Deere decision, one of the early excess revenue-sharing cases) have consistently declined to impose fiduciary status on service providers that create a menu of investment options for plan trustees. Nor was the judge persuaded that Merrill Lynch provided the type of regular and individualized advice to the plan that would make it an ERISA fiduciary on that basis.
Ultimately the claims were dismissed rather abruptly, on the grounds that the plaintiffs failed to show that Merrill Lynch acted as a fiduciary under ERISA when it provided recordkeeping, administrative and investment services to the Clifford Chance plan.
Of lesser import, the judge also rejected the notion that Merrill Lynch should be held liable under the Sherman Antitrust Act for using its position as plan recordkeeper to force its in-house investment products on participants.
Judge Paul G. Gardephe of the U.S. District Court for the Southern District of New York issued the decision.
