Skip to main content

You are here


‘Short’ Excessive Fee Suit Struck Down


Noting that “Plaintiffs fail to plausibly allege the Committee breached its ERISA-imposed fiduciary duty by charging unreasonable recordkeeping fees”—another excessive fee suit has been dismissed.

The plaintiffs here—Keith K. Kruchten, Angel D. Muratalla and William Begani—sued on behalf of the $2.1. billion Ricoh USA, Inc. Retirement Savings Plan earlier this year. They’re represented by Capozzi Adler PC and rely on a foundation of allegations that are basically a “rinse and repeat” from other suits. 

In a suit that was a mere 27 pages long, they alleged that the Ricoh defendants as fiduciaries “breached the duties they owed to the Plan, to Plaintiffs, and to the other participants of the Plan by, inter alia, (1) failing to objectively and adequately review the Plan’s investment portfolio with due care to ensure that each investment option was prudent, in terms of cost; and (2) failing to control the Plan’s recordkeeping administration costs”—and that those shortcomings not only constituted a breach of the fiduciary duty, but “…were contrary to actions of a reasonable fiduciary and cost the Plan and its participants millions of dollars….”

‘Short’ Falls

That said, Judge Juan R. Sánchez made equally short order of the claims, noting that (even) “taking all facts in the Amended Complaint as true and deciding all inferences in their favor, Plaintiffs fail to plausibly allege the Committee breached its ERISA-imposed fiduciary duty by charging unreasonable recordkeeping fees. Plaintiffs also do not state a failure to monitor claim against Ricoh and the Board, since this second claim is derivative of the first. Accordingly, Defendants' motion to dismiss will be granted.”

He explained (Kruchten v. Ricoh USA, Inc., 2022 BL 407809, E.D. Pa., No. 2:22-cv-00678, 11/15/22) that “[m]ismanagement of plan expenses—like overcharging for recordkeeping and administrative fees—constitutes a breach of fiduciary duty because unreasonable expenses can ‘significantly reduce the value of an account in a defined-contribution plan,’” citing the Sweda case where, “In dismissing the defendants' 12(b)(6) motion, the Third Circuit held that the plaintiffs plausibly alleged a breach where they used ‘specific comparisons’ between the plan's choices and available alternatives and showed that the ‘practices of similarly situated fiduciaries’ differed from the allegedly imprudent plan.” 

Sweda Standard

Judge Sánchez went on to note that “in assessing mismanagement of recordkeeping expenses after Sweda, courts in this circuit have found relevant whether the plan engaged in competitive bidding for recordkeeping services, the plan's ability to leverage its size to reduce fees, how many recordkeepers the plan pays, and if the complaint includes "a sound basis for comparison [or] meaningful benchmark" to create an inference of imprudence.” He went on to note that “a meaningful benchmark must include both the quality and type of recordkeeping services provided by comparator plans to show that identically situated plans received the same services for less” (citing Mator v. Wesco). In the Wesco case, he noted that the court “dismissed the claim, holding that the plaintiffs' failure to "address the types or levels of services that any plan contracted to receive" made the benchmark an "apples to oranges comparison."

In fact, he compared the arguments made here to those in the Mator case, noting that this suit “fails to include any information about the specific services used by Defendants' Plan or the benchmark plans.”  In fact, he noted that the plaintiffs here “actually plead fewer facts than the plaintiff in Mator: The Amended Complaint lists the services that ‘all national recordkeepers have the capability to provide,’ but only notes that the Plan's selected services ‘fell within the broad range’ of those available.”

He continued to note that the plaintiffs here “allege nothing about the services chosen by the benchmark plans, the plans included in the NEPC survey, or those under review in their cited case law,” while “fiduciaries may select diverse services from bundled offerings or elect additional ala carte services, prioritizing various options differently depending on their plans' unique needs and reasonably choosing to pay more for higher quality services. Without this ‘apples to apples’ information, this Court cannot assess whether the Plan even pays for the same services as its comparators, much less what ‘similarly situated fiduciaries’ would do.”

Circuits ‘Breaking’

Then, in addition to the Sweda decision, he found “support in several other circuits,” citing Albert v. Oshkosh Corp., Smith v. CommonSpirit Health, among others. He also cited Matousek v. MidAmerican Energy Co., where he noted that it rejected the NEPC survey as a benchmark because it did not show which services were selected by the survey's plans.

Noting that “a failure to monitor claim cannot survive without an underlying breach of an ERISA-imposed duty,” he concluded that “Plaintiffs do not plausibly allege a breach of fiduciary duty, so they do not plausibly allege a failure to monitor.” Ultimately, “because the Amended Complaint does not provide meaningful benchmarks by which the Court can assess the prudency of Defendants' actions, the motion to dismiss will be granted with leave to amend.” 

Which means, of course, that despite the dismissal, the plaintiffs can modify/“fix” their claims and try again.

What This Means

You can add this decision to the (growing) list of cases dismissed for merely asserting that recordkeeping fee comparisons based solely on plan size (assets and/or participant count) are a suitable reference point. Setting aside the relevance of the benchmarks frequently cited in many of these actions (though this too has been emerging as a point of contention), it seems that the courts are beginning to appreciate that the determination of the reasonability of a fee requires an understanding of the services provided for that fee—and are disinclined to allow the plaintiffs’ bar to use the discovery process to make that determination. 

Quite simply, they have raised the bar for this type of litigation to proceed to trial.