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401(k) Excessive Fee Suit Won’t Wait for SCOTUS Review


A federal judge has denied a request to hold off proceedings in an excessive fee suit pending the Supreme Court’s review of a case that the fiduciary defendants say could impact the burden of proof.

Specifically, U.S. District Judge Marilyn Horan has denied Wesco Distribution Inc.'s request for a stay in a suit brought against the plan and its fiduciaries pending the United States Supreme Court’s ruling in Hughes v. Northwestern University—a case that the law firm of Schlichter Bogard & Denton says is having a “chilling effect” on excessive fee litigation, in that there is an apparent split in the various federal court districts as to which side bears the burden of proof in arguing that “…fiduciaries caused the participants to pay investment-management or administrative fees higher than those available for other materially identical investment products or services.”

The Case

The suit (Mator v. Wesco Distrib., Inc., W.D. Pa., No. 2:21-cv-00403, complaint 3/26/21) in question before Judge Horan was filed in March of this year on behalf of current participants Robert Mator and Nancy Mator against the fiduciaries of the Wesco Distribution, Inc. Retirement Savings Plan, a plan with 8,870 participants and some $750 million in net assets. The suit claims, as most do, that as a “large” retirement plan, the fiduciaries “…had tremendous bargaining power to demand low-cost administrative and investment management services,” but that “instead of leveraging the Plan’s substantial bargaining power to benefit Plan participants and beneficiaries, Defendants caused the Plan to imprudently pay unreasonable and excessive fees….” 

To this point, the claims alleged (and the brevity with which they were presented) were perhaps most notable for the (relatively) small size of the plan, and that the plaintiffs were represented by Franklin D. Azar & Associates PC[i] (and Chimicles Schwartz Kriner & Donaldson-Smith LLP), a firm that had previously held itself out as a personal injury law firm that specializes in motor vehicle accidents, defective products and slip-and-fall accidents.

‘Stay’ Way

Here, Judge Horan noted that the “Defendants argue that a stay will reduce the burdens on the parties and the Court in preventing multiple rounds of briefing on the motion to dismiss and that a stay will not prejudice or tactically disadvantage Plaintiffs[ii]. In response, Plaintiffs oppose a stay and argue that judicial stays are disfavored, and Defendant fails to establish their right to a stay.” In support of their position—more specifically that the Supreme Court will wind up supporting the Third Circuit’s holding in Sweda v. Univ. of Pa., 923 F.3d[iii]—and that, in any event, that decision is not likely to emerge until June of 2022.

“The Court has carefully considered both Sweda and the pending issues presented in Hughes,” Judge Horan’s order states. “After due consideration, the interests of justice mandate that a stay is not warranted.” 

And so, the case will proceed without waiting to see what the Supreme Court may have to say on the issue.


[i] However, they have recently brought suit unsuccessfully against the CenturyLink Dollars & Sense 401(k) Plan, had mixed results in litigation against Voya, while also filing suit against the fiduciaries of Pioneer Natural Resources USA, Inc., a suit that was eventually settled for $500,000.

[ii] The defendants here had noted, “There is little to be gained—and much to be lost—from finishing all briefing on the motion to dismiss and having this court attempt to resolve the motion, when Hughes may upend or further inform the analysis.” 

[iii]After a win for the fiduciary defendants at the district court level, that was rejected on appeal, it was eventually settled for $13 million and procedural changes.