A recent appellate court ruling that upheld a district court’s rejection of expert witness testimony has been raised as a defense in an excessive fee suit.
The suit in question involved the fiduciaries of the $5.2 billion L3Harris Retirement Savings Plan—a suit that in March 2022 claimed the participant-plaintiffs had exhausted their administrative remedies. Specifically, the plan had in place an administrative procedure to be followed if any participant or beneficiary believed they were entitled to a benefit beyond that which they received. It involved filing a claim with the plan’s Administrative Committee, in writing, that was to be reviewed within 90 days (unless an extension was granted).
Those claims were a precursor to the excessive fee suit that, as others in this class of litigation have, alleged that L3Harris violated its fiduciary duties by failing to negotiate lower record-keeping fees for workers—and for retaining expensive investment options in the $5.2 billion L3 Technologies Master Savings Plan.
For its part, L3Harris argued in the original summary judgment motion that the plaintiffs hadn’t presented evidence that the record-keeping fees and the funds in question weren't "objectively prudent," or that "no reasonable 401(k) plan fiduciary would have included them" on a list of choices.
They also noted that it was “well-settled that, to show imprudence, a plaintiff has to offer a 'meaningful benchmark,”—and that “no court has held that a single fund satisfies this requirement. And, because it will always be possible to find at least one less expensive fund, such evidence does not provide the requisite meaningful comparison." But, and perhaps significantly to its recent amendment to that motion, L3Harris pointed to the expert employed by the plaintiffs as having failed to identify a meaningful benchmark index or comparable peer group.
Expert ‘Opinion’
In the supplemental filing (Stengl et al. v. L3Harris Technologies Inc. et al., case number 6:22-cv-00572, in the U.S. District Court for the Middle District of Florida) to that motion (a “notice of supplemental authority in support of their motion for summary judgement and motion to exclude expert testimony of Michael Dicenso”), L3Harris cited the recent decision in a case involving Cornell University. From that case they cited two quotes:
“At the summary judgment stage, Plaintiffs sought to establish loss primarily through the testimony of two putative experts on the subject of the market for contribution plan recordkeeping. Al Otto and Ty Minnich. Both declared that, in their ‘experience,’ a reasonable recordkeeping rate for the Plans would have been $35 to $40 per participant. But neither offered any cognizable methodology in support of their conclusions, instead simply referencing their knowledge of the relevant industry and a few examples of other university plans that paid lower fees, though without explaining how these putative comparators were selected. Given these deficiencies, the district court did not abuse its discretion in excluding Otto’s and Minnich’s testimony on the recordkeeping fees.”
And
“Absent admissible expert testimony opining on why these data are based upon relevant comparators or would lead to a reasonable juror to conclude that Cornell could have achieved lower fees, such data are not enough, on their own, to establish a prudent alternative fee or otherwise prove loss.”
Those were the comments of the Second Circuit’s decision in the Cornell case that supported the exclusion of expert testimony regarding the market for contribution plan recordkeeping. In that case, the court ruled that neither expert offered any methodology to support their conclusions, but merely relied upon their personal knowledge of the industry alongside examples of other university plans (that may or may not have been comparable.
The point here being that the opinions presented in support of the allegations of the plaintiffs were no more than that—and should be discarded in the court’s determination as to whether the fees in question were, in fact, reasonable.
Will the court be persuaded? Stay tuned.
