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(Another) 401(k) Plan Fiduciary Prevails in Excessive Fee Suit


A federal judge has accepted a magistrate judge’s recommendation to dismiss an excessive fee suit—but gave the plaintiff 30 days to amend their suit, but only with regard to certain points.

The suit (Guyes et al. v. Nestle USA Inc. et al.) was brought in the U.S. District Court for the Eastern District of Wisconsin in October 2020 by Walcheske & Luzi, LLC on behalf of Lorie M. Guyes—a participant in the $1.1 billion plan until April 2020—“individually and as representative of a Class of Participants and Beneficiaries on behalf of the Nestle 401(k) Savings Plan.”

As other excessive fee suits have alleged, this one alleged that “after an inquiry reasonable under the circumstances,” the defendants breached their fiduciary duties by “…among other things: (1) authorizing the Plan to pay unreasonably high fees for recordkeeping and administration (RK&A); (2) authorizing the Plan to pay unreasonably high fees for managed account services; and (3) engaging in self-dealing with regard to administration of the Plan.”

The Recommendation

More recently, a 19-page recommendation (Guyes v. Nestle USA Inc et al., case number 1:20-cv-01560, in the U.S. District Court for the Eastern District of Wisconsin) made relatively quick work in dismissing most of the plaintiff’s claims. Citing the Oshkosh decision, U.S. Magistrate Judge Stephen C. Dries explained that “the complaint in this case does not provide the necessary context to support a plausible recordkeeping claim.” Indeed, Judge Dries recommended that the claims of breach of the duty of loyalty regarding recordkeeping and administration fees, breach of the duties of prudence and loyalty regarding managed account service fees, failure to adequately monitor other fiduciaries regarding managed account service fees, and engaging in prohibited transactions be dismissed—with prejudice. However, he also recommended that Judge William C. Griesbach partially grant the plaintiffs’ motion for an opportunity to proceed with claims regarding recordkeeping.

The Decision

In considering the recommendation, Judge Griesbach noted (Guyes v. Nestlé USA Inc., E.D. Wis., No. 1:20-cv-01560, 1/3/23) that the defendants here objected to that recommendation—arguing that “the plaintiff’s proposed amended complaint is futile because it fails to provide the kind of additional context regarding the Plan’s recordkeeping services that the Seventh Circuit held was necessary in Albert v. Oshkosh Corp., 27 F.4th 570 (7th Cir. 2022)”—a decision, as it turns out, that came from none other than this same Judge Griesbach. Judge Griesbach noted that “generally, motions to amend pleadings are treated favorably under Rule 15’s liberal amendment policy.” 

And, in fact, he concluded that, “Given Rule 15’s liberal standard, the court finds that the defendants’ arguments regarding the inadequacy of the plaintiff’s allegations are better suited for consideration in the context of a motion to dismiss. In other words, while the defendants are free to raise these arguments on a motion to dismiss, or at a later point in the litigation, the court declines to resolve these issues now without the benefit of thorough briefing directed toward the issue.”

And provided 30 days in which to do so.