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Defendants Push Back on ‘Copycat’ Claims in Excessive Fee Suit


A rebuttal to an excessive fee lawsuit not only calls it a “copycat” effort, it looks as though they copied the wrong paper.

The defendants in the case were the fiduciaries of the $1 billion University of Miami’s Retirement Savings Plan, moving to dismiss a suit brought by plaintiffs Augustino Santiago, Lilly Leyva, Guillermo Creamer and Maria Aceituno earlier this year, challenging a number of practices (or lack of practices) by the fiduciaries that they claimed amounted to a breach of their fiduciary duties. Specifically, the suit alleged that there were too many recordkeepers (six), too many funds (“a haphazard lineup of over 390 duplicative investments that are proprietary to the recordkeeper”), funds that were too expensive (or at least more expensive than the plan’s large size would seem to warrant), and recordkeeping fees that were too high (over $100).    

‘A Literal Copy-and-Paste’

The rebuttal (Santiago v. Univ. of Miami, S.D. Fla., No. 1:20-cv-21784, motion to dismiss 7/8/20) was swift—and sharp. “Without any allegations about the Plan fiduciaries’ actual decision-making process, Plaintiffs[i] rely on a litany of alleged characteristics about the Plan’s investment menu to try, futilely, to create an inference that the fiduciary process was imprudent,” the motion to dismiss begins, calling out the complaint as “a literal copy-and-paste: Its allegations, right down to the typos, are lifted directly from complaints in other cases about other plans offered by other universities, without regard for how (or even if) they relate to Plaintiffs, Miami, or the Plan.”

It continues that the complaint “contains holdover allegations that do not apply; rests on outdated data that leaves Plaintiffs with no factual support for certain claims during the relevant period; and asserts 'facts' that are contradicted by documents referenced or incorporated in the Complaint and must therefore be disregarded.” 

They continue, “Borrowing allegations might be an unfortunate but inconsequential reality in some cases. But, here, Plaintiffs got wrong every fact from which they ask the Court to draw an inference of fiduciary imprudence. As a result, the Complaint must be dismissed.”

‘Wrong’ Headed

The defendants state that “as judicially-noticeable documents confirm, the Plan uses a single ‘master’ recordkeeper—Fidelity—and has done so at all relevant times,” that the plan has paid that recordkeeper “a flat fee of just $39 per participant since mid-2018, and just $54 before then,”[ii] and that while the “plaintiffs allege that a ‘prudent fiduciary must ensure that the recordkeeper rebates to the plan all revenue sharing payments that exceed a reasonable, negotiated recordkeeping fee,’ the plan fiduciaries did that, too. In short, the allegations underlying Count I bear no resemblance to the Plan, much less plausibly suggest an imprudent fiduciary process.”

As for the number of funds, the suit had alleged that “a narrower menu of 15 options” (excluding target-date funds) would reflect “the output of an evaluation and selection by a prudent fiduciary,” the defendants point out that “the Plan’s investment menu offered between 15 and 26 options (excluding target-date funds), allowing participants to choose among mutual funds and annuities spanning a diverse range of asset categories, investment styles, and fund managers.” They also note that the plaintiffs advocated “a ‘tiered’ structure,” but again—“that is exactly what the Plan does by offering participants four tiers of options corresponding to participants’ varying savings goals and investment styles (hands-on or hands-off).” As for the alleged lack of institutional share class offerings, the defendants point to a lack of specificity in the suit “because, in fact, the Plan already was composed of predominately institutional share-class investments in 2014, and offers such low-cost investments today in every fund for which they are available, belying any inference of fiduciary neglect.”[iii]

With regard to allegedly badly performing funds (specifically the TIAA Real Estate Account and CREF Stock Account), they note that “none of the Plaintiffs ever invested a penny in the challenged funds,” and that “even if they had standing, Plaintiffs only allege facts about the performance of the two funds as of December 2014,” and “allege nothing about how these funds performed after December 2014, much less offer apples-to-apples comparisons to alterative funds or otherwise plausibly demonstrate that these funds were so imprudent that participants should not even have been given the option to invest in them during the alleged class period.

“Where, as here, the Complaint includes no allegations about the fiduciaries’ actual process for making the challenged decisions, Plaintiffs must allege sufficient facts from which the Court may reasonably infer that this process was flawed,” the defendants argue.

And thus, the University of Miami defendants “respectfully requests that the Court dismiss the Complaint with prejudice.”

[i]In case you were wondering, plaintiffs and the proposed class are represented by Wenzel Fenton Cabassa PA, Justice for Justice LLC, and Michael C. McKay of Scottsdale, AZ. The former was one of the firms representing the plaintiffs in litigation involving Trader Joes’ 401(k), dismissed earlier this year. 

[ii]The motion notes that not only since July 2018 has it paid a flat annual fee of $39 per participant, a rate that was reduced from $54, which the Plan paid since July 2015, but that the Plan does not charge any recordkeeping fee to participants with account balances below $5,000. While not necessarily relevant to the charge, the motion explains that Miami automatically contributes 5% of an eligible employee’s compensation each pay period, without requiring any contribution by the employee. Participants also can elect to defer a portion of their compensation into the Plan on a tax-deferred basis, and if they choose to do so, Miami makes an additional dollar-for-dollar matching contribution on the first 5% of compensation the employee elects to defer/save. 

[iii]The motion to dismiss notes that not only did the Plan “already offered predominantly lower-cost ‘institutional’ share classes of the Plan’s investments in 2014,” but that “today the entire Plan menu is made up of institutional shares where available,” and that they “…added, replaced, or removed several investment options over the relevant period.” They go on to note that “the Plan’s investments are available at low expense ratios ranging from 0.035% to 0.81%—objectively reasonable by any measure.”