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Lack of Standing Stumps Excessive Fee Suit

Litigation

An excessive fee suit which alleged that the “Plaintiff has standing to bring this action on behalf of the Plan because he participated in the Plan and was injured by Defendants’ unlawful conduct” was dismissed… because that turned out to not be completely accurate.

More specifically, the suit filed last September in the U.S. District Court for the District of Massachusetts on behalf of participant-plaintiff Aaron Brown (by Capozzi Adler PC and Jeffrey Hellman) had made the same type allegations[i] common to this brand of litigation against the fiduciaries of two retirement plans[ii] of nonprofit research and development organization MITRE Corp. (one a 403(b) plan, the other a 401(a)). It was actually the second of two suits filed against MITRE that same month.[iii]

However, Judge Richard G. Stearns determined (Brown v. MITRE Corp., D. Mass., No. 1:21-cv-11605, electronic order 4/28/22) that plaintiff Brown was invested in a single fund during the relevant time period—and that turned out to be one of the lowest-cost share class options—and one that paid no revenue-sharing fees, to boot.

In that the plaintiff’s argument for damages was based on the plan’s revenue-sharing arrangement, he was unable to show how he was personally injured by the allegedly unreasonable fee practices—Judge Stearns said he lacked standing to bring suit on those grounds. 

Interestingly enough, MITRE had also argued that Brown lacked standing because the administrative fees he paid were less than $5 per year—far lower than the fee level the suit claimed was “reasonable.” However, Judge Stearns pushed back, writing that “the fact that he paid only a small absolute amount in administrative and recordkeeping fees does not establish that he did not suffer an injury.”

What This Means

Perhaps not much—beyond a commonsense observation that there must be an actual injury to the plaintiff for them to have “standing”—necessary in order for them to bring suit (or, more precisely, to prevail, since clearly they can bring suit regardless). That said, courts have been willing to entertain suits brought on behalf of participants in the plan for injuries beyond that suffered by a specific plaintiff(s)—so long as they have, in fact, suffered personal injury.      


[i] As has been common in suits filed by the Capozzi Adler firm, the suit claimed that the plans’ recordkeeping fees were “astronomical,” ranging from $60 to $220 per person, per year, as well as criticizing the plans’ use of revenue-sharing (that admitting that it was not “per se” illegal), as well as relying on high-cost share classes of certain investment options when identical, but lower cost, options were available.

[ii] The suit says that the MITRE Qualified Retirement Plan’s assets under management for all funds as of Dec. 31, 2020 was $2,491,873,696. 2020, while the MITRE Corporation Tax Sheltered Annuity Plan assets under management for all funds as of Dec. 31, 2020 was $4,545,351,415.

[iii] The other, filed on behalf of a different plaintiff, represented by different counsel, read more like one of the classic 403(b) suits, claiming that participants had to choose from an “overwhelming number of options”—that the “vast number of investment options in the Plans rendered it infeasible for the fiduciaries to adequately and prudently review and analyze each of the investment options offered to the Plans’ participants”—and that many of which were alleged to be underperforming or unduly expensive. This other suit also challenged the use of multiple plan recordkeepers, which it says resulted in “redundant services and overpayment by the Plans.”

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