A pair of excessive fee suits have been dismissed for failure to state a claim—for now.
The separate suits were brought against the fiduciaries of the plans at ThedaCare, Inc. and Prevea Clinic, Inc. In the former, participant-plaintiff Glick had argued (in August 2020) that ThedaCare, Inc. and its Board of Directors violated the duty of prudence under ERISA with respect to the ThedaCare Retirement and 403(b) Savings Plan because he alleged that:
(1) the Plan’s recordkeeping fees were “excessive;”
(2) the Plan includes investment share classes that did not result in the lowest “Net Investment Expense” to participants;
(3) the Plan’s actively managed investment and stable value investment options charged excessive fees compared to available alternatives; and
(4) the Plan’s “Managed Account Services”—Managed Advice and PortfolioXpress—were too expensive.
Similar claims were made in the Prevea case.
Subsequently, ThedaCare moved to dismiss each of these claims—but on Aug. 25, 2022, the Court issued a Decision and Order denying in part ThedaCare’s motion to dismiss, largely based on the U.S. Supreme Court’s decision in Hughes v. Northwestern University (the suits had been paused pending that outcome). But then—just four days later, the Seventh Circuit issued its decision in Oshkosh, which the defendants here characterized as “a precedential opinion that affirmed this Court’s 12(b)(6) dismissal with prejudice of virtually identical[ii] ERISA fiduciary-breach claims in a lawsuit filed in this Court by the same counsel[iii] representing Mr. Glick.”
The Theda defendants had moved for reconsideration in light of the Oshkosh decision in September.
Now Judge William C. Griesbach—who was the judge in the Oshkosh case—has dismissed the lawsuits against both Prevea (Nohara v. Prevea Clinic, Inc., 2022 BL 406225, E.D. Wis., No. 2:20-cv-01079, 11/14/22) and ThedaCare—but left the door open for the plaintiffs in those cases to file amended complaints.
In doing so, Judge Griesbach followed the recommendations of Magistrate Judge Stephen C. Dries, who had “recommended that I grant the defendants' motion for partial reconsideration, grant the defendants' motion to dismiss the plaintiffs' amended complaint in its entirety, and grant the plaintiffs leave to file a third amended complaint.” In issuing his decision, Griesbach explained “the parties have not filed objections to this recommendation. After careful consideration of the Report and Recommendation, as well as the record as a whole, the court adopts the Report and Recommendation of the Magistrate Judge.”
They’ll have 30 days to do so.
What This Means
Without question the Oshkosh case—and those of CommonSpirit and TriHealth—have brought with them what appears to be a higher standard of “plausibility” in asserting claims that can get past the standard motion to dismiss. Certainly, with regard to recordkeeping charges/structures, the courts are looking for more than mere assertions of comparability based on plan size (assets or participants) and requiring comparison with service levels. Arguably the only fair way to evaluate reasonability—but one that is surely more difficult for the plaintiffs’ bar to clear.