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Plaintiffs Punt Appeal in Two BlackRock TDF Suits


Plaintiffs in two of the fiduciary breach suits involving plans that held the BlackRock Lifepath target-date funds have…folded.

More specifically, the plaintiffs in cases involving Booz Allen Hamilton and Capital One – that had just last month filed notice of their intent to appeal dismissal of their cases – have now effectively said (in the immortal words of SNL’s Emily Latella) – “never mind.” 

These were two of the dozen or so suits[i] filed in federal courts across the country alleging the same basic breaches of fiduciary duty, simplistically characterized as “imprudently selecting, retaining, and failing to appropriately monitor the clearly inferior BlackRock TDFs.” Somewhat ironically, considering the focus of the recent spate of excessive fee suits, these claimed that the plan fiduciaries elected to chase low fees, alleging that they did so sacrificing performance. Representing the plaintiffs in each of these suits is the law firm of Miller Shah LLP.

Where We’ve Been

Late last year, these two suits were dismissed for failing to present a “plausible” case, but were allowed two weeks to right those shortcomings. These plaintiffs (separately) “fixed” their claims by adding as comparator benchmarks “data regarding the S&P Target Date Indices and Sharpe ratio.” U.S. District Judge Michael S. Nachmanoff (who ruled in both these cases – separately – described as “a composite of the disparate strategies and styles present in the broad universe of investable alternative TDFs,” commenting further that “the S&P Indices ‘include a separately calculated index for each target date,’ each of which measures the performance of sub-indices purporting to represent a ‘consensus of the opportunity set available in the U.S. universe of target date funds.’”

As for the latter, at the time he noted that “the Sharpe ratio is a measurement of investment performance that considers ‘risk-adjusted return[s],’” and in so doing purportedly “accounts for differing levels of risk by measuring the performance of an investment, such as a TDF, compared to the performance of similar investments, after adjusting for risk.”

That said, and after a recitation of the history of the suit and responses in this case, Judge Nachmanoff then summed up the current (re) arguments thusly; “Plaintiff alleges in conclusory fashion that the ‘fiduciaries here employed a fundamentally irrational decision-making process (i.e., inconsistent with their duty of prudence)’” – and then went on to comment that the Amended Complaint “is completely devoid of facts about the particular decision-making process undertaken by Defendants with respect to the Plan at issue here.”

Where Things Stand Now

In a May 12 filing, the court noted, “Upon consideration of the motion to voluntarily dismiss this case pursuant to Rule 42(b) of the Federal Rules of Appellate Procedure, and there appearing no opposition, the court grants the motion.”

Late last month, a nearly identical case involving Microsoft’s 401(k) and its holding of the BlackRock Lifepath target-date funds – with identical “adjustments” that attempted to remedy the shortfalls that had (also) produced a dismissal of that case (in a different federal court) – also came up short.   

What This Means

It is perhaps too much to hope for that these plaintiffs (not to mention those in the dozen or so other cases filed in various federal district courts across the country) have determined that they’re pursuing cases with a weak argument against defendants who are refusing to simply acquiesce and take a settlement. 

But we’re going to hope, regardless.


[i] The suits have also been filed on behalf of participants in in the 401(k) plans of Citigroup Inc., Cisco Systems Inc., Genworth, Stanley Black & Decker Inc., Microsoft, Marsh & McLennan Cos., Advance Publications, and Wintrust Financial Corp. – all holders of the BlackRock LifePath Index Funds. Representing the plaintiffs in each of these suits is the law firm of Miller Shah LLP – which has also targeted the Fidelity Freedom funds in a series of suits (albeit on different grounds).