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Plan Fiduciaries Sue to Recover Costs of Defending 401(k) Excessive Fee Suit


Amidst a number of excessive fee suit settlements, and decisions, a plan fiduciary who won their case in court has now filed to recover their costs of defending against the suit.

The defendants in this case are the fiduciaries of the $8.2 billion Eli Lilly plan (as well as the company itself, and the employee benefit committee and fund advisory committee), who won their case earlier this month. More specifically, U.S. District Judge Jane Magnus-Stinson granted Eli Lilly’s motion to dismiss the suit with prejudice—at least participant-plaintiff Jennifer Probst's claims against the company, its board of directors, its benefit committee and its fund advisory committee.

Probst, a senior sales representative at Eli Lilly, according to the suit, had claimed the defendants breached their fiduciary duty to the $8.2 billion plan by permitting excessive record-keeping fees for the 401(k) plan.

‘Wholly Conclusory’

But Judge Magnus-Stinson found the allegations to be “wholly conclusory and do nothing to identify what specific types of services comparator plans received relative to the Plan,” and that Probst's allegations that any difference in services provided does not affect the price of the services was “not plausible.” All in all, Judge Magnus-Stinson determined that “Ms. Probst's allegations are conclusory and do not state a plausible claim for breach of the duty of prudence.”

Lilly’s memorandum in support of motion for attorney’s fees and costs (Probst v. Eli Lilly & Co., S.D. Ind., No. 1:22-cv-01106, motion for attorneys’ fees 2/21/23) retraces the ground of the suit, which was filed a little less than a year ago. It starts by commenting that, “because Lilly received payments from the Plan for administrative services, Plaintiff guessed that Lilly’s services might have duplicated services from the Plan’s third-party recordkeeper, Alight”—“guessed” in this case was key. 

They go on to explain that “the Plan’s public filings with the Department of Labor, which were referenced in the complaint, contradicted that allegation, but Plaintiff asserted it as fact”—and in fact, they note that “in response to the motion to dismiss, Plaintiff admitted that this core allegation had no support, but pressed it anyway, hoping that discovery might reveal it to be true.” A point they explain that “disturbed” the court when it dismissed the suit with prejudice.[i] “In other words,” they continue, Plaintiff’s counsel acknowledged that they did not know whether the core of the self-dealing claim was true—and seemingly had done nothing to find out (even after the initial motion to dismiss).”

Plaintiff’s Counsel Cited

That said, and while they note that “none of Plaintiff’s claims were ‘substantially justified’ (the shorthand for the multifactor test for awarding attorneys’ fees and costs under ERISA), Defendants are seeking fees only for defending Count III.” They continue to note that “most of the blame for the pursuit of Count III belongs to Plaintiff’s counsel[ii]”—counsel that, as it turns out, also represented the plaintiffs in Albert v. Oshkosh Corp., 47 F.4th 570 (7th Cir. 2022), “and other copycat complaints just like the Amended Complaint. The claims are not based on meaningful investigation other than a review of plans’ public filings, which generally fall short of the kind of detail needed to plausibly allege a claim under ERISA,” they note. 

The Eli Lilly defendants note that “the goal of these lawsuits is to extract multi-million-dollar settlements by ‘exposing the ERISA fiduciar[ies] to probing and costly inquiries and document requests.’” This, they continue was the case “Particularly for Count III—which was filed only with the hope that discovery would uncover wrongdoing, rather than with a sound factual foundation—a fee award is necessary to deter similar conduct. That Plaintiff asserted Count III in her original complaint, and then reasserted it in her Amended Complaint even after Defendants noted its shortcomings in their original motion to dismiss, amply justifies a fee award.”

‘Serious Business’

“Accusations of self-dealing and disloyalty are serious business; they must be based on fact, not the hope that discovery will uncover wrongdoing,” Eli Lilly wrote. They later commented that “Plaintiff and her counsel just assumed that any reimbursement to the plan sponsor was self-dealing, which is a reckless charge—especially given that Lilly self-reported the annual payments on publicly available forms it provides to the government under a service code that is for the express purpose of noting reimbursements from a plan to a plan sponsor.”

And then finally the memorandum steps through the five-part test that they say the Seventh Circuit uses to ascertain whether such a claim is justified: (1) the degree of the offending parties’ culpability or bad faith; (2) the degree of the ability of the offending parties to satisfy personally an award of attorneys’ fees; (3) whether or not an award of attorneys’ fees would deter other persons acting under similar circumstances; (4) the amount of benefit conferred on members of the pension plan as a whole; and (5) the relative merits of the parties’ positions—concluding, as one might expect, that this situation and the plaintiff’s circumstances support that conclusion.

Despite those strong arguments, the defendants here comment that while a recovery of ALL their fees and costs total more than $430,000,[iii] they are seeking an award of only $86,000. This, they comment “represents a reasonable, indeed conservative, estimate of those incurred as a result of the assertion of Count III, in light of the multiple rounds of briefing on Defendants’ motion to dismiss and the factual investigation Defendants conducted toward the beginning of the case”—and offer to “provide detailed invoices and billing information at the Court’s direction.”

Stay tuned.


[i] “Worse, the Plan’s Form 5500s, which Plaintiff cited in the Amended Complaint, contradicted the allegation that Lilly’s services overlapped with those provided by Alight. Id. Rather than withdraw Count III, however, Plaintiff argued that “it is impossible to know without discovery” whether Count III had merit—an admission that “disturbed” the Court because it “shows that Ms. Probst’s allegations are based on speculation.”

[ii] Walcheske & Luzi LLC—who, not surprisingly, have been involved in a large number of these excessive fee-type cases.

[iii] While this type of action seems rare in these types of cases (at least to this point), it is not without precedent. Last summer, a federal judge has affirmed a $1.5 million judgement against Schlichter Bogard & Denton LLP and Schneider Wallace Cottrell Konecky LLP for their role in bringing a “reckless” excessive fee suit.