Despite a judge’s observation that he deemed “total victory improbable, and recovery on the scale suggested by Plaintiffs highly improbable,” he acknowledged that “plaintiffs have largely cleared the low bar that avoids summary judgment in favor of their opponent.”
This time the suit—filed almost exactly four years ago—involves T. Rowe Price, and allegations by a participant in its own plan (and funds), one David G. Feinberg, on behalf of the T. Rowe Price U.S. Retirement Program and all “similarly situated Plan participants and beneficiaries (henceforth, collectively, “participants”), and all predecessor plans.” The suit claims that the T. Rowe Price plan fiduciaries breached their fiduciary duties by only offering T. Rowe Price’s own in-house investment funds in its 401(k) Plan, which the plaintiff claims “provided a windfall to T. Rowe Price affiliates T. Rowe Price Associates, Inc. (“TRP Associates”) and T. Rowe Price Trust Company (“TRP Trust”), collectively the ‘TRP Investment Affiliates.’”
But, as is easily discerned from the above comments by Chief Judge James K. Bredar of the U.S. District Court for the Maryland, seems skeptical of the case presented, if not this particular class of litigation in general. Early in the opinion (Feinberg v. T. Rowe Price Grp., Inc., D. Md., No. 1:17-cv-00427, 2/10/21), Judge Bredar commented that, “The Court is generally skeptical of such litigation to the extent it seeks to cast the Court in the role of policymaker and have the Court declare strictly unlawful ‘normal business practice[s]’ that do not harm plan participants and that Congress and the Department of Labor have declined to expressly prohibit.”
‘Egregious Improprieties’
Turning to the case at hand, and in the very next paragraph, Bredar wrote: “Having reviewed the evidence in this case, the Court does not see the sort of egregious improprieties that would support the nine-figure damages award Plaintiffs seek. Though Defendants showed a preference for in-house funds, those funds have generally performed well, as attested by the fact that the Plan’s assets have more than tripled in value in the relevant period. The record reflects that the fees Plaintiffs characterized as highly exceptional in their pleadings were mid-market for peer group investment vehicles. Many of the funds at issue were widely utilized by independent investors, who evidently deem them desirable. This evidence does not conform with Plaintiffs’ allegations of shocking and pervasive mismanagement.”
So then, one might wonder—why allow the case to proceed? Judge Bredar explains thusly, “the Court is mindful that on summary judgment, Plaintiffs need only produce evidence that, if accredited, would be sufficient for a fact-finder to surmise that Defendants took some unlawful actions and thereby caused Plaintiffs at least some harm. While on the record before it this Court deems total victory improbable, and recovery on the scale suggested by Plaintiffs highly improbable, Plaintiffs have largely cleared the low bar that avoids summary judgment in favor of their opponent. Accordingly, they are entitled to proceed to trial.”
And there you have it—and we’re only on page 3 of the 30-page ruling.
For the rest, Judge Bredar recounts his assessment of the particulars that have been presented to him thus far, noting that the plan fiduciaries “met at least twice annually to review and discuss the plan’s performance,” that, “pursuant to an Investment Policy Statement and Investment Option Review Checklist, the Trustees have reviewed qualitative and quantitative factors for each Plan offering at these meetings,” and that while they haven’t compared or “seriously contemplated the merits of replacing” T. Rowe funds with an alternative, the “majority of the funds offered by the Plan have consistently been in the top half of their peer groups in terms of both performance and expenses.” He noted that there have been fund changes, and that “as changes in the Plan’s assets or the directions in the Plan document have made lower-fee options available, the Trustees have replaced higher-fee investment vehicles (often mutual funds) with lower-fee investment vehicles (often CITs) that pursue the same strategies.”
“It is clear that in their efforts to fully present numerous sophisticated arguments regarding a multi-faceted dispute, both sides have used their responses to statements of material fact to raise legal arguments not addressed in their briefing,” Judge Bredar wrote.
However, when all was said and (nearly) done (the recitation of legal standards and relevant case law continued for several pages, as did the cases made by both parties), he concluded: “Factual disputes preclude summary judgment for either Plaintiffs or Defendants on almost all claims. Though the Court is skeptical of certain of Plaintiffs’ arguments regarding alleged breaches of fiduciary duties, Plaintiffs have largely identified sufficient evidence to allow their claims to proceed to trial. As for the prohibited transaction claims, while the Court can resolve the legal questions presented by the parties, factual complexities preclude a global ruling in either side’s favor at the summary judgment stage.”
And so, having cleared that “low bar,” we proceed to trial…
