University 403(b) Excessive Fee, Fiduciary Breach Suit Sacked—Again

It’s said that if at first you don’t succeed, try, try again—but if you’re suing in federal court, you had better make your case.

The suit in question this time—which was last decided in favor of the fiduciary defendants almost exactly a year ago—had alleged that the Georgetown University 403(b) plan “retained not one, but three separate recordkeepers” that “charge asset-based fees,” that the defendants (in the words of U.S. District Judge Rosemary M. Collyer, who heard the case in the district court) … ignored the abysmal historical investment performance” of the CREF Stock Account and the TIAA Real Estate Account,” that they offered “an overwhelming 300 investment options” and that they “… failed to provide accurate reporting ... in reports filed with the DOL,” and finally that they “approved a loan program that ... violated federal regulations,” and the TIAA Traditional Annuity violates regulations “that all contracts be terminable on reasonably short notice without penalty.”

The (First) Appeal

On appeal of that decision in favor of the Georgetown defendants, Judge Amy Berman Jackson’s denial of the participant-plaintiffs motion to amend their suit was no less harsher than Judge Collyer had been in dismissing the suit back in 2019, commenting that “the case appears to be a lawsuit in search of a theory, and notwithstanding its length, the proposed amended complaint does not add much to the original pleading that was dismissed. Plaintiffs identify ways in which plan management could be different, or even improved, but they have not alleged facts to support a plausible inference that the defendants have failed as fiduciaries.”

Not that it’s been all sunshine and roses for the fiduciary defendants in this case. In 2021, the U.S. Court of Appeals for the District of Columbia Circuit backed the participant-plaintiffs in a 2-1 split that revived the suit that the aforementioned Judge Collyer had tossed. But, having won an opportunity to remake their case—and perhaps sensing what would be the eventual (re)decision here—the participant-plaintiffs had filed for an opportunity to amend their suit (and, FWIW, not for the first time).

District Court Decision

But going back to the judgment in the district court (Wilcox v. Georgetown Univ., 2023 BL 110645, D.D.C., No. 1:18-cv-00422, 3/31/23) where it was determined that the participants filing the suit lacked standing to challenge both the specific Vanguard fund cited (they hadn’t invested in those funds), and the TIAA Traditional Annuity (there was no evidence presented that they had been harmed by the withdrawal limitations, nor had they indicated any intention to act in a way that would have triggered them). 

With that as background, it should perhaps come as no surprise that a unanimous three-judge panel[i] (again) concluded (Darrell Wilcox et al. v. Georgetown University et al., case number 23-7059, in the U.S. Court of Appeals for the D.C. Circuit) not only that the district court correctly denied appellants’ motion for leave to amend their complaint, but that the participant-plaintiffs lacked standing to bring two of their claims (challenging the inclusion of certain share classes of Vanguard mutual funds in Georgetown University’s two retirement plans and the withdrawal restrictions on the Teachers Insurance Annuity Association Traditional Annuity in one of the plans) because they did not allege a specific injury. 

As for the remaining claims (recordkeeping, imprudent management and duty of candor), they also concluded that the district court correctly held that the original complaint failed to adequately plead any claims, and that “the proposed amended complaint would be futile because it did not cure any of the earlier-identified deficiencies.”

What This Means

This would appear to be yet another case where the folks bringing suit failed (at least in the opinion of the judges hearing their case) to persuade based on the facts presented that there had been an injury, and that they, therefore, had standing (the right to bring suit) to sue. And failed to do so through a couple of different opportunities to do so. 

Sadly, what it also means is the defendants here have had to be tied up in judicial proceedings through multiple rounds—that’s time and money that surely could have been put to more productive uses.