Huang v. TriNet HR III, Inc.

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

TAMPA DIVISION

SHIQIONG HUANG, et al.,

Plaintiffs,

v. Case No.: 8:20-cv-2293-VMC-TGW

TRINET HR III, INC., et al.,

Defendants.

_____________________________/

ORDER

This cause is before the Court pursuant to the

Defendants’ Motion to Dismiss the Amended Complaint (Doc. #

29), filed on September 10, 2021. Plaintiffs responded on

October 15, 2021 (Doc. # 43), and Defendants replied on

November 4, 2021. (Doc. # 50). For the reasons that follow,

the Motion is denied.

I. Background

A. Factual Background

This case involves multiple employer plans (“MEPs”).

(Doc. # 23 at ¶ 38). “At its most basic level, a MEP is a

retirement plan that is adopted by two or more employers that

are unrelated for income tax purposes.” (Id. at ¶ 39)

(internal quotation marks omitted). MEPs “are typically used

by outsourced human resource providers . . . like TriNet.”

(Id. at ¶ 38). Specifically, TriNet1 is a professional

employer organization (“PEO”) that provides human-resources

expertise, payroll, and employee benefits services to small

and medium-sized businesses. (Id. at ¶¶ 24, 38). The

retirement plans at issue are the TriNet 401(k) Plan (the

“TriNet III Plan”) and the TriNet Select 401(k) Plan (the

“TriNet IV Plan”) (referred to collectively as the “Plans”).

(Id. at 1). TriNet established the Plans in order to help the

employees of their client employers save money for

retirement. (Id. at ¶ 41). The Plans are “defined

contribution” or “individual account” 401(k) plans under

ERISA.2 (Id. at ¶ 42). By the end of 2018, the TriNet III Plan

had $2.9 billion in assets under management, and the TriNet

IV Plan had $1.1 billion in assets under management. (Id. at

¶ 48).

1 Defendants TriNet HR III, Inc., TriNet HR IV, Inc., the

Board of Directors of TriNet HR III, Inc., the Board of

Directors of TriNet HR IV, Inc., and the Investment Committee

of TriNet Group, Inc. will be collectively referred to as

“TriNet” unless stated otherwise.

2 The retirement plans at issue in this case are defined-

contribution plans, “which provide[] for an individual

account for each participant and for benefits based solely

upon the amount contributed to the participant’s account, and

any income, expenses, gains and losses.” 29 U.S.C. § 1002(34).

Defined-contribution plans offered by for-profit companies

are commonly known as 401(k) plans.

Plaintiffs are all participants in the Plans. (Id. at ¶¶

17-21). Defendants TriNet HR III, Inc. and TriNet HR IV, Inc.

are the sponsors and fiduciaries of the Plans. (Id. at ¶¶ 1,

24). Defendant Investment Committee of TriNet Group, Inc.

(the “Committee”) is responsible for selecting and monitoring

the investments in the Plans and monitoring the Plans’

expenses. (Id. at ¶ 25). Plaintiffs also name as Defendants

the Boards of Directors of TriNet III and TriNet IV because

the companies acted through the Boards. (Id. at ¶ 29).

Plaintiffs purport to bring this case as a class action

for the following proposed class:

All persons, except Defendants and their immediate

family members, who were participants in or

beneficiaries of the Plans, at any time between

September 29, 2014 through the date of judgment[.]

(Id. at ¶ 50).

According to Plaintiffs, Defendants breached their

fiduciary duties by failing to adequately review the Plans’

investment portfolio to ensure that each investment option

was prudent, maintained certain funds in the Plan despite the

availability of identical or materially similar investment

options with lower costs and/or better performance histories,

and failed to control the Plans’ recordkeeping expenses. (Id.

at ¶¶ 11-12, 57-116). First, Plaintiffs allege that

Defendants failed to investigate and select lower cost

alternative funds. (Id. at ¶ 57). Specifically, Plaintiffs

allege that Defendants retained several actively managed

funds in the Plans’ investment options “despite the fact that

these funds charged grossly excessive fees compared with

comparable or superior alternatives[.]” (Id. at ¶ 61).

Plaintiffs allege that the expense ratios for many funds in

the Plans greatly exceeded the ICI Median. (Id. at ¶¶ 63-66).

Second, Plaintiffs allege that Defendants breached their

fiduciary duty by failing to utilize lower fee share classes

that are available to “jumbo” defined contribution investment

plans. (Id. at ¶¶ 68-77). Plaintiffs allege that “a fiduciary

to a large defined contribution plan such as the Plans [here]

can use its asset size and negotiating power to invest in the

cheapest share class available,” but that the TriNet

fiduciaries failed to do so on multiple occasions. (Id. at ¶¶

70, 73-77). Third, Plaintiffs allege that Defendants failed

to utilize lower-cost and better performing passively managed

funds in favor of higher-cost actively managed funds. (Id.

at ¶¶ 85-96).

In addition to their allegations regarding the selected

investments’ costs and performance, Plaintiffs also allege

that Defendants failed to monitor or control the Plans’

recordkeeping expenses. (Id. at ¶¶ 97-116). Plaintiffs take

exception with the Plans’ approach of using revenue sharing

to pay for the Plans’ recordkeeping and administrative costs

and with the Plans’ process of identifying and retaining its

recordkeepers. (Id. at ¶¶ 101, 113-16).

Based on these allegations, Plaintiffs bring the

following causes of action: (1) as against the Committee,

breach of the fiduciary duty of prudence under ERISA; and (2)

as against TriNet and the Board, failure to adequately monitor

the Committee, thus breaching their fiduciary duties under

ERISA. (Id. at ¶¶ 117-30).

B. Procedural History

Plaintiffs initiated this case on September 29, 2020.

(Doc. # 1). In December 2020, the parties filed a joint motion

to stay the case pending the Plaintiffs’ exhaustion of the

administrative remedies set forth in the Plans. (Doc. # 16).

The Court granted the motion, requiring periodic status

reports. (Doc. # 17). On August 6, 2021, based on the parties’

representation that the appeals administrator had issued a

final decision, the Court reopened the case. (Doc. # 22). The

Plaintiffs filed the operative Amended Complaint on August

20, 2021. (Doc. # 23).

All Defendants have now moved to dismiss the Amended

Complaint. (Doc. # 29).3 The Motion has been fully briefed

(Doc. ## 43, 50) and is now ripe for review.4

II. Legal Standard

On a motion to dismiss pursuant to Rule 12(b)(6), the

Court accepts as true all the allegations in the complaint

and construes them in the light most favorable to the

3 Defendants also filed an unredacted version of its Motion

to Dismiss and certain exhibits under seal in order to protect

confidential and commercially sensitive pricing information

of non-parties to the litigation.

4 The Court also solicited the parties’ positions on whether

this matter should be stayed in light of the Supreme Court’s

pending decision in Hughes v. Northwestern University, 2021

WL 2742780, at *1 (July 2, 2021). (Doc. # 47). The parties

both opposed a stay, although for differing reasons. Upon

careful review, the Court has determined that a stay is not

appropriate in this case for two reasons. First, in the

absence of guidance from the Eleventh Circuit, it is persuaded

that the approach taken by the Third, Eighth, and Ninth

Circuits is the correct one. See Garcia v. Alticor, Inc., No.

1:20-CV-1078, 2021 WL 5537520, at *4 (W.D. Mich. Aug. 9, 2021)

(“The Third, Eighth, and Ninth Circuits have held that

allegations regarding imprudent investment selections and

excessive fees, such as the ones presented by Plaintiffs here,

may state a claim for violation of ERISA. . . . The Seventh

Circuit disagrees, but a petition for certiorari has been

granted in the Seventh Circuit case. Absent guidance from the

Supreme Court or the Sixth Circuit, the Court finds the

majority view to be more persuasive than the Seventh Circuit’s

position.” (citations omitted)). Second, the Court agrees

with Plaintiffs that, no matter the Supreme Court’s ruling on

the pleading standard required in cases such as these, “no

courts disagree that discovery must be taken on the actual

process undertaken by a plan’s fiduciaries.” See (Doc. # 51

at 3).

plaintiff. Jackson v. Bellsouth Telecomms., 372 F.3d 1250,

1262 (11th Cir. 2004). Further, the Court favors the plaintiff

with all reasonable inferences from the allegations in the

complaint. Stephens v. Dep’t of Health & Human Servs., 901

F.2d 1571, 1573 (11th Cir. 1990). But,

[w]hile a complaint attacked by a Rule 12(b)(6)

motion to dismiss does not need detailed factual

allegations, a plaintiff’s obligation to provide

the grounds of his entitlement to relief requires

more than labels and conclusions, and a formulaic

recitation of the elements of a cause of action

will not do. Factual allegations must be enough to

raise a right to relief above the speculative

level.

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)

(citations omitted). Courts are not “bound to accept as true

a legal conclusion couched as a factual allegation.” Papasan

v. Allain, 478 U.S. 265, 286 (1986).

III. Analysis

Before the Court can address the merits of the Motion to

Dismiss, there are several threshold arguments that it must

address.

A. Standard of Review

Defendants contend that this Court should review the

administrative decision denying relief to Plaintiffs under a

six-step process enunciated in Blankenship v. Metropolitan

Life Insurance Co., 644 F.3d 1350 (11th Cir. 2011). (Doc. #

29 at 8). Defendants argue that, using this standard, the

administrator’s decision should be affirmed because it was

not de novo wrong, nor was it arbitrary and capricious. (Id.

at 8-10, 24-25). Plaintiffs counter that Blankenship does not

apply here because that case involved a plan administrator’s

denial of an individual employee’s claim for benefits. (Doc.

# 43 at 24). They argue that “the Eleventh Circuit’s test

does not provide for an administrator’s denial of claims

brought on behalf of a class of plan participants [and] the

representative claims here require assessment before a

federal district court.” (Id.).

As Plaintiffs note, Blankenship was a case outlining a

“multi-step framework” district courts should utilize in

reviewing “an ERISA plan administrator’s benefits decision.”

644 F.3d at 1354 (involving an appeal of the defendant’s

denial of plaintiff’s claim for long-term disability

benefits). As such, it is silent on the standard of review

courts should use when analyzing putative class action claims

brought on behalf of a defined contribution retirement plan

for breach of ERISA’s statutory duty of prudence.

In 1989, the Supreme Court held that “[t]rust principles

make a deferential standard of review appropriate when a

trustee exercises discretionary powers” under an ERISA

benefits plan. Firestone Tire & Rubber Co. v. Bruch, 489 U.S.

101, 111 (1989). In the intervening years, federal courts of

appeals have split as to whether this deferential standard

applies to breach-of-fiduciary-duty cases. See Tussey v. ABB,

Inc., 746 F.3d 327, 335 (8th Cir. 2014) (“[W]e see no

compelling reason to limit Firestone deference to benefit

claims.”); Tibble v. Edison Int’l, 729 F.3d 1110, 1129-30

(9th Cir. 2013) (holding that fiduciary’s actions, in action

alleging breach of fiduciary duty, were subject to arbitrary

and capricious standard of review), vacated on other grounds

by Tibble v. Edison Int’l, 575 U.S. 523 (2015); Hunter v.

Caliber Sys., Inc., 220 F.3d 702, 711 (6th Cir. 2000) (finding

“no barrier” to applying a deferential standard to a case

“not involving a typical review of denial of benefits”). But

see John Blair Commc’ns, Inc. Profit Sharing Plan v. Telemundo

Grp., Inc. Profit Sharing Plan, 26 F.3d 360, 369 (2d Cir.

1994) (declining to apply the arbitrary and capricious

standard beyond the “simple denial of benefits”).

The Eleventh Circuit has not opined on this issue and,

in any event, the Court agrees with Plaintiffs that the Court

cannot address the administrator’s decision at this juncture

without additional fact discovery. Defendants have not

pointed this Court to any breach-of-fiduciary-duty ERISA case

in which a matter was terminated on a motion to dismiss based

only upon the record developed in administrative proceedings.

The cases that advocate for a deferential standard in such

breach-of-fiduciary-duty cases were decided on a later

procedural posture. See, e.g., Tussey, 746 F.3d at 330

(involving motion filed after 16-day bench trial); Hunter,

220 F.3d at 706 (involving summary judgment). Thus, the Court

will treat this matter as it would any other motion to dismiss

and will not apply the Blankenship framework for resolving

it.

B. Documents Considered

Here, Defendants filed voluminous records in support of

their Motion. See (Doc. # 30). Typically, on a motion to

dismiss, the Court limits its consideration to well-pleaded

factual allegations, documents central to or referenced in

the complaint, and matters judicially noticed. La Grasta v.

First Union Sec., Inc., 358 F.3d 840, 845 (11th Cir. 2004).

The Eleventh Circuit has recognized the incorporation by

reference doctrine which permits courts to consider documents

attached to a motion to dismiss without converting the motion

into one for summary judgment, but only if the attached

documents are central to the plaintiff’s claims and

undisputed. Horsley v. Feldt, 304 F.3d 1125, 1134 (11th Cir.

2002).

In the Motion to Dismiss, Defendants point to portions

of the administrative record to argue that:

(1) “Plaintiffs’ claim that the expense ratios of

the Plans’ investment options exceeded the ICI

Median is plagued by errors – indeed, the

administrative record establishes that

plaintiffs allege erroneous expense ratios for

all but one of the challenged investments in

the TriNet 401(k) Plan. . . . [Relying on the

“correct” expense ratios], it is readily

apparent that almost all of the challenged

funds charged fees well below the ICI Median.”

(2) “In 2020, the Plans invested in the lowest-

cost share class for six of the nine

challenged investments. And the difference in

cost for the other three investments was

entirely attributable to a ‘revenue sharing’

credit that the ‘higher-cost’ share classes

made available to defray recordkeeping

costs[.] . . . Plaintiffs’ claim that

defendants failed to select lower-cost

investments fails at every level and must be

dismissed.”

(3) Defendants use the documents to outline the

RFP and RFI process used to select the Plans’

recordkeeper and underscore how their process

for doing so fails to show imprudence or a

failure to monitor.

(Doc. # 29 at 11-12, 15-17, 18-23).

In other words, Defendants primarily dispute the facts

alleged in the operative Complaint, relying on the multiple

exhibits attached to their Motion. Plaintiffs appear to

object to the Court taking judicial notice of these documents.

(Doc. # 43 at 6 n.6).

Defendants argue that the Court may rely on these

documents as part of its review of the administrator’s

decision or may take judicial notice of them. For the reasons

explained above, the Court does not believe that it is

appropriate, at least at this juncture, to undertake a review

of the administrator’s decision. And the Court further

declines to take judicial notice of nearly 1,000 pages of

submitted documents. Courts may take judicial notice of

documents when the facts therein are “not subject to

reasonable dispute in that it is either (1) generally known

within the territorial jurisdiction of the trial court or (2)

capable of accurate and ready determination by resort to

sources whose accuracy cannot reasonably be questioned.” Fed.

R. Evid. 201(b). Here, many of the documents submitted by

Defendants are precisely the sort of evidence that might be

submitted at summary judgment or at trial and subject to the

typical rules for admission. For example, Defendants submit

letters of engagement with third parties, presentations on

the recordkeeper RFP process, agreements and service fee

schedules with the Plans’ recordkeepers, and performance

information on various investment funds, all in an effort to

undercut Plaintiffs’ factual allegations. See, e.g., (Ex.

3(P), (Q-5), (T), (W), (Z), (NN), (RR-4)).

The Court declines to take judicial notice of

Defendants’ submitted documents, with one exception. See

Shahar v. Bowers, 120 F.3d 211, 214 (11th Cir. 1997)

(recognizing that judicial notice is a “highly limited

process” because “the taking of judicial notice bypasses the

safeguards which are involved with the usual process of

proving facts by competent evidence in district court”).

Because they are cited by and relied on in the Amended

Complaint, the Court will take judicial notice of the ERISA

Plans at issue in this litigation. See Cervantes v. Invesco

Holding Co. (US), Inc., No. 1:18-cv-02551-AT, 2019 WL

5067202, at *11-12 (N.D. Ga. Sept. 25, 2019) (taking judicial

notice of a 401(k) plan due to plaintiff’s “multiple

references to the Plan and reliance on its contents” but

declining to take judicial notice of defendant’s submitted

account statements and fee disclosures).

C. Merits arguments

Under the Employee Retirement Income Security Act of

1974 (“ERISA”), 29 U.S.C. § 1104, a plan fiduciary is required

to meet a standard of “prudence” in administering the plan

holding the participant’s retirement assets in a defined

contribution plan. 29 U.S.C. § 1104(a)(1)(B) (requiring

fiduciaries to discharge their duties “with the care, skill,

prudence, and diligence under the circumstances then

prevailing that a prudent man acting in a like capacity and

familiar with such matters would use in the conduct of an

enterprise of a like character and with like aims”).

“An ERISA fiduciary’s duty is derived from the common

law of trusts.” Tibble v. Edison Int’l, 575 U.S. 523, 528

(2015). “A trustee (and thus an ERISA fiduciary) has a

continuing duty to monitor . . . investments and remove

imprudent ones. This continuing duty exists separate and

apart from the trustee’s duty to exercise prudence in

selecting investments at the outset.” Id. (internal citations

and quotation marks omitted). This monitoring “is to be done

in a manner that is reasonable and appropriate to the

particular investments, courses of action, and strategies

involved.” Id. (internal citations and quotation marks

omitted). ERISA empowers a plan participant or beneficiary to

sue plan fiduciaries for breach of fiduciary duties. 29 U.S.C.

§ 1132(a)(2).

Here, Defendants argue that the Amended Complaint must

be dismissed because it fails to state a claim of imprudence

for three reasons. First, according to Defendants,

Plaintiffs’ “inaccurate and inapt fee comparisons” do not

permit an inference of imprudence. (Doc. # 29 at 10-17).

Second, Defendants argue that the Amended Complaint’s

“hindsight performance allegations” do not permit an

inference of imprudence. (Id. at 17-18). Third, they claim

that Plaintiffs do not plausibly allege that the Plans’

fiduciaries failed to monitor the recordkeeping fees. (Id. at

18-24).

1. Fees, expense ratios, and investment performance

First, Defendants quibble with the accuracy of the fee

information pled in the Amended Complaint and argue that,

when the “correct expense ratios” are used, the challenged

funds actually charged fees below the ICI Median. (Id. at 12-

13). Moreover, Defendants take issue with Plaintiffs using

the ICI Median as a comparator, arguing that because the ICI

Median looks to both actively and passively managed funds,

it’s an inapt comparison. (Id. at 13-14). Similarly,

Defendants decry Plaintiffs’ comparison of certain Plan funds

to “cherry picked” Vanguard index funds because index funds

are fundamentally different from actively managed funds, with

concomitantly different fee structures. (Id. at 14-15).

Second, Defendants claim that, in 2020, the Plans

invested in the lowest-cost share class for six of the nine

investments challenged by Plaintiffs and, further, the

difference in cost of the remaining three investments is

attributable to permissible revenue sharing. (Id. at 15-17).

Third, Defendants argue that Plaintiffs incorrectly use

hindsight to plead the underperformance of certain funds and

that they are required only to be prudent, not omniscient.

(Id. at 17-18).

As the Eighth Circuit has explained, the prudence

inquiry is “fact intensive.” Tussey, 746 F.3d at 336. The

arguments raised by Defendants implicate fact issues that are

not appropriate for resolution on a motion to dismiss. See

McCool v. AHS Mgmt. Co., Inc., No. 3:19-CV-01158, 2021 WL

826756, at *5 (M.D. Tenn. Mar. 4, 2021) (rejecting similar

arguments on a motion to dismiss because such claims “require

examination of particular circumstances, specific decisions

and the context of those decisions” and, accordingly, “the

appropriate inquiry on these claims involves issues of fact,

which cannot be determined on a motion to dismiss”); see also

Nicolas v. Trustees of Princeton Univ., No. 17-3695, 2017 WL

4455897, at *5 (D.N.J. Sept. 25, 2017) (holding that an

inquiry into “whether the alternative funds Plaintiff[s]

suggest[] are apt comparisons”’ is a question of fact

unsuitable for resolution on a motion to dismiss).

The only question before the Court is whether

Plaintiffs have pled sufficient facts, taken as true, that

meet the requisite pleading standard. Plaintiffs have met

that burden here. Other courts have found similar factual

allegations sufficient to allege ERISA breach of fiduciary

duties claims. See, e.g., Garcia v. Alticor, Inc., No. 1:20-

CV-1078, 2021 WL 5537520, at *4 (W.D. Mich. Aug. 9, 2021)

(denying motion to dismiss where plaintiffs made similar

claims challenging the 401(k) plan’s investment selections

and fees imposed and, when viewing the complaint as a whole,

plaintiffs had pled sufficient facts to support a claim that

Defendants breached their fiduciary duties under ERISA);

Jones v. Coca-Cola Consol., Inc., NO. 3:20-cv-00654-FDW-DSC,

2021 WL 1226551, at *4 n.3 (W.D.N.C. Mar. 31, 2021) (“Alleging

that excessively high fees were charged to plan participants

can independently constitute a breach of one’s duties of

prudence and/or loyalty under ERISA.”); In re MedStar ERISA

Litig., No. RDB-20-1984, 2021 WL 391701, at *6 (D. Md. Feb.

4, 2021) (“[P]laintiffs’ allegations that specific funds

underperformed” compared to funds tracking the market

plausibly stated a breach of fiduciary duty claim); Kruger v.

Novant Health, Inc., 131 F. Supp. 3d 470, 478 (M.C.N.C. 2015)

(“[T]he plaintiff alleged that the plan fiduciaries were

utilizing imprudently expensive investment options to the

detriment of the plan. Following this logic, present

Plaintiffs have stated enough of a claim for breach of

fiduciary duty to survive Defendants’ motion to dismiss.”).

The Third and Eighth Circuits have held that similar

allegations in ERISA breach-of-fiduciary-duty cases pass

muster, and the Court finds those cases and their progeny to

be persuasive. In Sweda v. University of Pennsylvania, the

plaintiff claimed that the University of Pennsylvania

selected and retained higher cost retail class shares despite

the availability of lower-cost institutional class shares;

failed to solicit competitive bids to assess the

reasonableness of Plan recordkeeping fees; and included a

table comparing Plan options with readily available, cheaper

alternatives. 923 F.3d 320, 332 (3d Cir. 2019). The Third

Circuit held that, “[w]hile Sweda may not have directly

alleged how [the University of Pennsylvania] mismanaged the

plan, she provided substantial circumstantial evidence from

which the District Court could ‘reasonably infer’ that a

breach had occurred.” Id. The University of Pennsylvania

argued it employed a prudent process, which the Third Circuit

described as a merits-based argument “misplaced” at the early

motion-to-dismiss stage. Id. at 333.

Similarly, the Eighth Circuit has rejected the argument

that a complaint must describe exactly the ways in which the

defendants breached their fiduciary duties. Braden v. Wal-

Mart Stores, Inc., 588 F.3d 585, 595–96 (8th Cir. 2009).

“Rather, it is sufficient for a plaintiff to plead facts

indirectly showing unlawful behavior, so long as the facts

pled give the defendant fair notice of what the claim is and

the grounds upon which it rests [] and ‘allow [ ] the court

to draw the reasonable inference’ that the plaintiff is

entitled to relief.” Id.(citations omitted).

The Eighth Circuit held that:

Braden has satisfied these requirements. The

complaint alleges that the Plan comprises a very

large pool of assets, that the 401(k) marketplace

is highly competitive, and that retirement plans of

such size consequently have the ability to obtain

institutional class shares of mutual funds. Despite

this ability, according to the allegations of the

complaint, each of the ten funds included in the

Plan offers only retail class shares, which charge

significantly higher fees than institutional shares

for the same return on investment. . . . The

complaint states that appellees did not change the

options included in the Plan despite the fact that

most of them underperformed the market indices they

were designed to track. . . .

The district court correctly noted that none of

these allegations directly addresses the process by

which the Plan was managed. It is reasonable,

however, to infer from what is alleged that the

process was flawed. Taken as true, and considered

as a whole, the complaint’s allegations can be

understood to assert that the Plan includes a

relatively limited menu of funds which were

selected by Wal–Mart executives despite the ready

availability of better options. . . . If these

allegations are substantiated, the process by which

appellees selected and managed the funds in the

Plan would have been tainted by failure of effort,

competence, or loyalty. Thus the allegations state

a claim for breach of fiduciary duty.

Braden, 588 F.3d at 595–96.

While the Eleventh Circuit has not issued a definite

opinion on this subject, several district courts have weighed

in. For example, one district court has held that “plaintiffs

have properly stated a claim that choosing retail-class

shares over institutional-class shares is imprudent. . . .

[T]he plaintiffs allege that the defendants did not use their

bargaining power to obtain the lower cost fees and that the

lower cost options are the exact same as the higher cost

shares except for the actual fees charged. The plaintiffs

assert that no reasonable fiduciary would choose or be

complacent with being provided retail-class shares over

institutional-class shares.” Henderson v. Emory Univ., 252

F.Supp.3d 1344, 1349-50 (N.D. Ga. 2017) (allowing an ERISA

breach-of-prudence claim to proceed where the plaintiffs

alleged that the defendants imprudently retained historically

underperforming stocks that charged excessive fees when lower

cost and higher performing investments were available).

Similarly, here, Plaintiffs have alleged that TriNet’s

decision-making process in managing the Plans was tainted by

imprudence because the decision-making process, or lack of

oversight thereof, allowed for the retention of poorly

performing investments and investments that charged

excessively high fees when other options were available to

the Plans.

While Defendants take issue with the fact that

Plaintiffs have not pointed to any specific flaw in their

decision-making process, the Court is persuaded that the

Plaintiffs need not do so at this stage of the litigation.

See Pizarro v. Home Depot, Inc., No. 1:18-CV-01566-WMR, 2019

WL 11288656, at *3 (N.D. Ga. Sept. 20, 2019) (refusing to

place a similar burden on plaintiffs at the motion to dismiss

stage, writing that “plaintiffs may rely on circumstantial

factual allegations to show a flawed process—particularly one

that involves the fiduciaries management of underperforming

investments”).

Lastly, Defendants argue that Plaintiffs’ chosen

benchmarks of measuring the funds’ performance or their

expense ratios is insufficient or inapt. (Doc. # 29 at 12-

13, 18 n.35). However, the appropriate benchmarking period is

a factual dispute that cannot be resolved at the motion-to-

dismiss stage. See Sacerdote v. New York Univ., No. 16-CV-

6284 (KBF), 2017 WL 3701482, at *10 (S.D.N.Y. Aug. 25, 2017)

(finding question of performance benchmarks raised factual

questions inappropriate for resolution at motion to dismiss

stage and that claim survived because plaintiffs a long record

underperformance along with allegations of inaction).

In sum, the thrust of Defendants’ Motion to Dismiss is

that Plaintiffs’ claims are factually incorrect or rely on

inapt comparators and that it complied with all of its

statutory obligations under ERISA. But as the Eighth Circuit

has explained, “there may well be lawful reasons appellees

chose the challenged investment options [but] it is not

[plaintiff’s] responsibility to rebut these possibilities in

his complaint[].” Braden, 588 F.3d at 596. Such factual

disputes are better resolved at a later stage of the

litigation.

2. Recordkeeping Fees

According to the Amended Complaint, “recordkeeping”

refers to the administrative services provided by a third

party to a defined contribution plan, such as providing

account statements to participants. (Doc. # 23 at ¶ 98).

Recordkeeping expenses can be paid either directly from plan

assets or indirectly through a process known as revenue

sharing. (Id. at ¶ 100). As the Amended Complaint explains

it: “Revenue sharing payments are payments made by

investments within the plan, typically mutual funds, to the

plan’s recordkeeper or to the plan directly, to compensate

for recordkeeping and trustee services that the mutual fund

company otherwise would have to provide.” (Id.).

Plaintiffs allege that the Plans at issue in this matter

utilized revenue sharing to pay recordkeeping expenses. (Id.

at ¶ 101). They allege that Defendants failed to prudently

manage the Plans’ recordkeeping costs by failing to obtain

lower costs than what was being charged, pointing to other

defined contribution plans’ recordkeeping expenses. (Id. at

¶¶ 105-09, 112).

While Plaintiffs concede that Defendants “did seek out

proposals from various recordkeepers in 2015 and again in

2018, the process they used was clearly deficient” because

those searches resulted only in proposals from recordkeepers

owned by insurance companies, and it is “well known in the

industry that insurance based recordkeepers” are not

appropriate for large institutional investors like the Plans.

(Id. at ¶¶ 113-15). Accordingly, Plaintiffs allege that “[a]

prudent fiduciary would have observed the excessive fees

being paid to the recordkeeper and taken corrective action.

Defendants’ failures to monitor and control recordkeeping

compensation cost the Plans millions of dollars per year and

constituted breaches of the duty of prudence.” (Id. at ¶ 116).

Pointing to their submitted evidence, Defendants argue

that the Plans participated in a “competitive” request for

proposal (“RFP”) process in 2015 and a request for information

(“RFI”) process in 2018 in order to find qualified

recordkeepers. (Doc. # 29 at 18-19). Further, once it narrowed

the field to three potential recordkeepers, the Plans

“thoroughly analyzed” the finalists’ services and pricing

before selecting Transamerica as the recordkeeper for the

TriNet 401(k) Plan and MassMutual for the TriNet Select 401(k)

Plan. (Id. at 19). Since, according to Defendants, Plaintiffs

do not and cannot challenge the thoroughness of the process

used to select the recordkeepers, they instead focus on a

comparison of their “estimate of the Plans’ recordkeeping

fees to two industry-wide surveys of single-employer plans.”

(Id. at 20). This is inappropriate, Defendants argue, because

recordkeeping fees must be evaluated in light of the specific

services that were rendered. (Id.).

Defendants also argue that the recordkeeping fees

included in the Amended Complaint are wrong, that the Amended

Complaint misconstrues the very surveys it relies on, and,

moreover, “there is no legal support for the allegation that

insurance-based recordkeepers are per se imprudent, and it

cannot be the case that 13% of plans with over $1 billion in

assets (and 49.5% of all plans) have breached their fiduciary

duties merely by hiring insurance-based recordkeepers.” (Id.

at 22-23).

These arguments, once again, raise factual questions

that are not appropriate for this Court to resolve at the

motion to dismiss stage. See Cassell v. Vanderbilt Univ., 285

F. Supp. 3d 1056, 1064 (M.D. Tenn. 2018) (“The question

whether it was imprudent to pay a particular amount of record-

keeping fees generally involves questions of fact that cannot

be resolved on a motion to dismiss.”); see also Santiago v.

Univ. of Miami, No. 1:20-CV-21784, 2021 WL 1173164, at *4

(S.D. Fla. Mar. 1, 2021), report and recommendation adopted,

No. 1:20-CV-21784, 2021 WL 1165441 (S.D. Fla. Mar. 26, 2021)

(pointing out the “fact-intensive inquiries” necessary to

resolve the parties’ dispute around recordkeeping fees and

refusing to take up such a dispute on a motion to dismiss).

Furthermore, Defendants’ argument that Plaintiffs failed

to plead which specific services were offered to the Plans

has been rejected by other courts. See Kruger, 131 F. Supp.

3d at 479 (“While Defendants claim that Plaintiffs have not

alleged facts regarding why the amount of the recordkeeping

fees are excessive, the services provided, or how the fees

charged to the Plan were excessive in light of those services,

this court finds that those are the types of facts warranting

discovery, and, therefore, dismissal at this stage is not

appropriate.”).

Accordingly, it is

ORDERED, ADJUDGED, and DECREED:

Defendants’ Motion to Dismiss the Amended Complaint

(Doc. # 29) is DENIED. Defendants are directed to file their

answer to the First Amended Complaint within 14 days of the

date of this Order.

DONE and ORDERED in Chambers, in Tampa, Florida, this

10th day of January, 2022.

VIR IA M. HERNANDEZ’COVINGTON

UNITED STATES DISTRICT JUDGE

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