SEIBERT v. NOKIA OF AMERICA CORPORATION

Not for Publication

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

SEIBERT, et al.,

Plaintiffs,

Civil Action No. 21-20478 (ES) (AME)

v.

OPINION

NOKIA OF AMERICA CORPORATION, et

al.,

Defendants.

SALAS, DISTRICT JUDGE

Plaintiffs Paul Seibert, Thomas Solury, Dana Molineaux, Henry Worcester, Stephanie

Schnepp, John Strong, Jr., and Scott Allen (together “Plaintiffs”) filed this putative class action

bringing claims for breach of fiduciary duty under the Employee Retirement Income Security Act

(“ERISA”), 29 U.S.C. § 1001, et seq. against Defendants Nokia of America Corporation

(“Nokia”), the Board of Directors of Nokia (the “Board”), and the Nokia 401(k) Committee (the

“Committee”) (together “Defendants”).1 (D.E. No. 1 (“Complaint” or “Compl.”)). Before the

Court is Defendants’ motion to dismiss the Complaint. (D.E. No. 20). Having considered the

parties’ submissions, the Court decides this matter without oral argument. See Fed. R. Civ. P.

78(b); L. Civ. R. 78.1(b). For the following reasons, Defendants’ motion is GRANTED-in-part

and DENIED-in-part.

1 The class period is defined in the Complaint as December 13, 2015, through the date of judgment (the “Class

Period”). (Compl. ¶ 38). As alleged in the Complaint, prior to 2017 Alcatel-Lucent was the plan sponsor and

subsequent to 2017 Nokia was the plan sponsor. (Id. ¶ 1 n.2). Further, prior to 2016 the Board allegedly may have

been known as the Board of Directors of Alcatel-Lucent USA. (Id. ¶ 1 n.3). Finally, the Committee was formerly

known as the Alcatel-Lucent 401(k) Committee. (Id. ¶ 1 n.4). After January 1, 2017, it was changed to the Nokia

401(k) Committee. (Id.). Accordingly, the Court construes the Defendants to include their Alcatel-Lucent

counterparts.

I. BACKGROUND

A. Factual Allegations

As alleged in the Complaint, Plaintiffs are participants of the Nokia Savings/401(k) Plan

(the “Plan”)2 who invested in options offered by the Plan. (Compl. at 1; id. ¶¶ 17–24 & 45). The

Plan is a “defined contribution” or “individual account” plan within the meaning of ERISA § 3(34),

29 U.S.C. § 1002(34), “in that the Plan provides for individual accounts for each participant and

for benefits based solely upon the amount contributed to those accounts, and any income, expense,

gains and losses, and any forfeitures of accounts of the participants which may be allocated to such

participant’s account.” (Id. ¶ 46). The Plan here is vast. According to the Complaint, the Plan

had at least $6.3 billion dollars in assets under management at all times during the Class Period

and had over 29,000 participants as of the end of 2020. (Id. ¶¶ 9 & 39).

Defendant Nokia, is the Plan sponsor. (Id. ¶ 26). Plaintiffs allege that Nokia, acting

through the Board, appointed the Committee to, among other things, “ensure that the investments

available to Plan participants were appropriate, had no more expense than reasonable and

performed well as compared to their peers.” (Id. ¶ 30). The Complaint alleges that, pursuant to

the Plan document, the Committee had full discretionary authority to determine the number and

type of investment options administered by the Plan. (Id. ¶ 34).

The Plan is governed under ERISA, and Plaintiffs claim that Defendants are fiduciaries of

the Plan and breached their ERISA-imposed fiduciary duties in several ways. First, Plaintiffs

claim that the Committee breached its fiduciary duty of prudence by failing to adequately review

the Plan’s investment portfolio with due care to ensure that each investment option was prudent in

2 As alleged in the Complaint, prior to 2016 the Plan was known as the Alcatel-Lucent/401(k) Plan but was

changed to its current name after 2016. (Compl. at 1 n.1). Accordingly, the Court construes the “Plan” to include

both the “Alcatel-Lucent/401(k) Plan” and the “Nokia Savings/401(k) Plan” since Plaintiffs allege that the Class

Period is defined as December 13, 2015, through the date of judgment. (Id. ¶ 38).

terms of cost and management fees. (Id. ¶¶ 11 & 64). This alleged breach resulted in several funds

in the Plan being more expensive than comparable funds found in similarly-sized plans with more

than $1 billion in assets. (Id. ¶ 64). According to the Complaint, each of the funds offered by the

Plan has an associated cost, including for investment management. (Id.). Plan participants pay

for costs associated with each fund “via the fund’s expense ratio, evidenced by a percentage of

assets.” (Id. ¶ 65). For example, “an expense ratio of .75% means that a plan participant will pay

$7.50 for every $1,000 in assets.” (Id.). Because the expense ratio reduces the participant’s return,

Plaintiffs allege that prudent plan fiduciaries must consider the effect expense ratios have on

investment returns. (Id.). Plaintiffs identity seventeen funds offered by the Plan that they allege

had excessively high expense ratios. (Id. ¶¶ 69–70). Plaintiffs compare these expense ratios to

median and average costs of funds according to a study conducted by the Investment Company

Institute (“ICI”) and argue that the expense ratios are “excessively high” when compared to the

ICI Medians and ICI Averages. (Id.). Plaintiffs further allege that though the Plan’s funds, which

are pooled separate accounts, should have been less expensive than their mutual fund counterparts,

they were much more expensive. (Id. ¶ 71). According to the Complaint, these excessively high

costs are circumstantial evidence that the Plan was managed imprudently. (Id. ¶ 72).

Second, Plaintiffs allege that the Committee breached its fiduciary duty of prudence by

subjecting the Plan to excessive recordkeeping and administrative costs. (Id. ¶ 73).

“Recordkeeping” refers to the “suite of administrative services typically provided to a defined

contribution plan by the plan’s ‘recordkeeper.’” (Id. ¶ 74). According to the Complaint,

recordkeeping services are generally provided as a bundle at a per-capita price—regardless of

whether a plan makes use of all of the services—or à la carte for an additional cost based on the

usage of the services by individual participants. (Id. ¶¶ 75–77). Plaintiffs allege that the price for

recordkeeping often “depends on the number of participants” in a plan, and because of “economies

of scale,” large plans can negotiate lower per-participant recordkeeping fees. (Id. ¶ 79). Plaintiffs

further claim that recordkeeping services “can either be paid directly from plan assets, or indirectly

by the plan’s investments in a practice known as revenue sharing.” (Id. ¶ 80). While the Complaint

alleges that revenue sharing is not per se imprudent, “unchecked, it is devastating for Plan

participants” because it is a way to hide fees. (Id. ¶ 81).

To show that the Plan’s recordkeeping and administrative fees were excessive, Plaintiffs

compare its fees to those of other plans. (Id. ¶ 93). From 2015 to 2020, Plaintiffs allege that the

Plan’s per participant administrative and recordkeeping fees ranged from $76.59 to $116.26, which

they characterize as “astronomical.” (Id. ¶¶ 87–88). Plaintiffs allege that the per participant fees

in seven other comparable plans with at least 30,000 participants and $3 billion in assets show fees

in the range of $21 to $34 per participant in 2019. (Id. ¶ 93). Plaintiffs also provide data from a

2020 report by a consulting group called NEPC that found that the majority of plans with over

15,000 participants paid under $40 per participant in recordkeeping, trust and custody fees. (Id.

¶¶ 91–92). In addition, Plaintiffs allege that fiduciaries should remain informed about overall

trends in the recordkeeping fee marketplace by conducting a Request for Proposal (“RFP”) at

“reasonable intervals” to determine if a plan’s recordkeeping and administrative expenses appear

high in relation to the general marketplace. (Id. ¶¶ 84–85). Because the Plan paid yearly amounts

in recordkeeping fees that increased each year, Plaintiffs allege that there is “little to suggest” that

the Committee conducted an RFP at reasonable intervals, “or certainly at any time prior to 2015

through the present.” (Id. ¶ 85). Instead, Plaintiffs allege that the Plan stuck with a recordkeeping

charge to participants based on the Plan’s total assets—causing the per participant charge to

increase each year as the assets of the Plan increased—even though the number of participants in

the Plan remained relatively unchanged. (Id. ¶¶ 86–88). Plaintiffs allege that such an asset-based

approach made little sense given that recordkeeping expenses are driven by the number of

participants in a plan and the vast majority of plans are charged on a per-participant basis. (Id. ¶¶

79 & 86). Further, Plaintiffs allege that in this matter using a combination of an asset-based fee

with revenue sharing “resulted in a worst-case scenario for the Plan’s participants because it

saddled [them] with above-market recordkeeping fees.” (Id. ¶ 83). According to the Complaint,

these excessive recordkeeping and administrative costs are circumstantial evidence that the Plan

was managed imprudently. (Id. ¶ 95).

B. Procedural History

Plaintiffs initiated this putative class action on December 13, 2021, on behalf of themselves

and “[a]ll persons, except Defendants and their immediate family members, who were participants

in or beneficiaries of the Plan, at any time between December 13, 2015 through the date of

judgment.” (Id. ¶ 38). The Complaint asserts two counts against (i) the Committee for breach of

fiduciary duties of prudence (“Count I”); and (ii) Nokia and the Board for failure to adequately

monitor other fiduciaries (“Count II”). (Id. ¶¶ 96–110). More specifically, in Count I, Plaintiffs

allege that the Committee and its members breached their fiduciary duty of prudence in violation

of 29 U.S.C. § 1104(a)(1) by (i) failing to adequately review the Plan’s investment portfolio with

due care to ensure that each investment option was prudent, in terms of cost, and (ii) subjecting

the Plan to excessive recordkeeping and administrative costs. (Id. ¶¶ 11 & 96–103). In Count II,

Plaintiffs allege that Nokia and its Board breached their fiduciary duties by failing to monitor the

Committee to ensure it avoided those same excessive fees and costs. (Id. ¶¶ 104–110). On July

28, 2022, Defendants moved to dismiss the Complaint under Federal Rule of Civil Procedure

12(b)(6), challenging the sufficiency of Plaintiffs’ allegations supporting all counts. (D.E. No. 20-

1 (“Mov. Br.”)). The motion is fully briefed. (D.E. No. 21 (“Opp. Br.”); D.E. No. 22 (“Reply”)).

Since the filing of Defendants’ motion, the parties have also submitted supplemental notices of

authority addressing similar allegations. (D.E. Nos. 23–25, 28–31, 33, 35–36, 38–40, 43–44, 46,

48 & 50–53).

II. LEGAL STANDARD

In assessing whether a complaint states a cause of action sufficient to survive dismissal

under Rule 12(b)(6), the Court accepts “all well-pleaded allegations as true and draw[s] all

reasonable inferences in favor of the plaintiff.” City of Cambridge Ret. Sys. v. Altisource Asset

Mgmt. Corp., 908 F.3d 872, 878 (3d Cir. 2018). “[T]hreadbare recitals of the elements of a cause

of action, legal conclusions, and conclusory statements” are all disregarded. Id. at 878–79 (quoting

James v. City of Wilkes-Barre, 700 F.3d 675, 681 (3d Cir. 2012)). The complaint must “contain

sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face,”

and a claim is facially plausible when the plaintiff “pleads factual content that allows the court to

draw the reasonable inference that the defendant is liable for the misconduct alleged.” Zuber v.

Boscov’s, 871 F.3d 255, 258 (3d Cir. 2017) (first quoting Santiago v. Warminster Twp., 629 F.3d

121, 128 (3d Cir. 2010); then quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “In evaluating

a motion to dismiss, [courts] may consider documents that are attached to or submitted with the

complaint, and any ‘matters incorporated by reference or integral to the claim, items subject to

judicial notice, matters of public record, orders, [and] items appearing in the record of the case.’”

Buck v. Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir. 2006) (second alteration in original)

(citation omitted) (quoting 5B Charles A. Wright & Arthur R. Miller, Federal Practice &

Procedure § 1357 (3d ed. 2004)).

III. DISCUSSION

A claim for a breach of fiduciary duty has three elements: “(1) a plan fiduciary (2) breaches

an ERISA-imposed duty (3) causing a loss to the plan.” Leckey v. Stefano, 501 F.3d 212, 225–26

(3d Cir. 2007), as amended (Dec. 21, 2007). With respect to the second prong, which is the central

dispute of Plaintiffs’ claims, ERISA imposes a duty of prudence. See § 1104(a)(1)(B). The Court

will address Plaintiffs’ claims for breach of the duty of prudence in Count I as well as Plaintiffs’

failure to monitor claim in Count II.

A. Breach of Duty of Prudence

ERISA fiduciaries are held to the “prudent man” standard of care, which requires fiduciaries

to exercise “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.” 29 U.S.C. § 1104(a)(1)(B). “It is not enough

to avoid misconduct, kickback schemes, and bad-faith dealings. The law expects more than good

intentions. ‘[A] pure heart and an empty head are not enough.’” Sweda v. Univ. of Pa., 923 F.3d

320, 329 (3d Cir. 2019) (alteration in original) (quoting DiFelice v. U.S. Airways, Inc., 497 F.3d

410, 418 (4th Cir. 2007)). In assessing this duty, a court must look at the process rather than the

results. Id. Hindsight indeed is 20/20, so the focus must be “on a fiduciary’s conduct in arriving

at [a] . . . decision.” Id. (alteration in original) (quoting In re Unisys Sav. Plan Litig., 74 F.3d 420,

434 (3d Cir. 1996)). A court should ask “whether a fiduciary employed the appropriate methods

to investigate and determine the merits of a particular [course of action].” Id. (quoting Unisys, 74

F.3d at 434). At the pleading stage, however, factual allegations do not have to “directly address[]

the process by which the [p]lan was managed.” Braden v. Wal-Mart Stores, Inc., 588 F.3d 585,

596 (8th Cir. 2009). A plaintiff’s allegations are sufficient if a court can reasonably infer that “the

process was flawed.” Renfro v. Unisys Corp., 671 F.3d 314, 327 (3d Cir. 2011) (quoting Braden,

588 F.3d at 596). Such allegations may include the “reasonableness of fees” and “practices of

similarly situated fiduciaries.” Sweda, 923 F.3d at 331. “Because the content of the duty of

prudence turns on the circumstances . . . prevailing at the time the fiduciary acts, § 1104(a)(1)(B),

the appropriate inquiry will necessarily be context specific” and “courts must give due regard to

the range of reasonable judgments a fiduciary may make based on her experience and expertise.”

Hughes v. Nw. Univ., 142 S. Ct. 737, 742 (2022) (internal quotation omitted).

i. Excessive Expense Ratios

Plaintiffs claim that the Committee breached its fiduciary duty of prudence by failing to

adequately review the Plan’s investment portfolio with due care to ensure that each investment

option was prudent in terms of cost and investment management fees. (Compl. ¶¶ 11 & 64). More

specifically, Plaintiffs allege that the Plan was managed imprudently because the expense ratios

charged by seventeen of the Plan’s funds were excessive. (Id. ¶¶ 58–72). To support their claim,

Plaintiffs compare the expense ratios of seventeen of the Plan’s funds to median and average

expense ratios of similarly-sized plans according to an ICI study. (Id. ¶¶ 69–70). Plaintiffs claim

that the Committee “could not have engaged in a prudent process as it relates to evaluating

investment management fees” because of the “excessively high expense ratios” charged by the

funds compared to the plans identified by the ICI study. (Id. ¶¶ 68–70). Defendants move to

dismiss this claim, arguing (among other things) that the ICI study does not constitute a meaningful

benchmark for purposes of comparing the costs of the Plan’s funds. (Mov. Br. at 14–21). Plaintiffs

oppose and contend that they have plausibly alleged a breach of the duty of prudence because the

ICI study provides a useful benchmark. (Opp. Br. at 12–17). In addition, Plaintiffs argue that

whether the ICI study is a meaningful comparator is a question that should not be evaluated on a

motion to dismiss. (Id. at 17–19). For the reasons set forth below, the Court agrees with

Defendants.

To determine whether a fiduciary breached its duty of prudence, courts look to “process

rather than results” and will consider “whether a fiduciary employed the appropriate methods to

investigate and determine the merits of a particular investment.” Sweda, 923 F.3d at 329 (internal

quotation omitted). “To survive a motion to dismiss, however, Plaintiffs need not ‘directly allege

how [Defendants] mismanaged the Plan,’ so long as there is ‘substantial circumstantial evidence’

to permit the Court to ‘reasonably infer that a breach had occurred.’” Cho v. Prudential Ins. Co.

of Am., No. 19-19886, 2021 WL 4438186, at *7 (D.N.J. Sept. 27, 2021) (quoting Silva v. Evonik

Corp., No. 20-2202, 2020 WL 12574912, at *5 (D.N.J. Dec. 30, 2020)). Nonetheless, “Plaintiffs

who rely on ‘circumstantial evidence must . . . provide a sound basis for comparison—a

meaningful benchmark—to show a prudent fiduciary in like circumstances would have selected a

different fund.’” Id. (quoting Silva, 2020 WL 12574912, at *5). A plaintiff does not adequately

plead a breach of the fiduciary duty of prudence merely by alleging that cheaper alternative

investments with some similarities exist in the marketplace. Id. at *8–9.

Here, the Complaint does not sufficiently allege that the Committee breached its duty of

prudence by failing to adequately review the Plan’s investment portfolio with due care to ensure

that each investment option was prudent, in terms of cost. To support their claim, Plaintiffs

compare the expense ratios of seventeen of the Plan’s funds, which they allege were excessively

high, with median and average expense ratios of funds in “similarly-sized plans” bearing similar

investment styles according to an ICI study. (Compl. ¶¶ 69–70).

First, the ICI study does not constitute a meaningful benchmark and is insufficient to

plausibly allege that the Committee’s review of the Plan’s investment portfolio was imprudent.

As Defendants point out (Mov. Br. at 15–18), rather than pointing to the expense ratios paid by

specific and similarly-situated investment options in other plans as a basis for comparison, the

Complaint only compares the expense ratios of the Plan’s funds with the median and average costs

of funds in “similarly-sized plans,” defined by high-level investment style groupings. (Id. ¶¶ 68–

70; see, e.g., id. ¶ 69 (comparing expense ratio of Plan’s High Yield Bond Fund with the ICI

median expense ratio for funds with an investment style of Domestic Bond)). However, Plaintiffs

do not allege what funds are included in these median and average calculations broken down by

investment style, or how those funds compare with the Plan’s funds. See Matousek v.

MidAmerican Energy Co., 51 F.4th 274, 281–82 (8th Cir. 2022) (finding that the plaintiffs did not

plausibly allege an investment duty of prudence claim by comparing expense ratios of the plan’s

funds with average and median expense ratios in their groups because “[t]here is no way to

compare the large universe of funds—about which we know little—to the risk profiles, return

objectives, and management approaches of the funds” in the plan). In effect, Plaintiffs have done

little more here than allege that cheaper alternative investments existed in the marketplace. This

is not sufficient to adequately plead a claim for breach of the duty of prudence. Cho, 2021 WL

4438186, at *8–9 (finding that the plaintiff failed to plausibly allege that defendants’ selection and

retention of challenged funds was imprudent where plaintiff compared each of the plan’s

challenged funds to a single corresponding fund with a “similar investment style” to show that the

defendants charged excessive fees, because a “[p]laintiff does not adequately plead a claim merely

by alleging that ‘cheaper alternative[] investments exist in the marketplace.’” (quoting Meiners v.

Wells Fargo & Co., 898 F.3d 820, 822 (8th Cir. 2018))). As such, these allegations are insufficient

to withstand a motion to dismiss.

Second, the fact that the Plan’s funds charged an expense ratio higher than certain averages

and medians does not, by itself, suggest that the fund’s costs are excessive. As Defendants point

out, if such were the case, then by definition half of all funds would be charging excessive fees.

(Mov. Br. at 19–20). Rather, as the Supreme Court has emphasized, a court evaluating whether a

plaintiff has plausibly alleged a breach of the duty of prudence must undertake a “context-specific”

inquiry. Hughes, 142 S. Ct. at 742 (internal quotation omitted). Plaintiffs do not offer any other

context to support their claim that the Plan’s funds were managed imprudently beyond their

allegation that the seventeen challenged funds had higher expense ratios as compared to third-party

median and average expense ratios for funds with certain investment styles. Plaintiffs do not allege

what funds are included in these median and average calculations broken down by investment style

groupings. Nor do Plaintiffs mention anything about the performance of the challenged funds.

(See generally Compl.). Such context is important, however, given that a prudent fiduciary might

decide to include funds with higher costs in a plan if those funds are likely to produce higher

returns. See, e.g., Hughes, 142 S. Ct. at 742 (“Because the content of the duty of prudence turns

on the circumstances . . . prevailing at the time the fiduciary acts, § 1104(a)(1)(B), the appropriate

inquiry will necessarily be context specific”); Smith v. CommonSpirit Health, 37 F.4th 1160, 1165

(6th Cir. 2022) (“[T]here is nothing wrong with permitting employees to choose [more expensive

options] in hopes of realizing above-average returns over the course of the long lifespan of a

retirement account.”); Rodriguez v. Hy-Vee, Inc., No. 22-0072, 2022 WL 16648825, at *6 (S.D.

Iowa Oct. 21, 2022) (“In their Complaint, Plaintiffs do not mention anything about the

performance of the seven funds, instead focusing entirely on fees. This is a notable omission, as

a prudent fiduciary reasonably might decide to include higher-fee options in the menu of choices

for plan participants if those options were reasonably likely to produce higher returns.”). Instead,

Plaintiffs allege only that the offered funds in the Plan were more expensive than other funds. And

as stated already, a plaintiff does not adequately plead a claim for breach of the duty of prudence

merely by alleging that cheaper alternative investments with some similarities exist in the

marketplace. Cho, 2021 WL 4438186, at *8–9. Without additional facts to show other indicia of

imprudence, Plaintiffs have not plausibly alleged that the Committee breached its duty of prudence

by failing to adequately review the Plan’s investment portfolio with due care to ensure that each

investment option was prudent, in terms of cost and investment management fees.

Plaintiffs’ arguments to the contrary are unavailing. To start, Plaintiffs argue that there is

no one-size-fits-all approach to picking appropriate benchmarks, and here the large deviations (as

much as 364% in some instances) between the expense ratios of the funds offered by the Plan as

compared to the medians and averages of other funds in the ICI study are sufficient to allege

imprudence. (Opp. Br. at 12–14). Further, Plaintiffs contend that Defendants’ arguments

regarding their choice of comparators raise issues of fact that require assessment on a more

developed record. (Id. at 17–19). The Court disagrees. While there may indeed be no one-size-

fits-all approach to choosing appropriate benchmarks, to survive a motion to dismiss, Plaintiffs

who rely on circumstantial evidence in raising a duty of prudence claim must nevertheless “provide

a sound basis for comparison” to show a prudent fiduciary in “like circumstances” would have

acted differently. Compare Cho, 2021 WL 4438186, at *7–9 (granting motion to dismiss where

the plaintiff failed to offer any meaningful benchmark), with Sweda, 923 F.3d at 332 (finding that

the plaintiffs stated a claim where the plaintiff offered “specific comparisons between returns on

[p]lan investment options and readily available alternatives, as well as practices of similarly

situated fiduciaries to show what plan administrators ‘acting in a like capacity and familiar with

such matters would [do] in the conduct of an enterprise of a like character and with like aims.’”

(emphasis added) (quoting 29 U.S.C. § 1104(a)(1)(B))). And as described above, here, Plaintiffs

have failed to provide comparisons with the practices of similarly situated fiduciaries by relying

on an ICI study that does not specify the funds captured in the aggregate median and average

investment style groupings.

Finally, Plaintiffs contend that notwithstanding Defendants’ criticism of the use of the ICI

medians and averages as an appropriate benchmark, other courts in the Third Circuit have upheld

claims based on this same benchmark. (Opp. Br. at 14–15). The Court, however, finds these cases

distinguishable. Plaintiffs first cite to Silva, 2020 WL 12574912, at *5–6, for support, where the

court found that the plaintiffs had plausibly alleged a breach of the duty of prudence due to the

defendants’ failure to investigate or select investments with lower expenses. While the plaintiffs

in Silva alleged that the funds in the plan charged higher-than-average fees with reference to

medians published by the ICI study, they also set forth allegations that (i) “the Plan offered mutual

funds in a higher cost share class, despite the availability of lower cost share mutual funds that

were identical in every way except for their lower cost”; (ii) “[d]efendant[]s failed to investigate

the availability of collective trusts or separate accounts, which are materially similar but cheaper

alternatives to the mutual funds in the Plan;” and (iii) “the Plan maintained three actively managed

funds, despite the comparable returns and lower costs offered by passively managed funds.” Id.

at *5 (internal quotation omitted). No such additional allegations are present here. And as

discussed above, Plaintiffs do not allege anything about the performance of the challenged funds

or the similarities between the challenged funds and the funds in the ICI study. Likewise, in

Pinnell v. Teva Pharms. USA, Inc., No. 19-5738, 2020 WL 1531870, at *5 (E.D. Pa. Mar. 31,

2020), though the plaintiffs alleged that the funds in the plan had higher expense ratios as compared

to median fees in the same investment category group, the plaintiffs also alleged that the challenged

funds were overpriced as compared to specific identical but lower-cost alternatives. Pinnell, 2020

WL 1531870, at *5. Again, no such additional allegations are present here.3

Accordingly, Plaintiffs’ claim for breach of the fiduciary duty of prudence regarding the

Committee’s failure to adequately review the Plan’s investment portfolio with due care to ensure

that each investment option was prudent, in terms of cost is DISMISSED. However, it is

dismissed without prejudice.4 The Court cannot rule out the possibility that Plaintiffs might

plausibly allege additional facts to show that the Committee breached its duty of prudence by

failing to adequately review the Plan’s investment portfolio with due care.

ii. Recordkeeping and Administrative Fees

Plaintiffs claim that the Committee breached its fiduciary duty of prudence by subjecting

the Plan to excessive recordkeeping and administrative costs. (Compl. ¶ 73). Defendants move

to dismiss this claim, arguing that Plaintiffs have improperly focused on recordkeeping and

administrative costs in isolation without taking the services provided by the Plan or comparator

plans into consideration. (Mov. Br. at 24–26). Further, Defendants contend that Plaintiffs have

3 Plaintiffs’ other cited cases do not support a contrary conclusion. For example, in Bouvy v. Analog Devices,

Inc., No. 19-0881, 2020 WL 3448385, at *2, *9 (S.D. Cal. June 24, 2020), while the plaintiff alleged that “the Plan’s

investment expenses were higher than industry averages,” he also alleged “specific examples of funds that

underperformed their peers” and “concrete examples of cheaper better performing funds.” Bouvy, 2020 WL 3448385,

at *2, *9. Similarly, in Davis v. Magna Int’l of Am., Inc., No. 20-11060, 2021 WL 1212579, at *7 (E.D. Mich. Mar.

31, 2021), while the plaintiffs alleged that the plan’s investment expenses were higher than industry averages they

also alleged that the investment committee should have selected lower-cost share classes of mutual funds where

available. Davis, 2021 WL 1212579, at *7; see also McCool v. AHS Mgmt. Co., Inc., No. 19-1158, 2021 WL 826756,

at *5 (M.D. Tenn. Mar. 4, 2021) (upholding duty of prudence allegations where “[p]laintiffs allege[d] that the [p]lan

failed to switch to identical lower-fee share class mutual funds, maintained expensive actively managed mutual funds,

and failed to make any significant changes to the funds for the entire class period”); In re Sutter Health ERISA Litig.,

No. 20-1007, 2023 WL 1868865, at *8–9 (E.D. Cal. Feb. 9, 2023) (upholding duty of prudence allegations where the

plaintiffs included allegations that the funds had high expense ratios and also consistently underperformed in relation

to other options); Stengl v. L3Harris Technologies, Inc., 22-0572, at 22 (M.D. Fla. Mar. 24, 2023) (noting that while

the ICI study “piques the Court’s interest” it cannot by itself carry the day at the motion to dismiss stage). No such

additional allegations are present here.

4 Because the Court dismisses Plaintiffs’ claim regarding the Committee’s failure to adequately review the

Plan’s investment portfolio with due care to ensure that each investment option was prudent, in terms of cost, the

Court will not consider Defendants’ remaining arguments with respect to this claim. (Mov. Br. at 20–22).

failed to state a claim because their calculations of the allegedly excessive recordkeeping fees are

based on demonstrably false facts. (Id. at 27–29). Plaintiffs oppose and contend that they have

plausibly alleged a breach of the duty of prudence regarding excessive recordkeeping and

administrative fees because they have provided the Court with adequate comparators. (Opp. Br.

at 21–22). In addition, Plaintiffs argue that their fee estimates are well-pled and to the extent they

made any errors of fact, it was due to Plaintiffs’ lack of access to accurate Plan data. (Id. at 22–

24). For the reasons set forth below, the Court agrees with Plaintiffs.

Encompassed within the duty of prudence is that fiduciaries must “understand and monitor

plan expenses.” Sweda, 923 F.3d at 328. “‘Expenses, such as management or administrative fees,

can sometimes significantly reduce the value of an account in a defined-contribution plan,’ by

decreasing its immediate value, and by depriving the participant of the prospective value of funds

that would have continued to grow if not taken out in fees.” Id. (quoting Tibble v. Edison Int’l,

575 U.S. 523, 525 (2015)). Accordingly, “fiduciaries should be vigilant in ‘negotiation of the

specific formula and methodology’ by which fee payments such as ‘revenue sharing will be

credited to the plan and paid back to the plan or to plan service providers.’” Id. (quoting DOL

Advisory Opinion 2013-03A, 2013 WL 3546834, at *4 (hereinafter DOL Advisory Opinion)).

In Sweda, the Third Circuit held that the plaintiffs plausibly alleged a breach of the duty of

prudence regarding excessive administrative and recordkeeping fees, where the plaintiffs alleged

that (i) the plan paid fees that were higher than those paid by similar plans for the same services;

(ii) fees went up as assets grew despite there being no corresponding increase in services; (iii) the

defendants failed to negotiate a cap on fees or solicit competitive bids for recordkeeping fees,

despite the fact that similarly situated fiduciaries had taken such actions; and (iv) the defendants

failed to review plan management and leverage the plan’s size to obtain lower fees or rebates. Id.

at 330–31. The Third Circuit found these allegations sufficient because the plaintiffs provided

“specific comparisons” between the fiduciary’s choices and available alternatives to show that the

“practices of similarly situated fiduciaries” for the “same services” differed. Id. at 330–32. In

keeping with that decision, courts in this Circuit evaluating a claim for excessive fees will consider

whether the plan engaged in competitive bidding for recordkeeping services, the plan’s ability to

leverage its size to reduce fees, and whether the complaint includes “a sound basis for comparison

[or] meaningful benchmark” to show that the “practices of similarly situated fiduciaries” for the

same services differed. Pinnell, 2020 WL 1531870, at *3–4 (internal quotation omitted). “A high

fee alone does not mandate a conclusion that recordkeeping fees are excessive; rather, fees must

be evaluated ‘relative to the services rendered.’” Ramos v. Banner Health, 461 F. Supp. 3d 1067,

1132 (D. Colo. 2020), aff’d, 1 F.4th 769 (10th Cir. 2021) (quoting Young v. Gen. Motors Inv.

Mgmt. Corp., 325 F. App’x 31, 33 (2d Cir. 2009)). Accordingly, allegations that include a

meaningful benchmark are those that plead that similarly situated plans received the same services

for less. Johnson v. PNC Fin. Servs. Grp., Inc., No. 20-1493, 2021 WL 3417843, at *4 (W.D. Pa.

Aug. 3, 2021).

Bearing in mind the necessarily fact-intensive inquiry of this claim, Plaintiffs have

sufficiently alleged fiduciary breach with respect to the allegedly excessive recordkeeping and

administrative fees. Plaintiffs allege, and the Court accepts as true, that the Plan paid unreasonably

high administrative and recordkeeping fees of $76.59 to $116.26 per participant from the years of

2015 to 2020. (Compl. ¶ 87). Plaintiffs also allege that recordkeeping and administrative fees

increased as the assets of the Plan increased, despite the fact that the number of participants

remained relatively unchanged from 2015 to 2020. (Id. ¶ 88). Further to demonstrate that the

Plan’s recordkeeping and administrative fees were excessive, Plaintiffs allege that the per

participant fees for seven other plans with more than 30,000 participants and more than $3 billion

in assets under management show fees in the range of $21 to $34 per participant in 2019. (Id. ¶

93). They also point to a report from consulting group NEPC that found that the majority of plans

with over 15,000 participants paid under $40 per participant in recordkeeping, trust and custody

fees, as well as case law to show that large plans can bargain for low recordkeeping fees. (Id. ¶¶

92 & 94 n. 15). In addition, Plaintiffs allege that because the Plan paid yearly amounts in

recordkeeping fees that increased each year over the Class Period, there is little to suggest that the

Committee conducted an RFP to determine if recordkeeping and administrative expenses of the

Plan were high in relation to the general marketplace, as a prudent fiduciary should do. (Id. ¶¶ 84–

85). Accordingly, Plaintiffs allege that “[g]iven the size of the Plan’s assets during the Class Period

and total number of participants, in addition to the general trend towards lower recordkeeping

expenses in the marketplace as a whole, the Plan could have obtained recordkeeping services that

were comparable to or superior to the typical services provided by the Plan’s recordkeeper at a

lower cost.” (Id. ¶ 95). Considering these facts in combination, Plaintiffs sufficiently plead that

the Committee breached its duty of prudence under § 1104(a)(1)(B) under the circumstances then

prevailing.5

Defendants’ arguments to the contrary are unavailing. First, Defendants argue that

Plaintiffs have failed to allege that the recordkeeping and administrative fees paid by the Plan were

excessive relative to the services being rendered. (Mov. Br. at 24–26). More specifically,

Defendants contend that the Complaint fixates only on the purported amount of recordkeeping and

administrative fees paid by the Plan versus comparator plans without offering any allegations about

5 While Defendants contend that other cases have held that the NEPC report is not an appropriate benchmark

(D.E. No. 39 at 3), here the Court finds that Plaintiffs have sufficiently pled that the Committee breached its duty of

prudence regarding excessive recordkeeping and administrative fees based on the consideration of all these facts in

combination.

the scope or caliber of services being provided by the Plan or comparator plans in exchange for

those fees. (Id. at 24–26; Reply at 8–10). Without such context, Defendants contend that the

Complaint fails to state a plausible claim of imprudence. (Mov. Br. at 26).

Though this issue is close, the Court finds that Plaintiffs have stated a claim for fiduciary

breach of the duty of prudence with respect to the allegedly excessive recordkeeping and

administrative fees. While Defendants argue that Plaintiffs have failed to offer allegations about

the scope or caliber of services being provided by the Plan or comparator plans, the Court

disagrees. Plaintiffs’ Complaint alleges that there are two types of recordkeeping services

provided by all national recordkeepers, including bundled and à la carte services, for large plans

“with substantial bargaining power (like the Plan).” (Compl. ¶ 75). Further, the Complaint alleges

that the bundled services “chosen by a large plan do not affect the amount charged by

recordkeepers for such basic and fungible services.” (Id. ¶ 76 (emphasis added)). Likewise, the

Complaint alleges that “[a]ll national recordkeepers have the capability to provide” bundled and à

la carte services “at very little cost to all large defined contribution plans, including those much

smaller than the Plan.” (Id. ¶ 78). And the Complaint alleges what bundled and à la carte services

typically include. (Id. ¶¶ 75 & 77). Further, Plaintiffs allege that “the market for recordkeeping

is highly competitive, with many vendors equally capable of providing a high-level service.” (Id.

¶ 85 (emphasis added)). Finally, the Complaint alleges that “[g]iven the size of the Plan’s assets

during the Class Period and total number of participants, in addition to the general trend towards

lower recordkeeping expenses in the marketplace as a whole, the Plan could have obtained

recordkeeping services that were comparable to or superior to the typical services provided by

the Plan’s recordkeeper at a lower cost.” (Id. ¶ 95 (emphasis added)). Though it may prove to be

the case at summary judgment that the recordkeeper for the Plan specifically provided a broader

range of services than comparator plans, thus justifying higher fees, at this stage the Court must

accept as true the Complaint’s allegation that there are two types of recordkeeping services

provided by all national recordkeepers for large plans and that the Committee failed to use its

bargaining power to obtain services that were comparable to or superior to the typical services

provided by the Plan’s recordkeeper at a lower cost. Those allegations—when combined with

other allegations regarding the Plan’s increasing recordkeeping and administrative costs from year

to year despite the fact that the number of participants remained relatively unchanged, the general

trend towards lower recordkeeping expenses in the marketplace as a whole, the Committee’s

failure to conduct an RFP in a competitive recordkeeping market, and the Committee’s failure to

leverage the size of the Plan to obtain lower fees—are enough to support a reasonable inference of

imprudence, notwithstanding Defendants’ argument that Plaintiffs should have provided more

specificity about the recordkeeping services provided to the Plan versus the comparators. See

Sweda, 923 F.3d at 331 (“The complaint should not be ‘parsed piece by piece to determine whether

each allegation, in isolation, is plausible.’” (quoting Braden, 588 F.3d at 594)); Silva, 2020 WL

12574912, at *8 (finding that the plaintiffs stated a claim for excessive recordkeeping fees where

plaintiffs “alleged that nearly all recordkeepers in the marketplace perform the same core group of

services”); Hughes v. Nw. Univ., 63 F.4th 615, 632 (7th Cir. Mar. 23, 2023) (finding that the

plaintiffs stated a claim for excessive recordkeeping fees in part where plaintiffs alleged that

“[t]here are numerous recordkeepers in the marketplace who are equally capable of providing a

high level of service to large defined contribution plans like the [p]lans” and that recordkeeping

services are fungible and the market for them is competitive); Berkelhammer v. Automatic Data

Processing, Inc., No. 20-5696, 2022 WL 3593975, at * 4–5 (D.N.J. Aug. 23, 2022); Johnson v.

PNC Fin. Servs. Grp., Inc., No. 20-01493, 2022 WL 973581, at *6 (W.D. Pa. Mar. 31, 2022);

Rodriguez, 2022 WL 16648825, at *11; Brown v. MITRE Corp., No. 22-10976, 2023 WL

2383772, at *5 (D. Mass. Mar. 6, 2023).

Defendants cite to out-of-Circuit cases to support their argument that Plaintiffs have failed

to adequately allege that the recordkeeping and administrative fees paid by the Plan were excessive

relative to the services being rendered. (Reply at 8–9; D.E. No. 23; D.E. No. 28). The Court,

however, finds these cases distinguishable. Defendants first cite Smith v. CommonSpirit Health,

37 F.4th 1160 (6th Cir. 2022), where the Sixth Circuit upheld the dismissal of the plaintiff’s

recordkeeping fee claim because the complaint failed to allege that the fees were excessive relative

to the services rendered. Smith, 37 F.4th at 1169. However, in Smith, the plaintiff alleged that the

plan’s recordkeeping fees were too high based on industry average costs for smaller plans and set

forth no allegations that the services the plan’s recordkeeper “covers are equivalent to those

provided by the plans comprising the average in the industry publication that she cites.” Id. In

contrast, here, Plaintiffs allege that the Plan’s recordkeeping and administrative fees were

excessive in relation to seven specific plans of a similar size. (Compl. ¶ 93). Further, Plaintiffs

plausibly allege that there are two types of recordkeeping services provided by all national

recordkeepers—including bundled “fungible” services and à la carte services—for large plans and

that the Plan failed to obtain services that were comparable to or superior to the typical services

provided by the Plan’s recordkeeper at a lower cost. (Id. ¶¶ 75–78 & 95). Plaintiffs also include

facts regarding the Plan’s increasing recordkeeping and administrative costs from year to year

despite the fact that the number of participants remained relatively unchanged, the general trend

towards lower recordkeeping expenses in the marketplace as a whole, the Committee’s failure to

conduct an RFP, and the Committee’s failure to leverage the size of the Plan to obtain lower fees.

(Id. ¶¶ 84–95). Accordingly, the Court finds Smith distinguishable.

Also distinguishable is Albert v. Oshkosh Corp., 47 F.4th 570 (7th Cir. 2022), where the

Seventh Circuit concluded that the plaintiff failed to allege an excessive recordkeeping claim

because the plaintiff compared the recordkeeping fees of the plan with nine other plans but did not

allege that the recordkeeping fees were excessive relative to the services rendered. Albert v.

Oshkosh Corp., 47 F.4th 570, 580 (7th Cir. 2022). In Albert, the plaintiff does not appear to have

alleged—as Plaintiffs have alleged here—that there are two types of recordkeeping services

provided by all national recordkeepers for large plans, and that the Committee failed to use its

bargaining power to obtain comparable services at a lower cost. And the Albert court did state that

“recordkeeping claims in a future case could survive the ‘context-sensitive scrutiny of a

complaint’s allegations’ courts perform on a motion to dismiss” should it “provide ‘the kind of

context that could move this claim from possibility to plausibility.’” Albert, 47 F.4th at 580 (first

quoting Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. 409, 425 (2014); then quoting Smith, 37

F.4th at 1169). In Hughes, the Seventh Circuit found that plaintiffs had survived that context

sensitive scrutiny with regards to their excessive recordkeeping claim in part where plaintiffs

asserted “[t]here are numerous recordkeepers in the marketplace who are equally capable of

providing a high level of service to large defined contribution plans like the [p]lans” and alleged

that recordkeeping services are fungible, that the market for them is highly competitive, and “that

$35 per participant was a reasonable recordkeeping fee based on the services provided by existing

recordkeepers and the [p]lans’ features.” Hughes, 63 F.4th at 632. Similarly, here as in Hughes,

Plaintiffs allege that “the market for recordkeeping is highly competitive, with many vendors

equally capable of providing a high-level service,” there are two types of recordkeeping services

provided by all national recordkeepers—including bundled “fungible” services and à la carte

services—for large plans, and that the Committee failed to use its bargaining power to obtain

services that were comparable to or superior to the typical services provided by the Plan’s

recordkeeper at a lower cost. (Compl. ¶¶ 75–78, 85 & 95 (emphasis added)).6 Accordingly,

Defendants’ reliance on Albert is unavailing.

Finally, in Matousek v. MidAmerican Energy Co., 51 F.4th 274 (8th Cir. 2022), the Eighth

Circuit found that the plaintiffs failed to state a claim for excessive recordkeeping expenses where

“[r]ather than point[ing] to the fees paid by other specific, comparably sized plans, the plaintiffs

rel[ied] on industry-wide averages” that did not specify whether the recordkeeping expenses were

too expensive in relation to the services rendered. Matousek, 51 F.4th at 279–80. In contrast, here,

Plaintiffs have offered allegations regarding the fees paid by other specific comparably sized plans.

(Compl. ¶ 93). When those comparisons are considered in conjunction with the other context-

specific facts already discussed by the Court, Plaintiffs have done enough to state a plausible claim.

(Id. ¶¶ 84–95).

Though the parties have made the Court aware of rulings from other Circuits coming to

different conclusions on similar claims,7 which the Court has considered, it does not appear that

6 Defendants point out that in contrast to the present case, the plaintiffs in Hughes also provided examples of

several other university 403(b) plans that successfully reduced recordkeeping fees by soliciting competitive bids,

consolidating service providers, and negotiating rebates and cited industry experts who recommended soliciting bids

to reduce overall fees. (D.E. No. 43 at 4 (citing Hughes, 63 F.4th at 632–33)). Nevertheless, as already discussed,

Plaintiffs here do provide additional context for their recordkeeping and administrative fees claim that is sufficient to

withstand a motion to dismiss.

7 Since Defendants filed their motion to dismiss, the parties have submitted multiple supplemental notices of

authority addressing similar allegations. (D.E. Nos. 23–25, 28–31, 33, 35–36, 38–40, 43–44, 46, 48 & 50–53). As

these notices, and the other cases the parties cite, demonstrate, district courts around the country have addressed similar

claims regarding excessive recordkeeping and administrative fees differently. See, e.g., Krutchen v. Ricoh USA, Inc.,

No. 22-0678, 2023 WL 3026705, at *2 (E.D. Pa. Apr. 20, 2023) (dismissing nearly identical claim for excessive

recordkeeping fees where plaintiffs alleged recordkeeping services were fungible); Singh v. Deloitte LLP, No. 21-

8458, 2023 WL 4350650, at *4–5 (S.D.N.Y. July 5, 2023) (same); Singh v. Deloitte LLP, No. 21-8458, 2023 WL

186679, at *5 (S.D.N.Y. Jan. 13, 2023) (same); Matney v. Barrick Gold of N. Am., Inc., No. 20-0275, 2022 WL

1186532, at * 11–13 (D. Utah Apr. 21, 2022) (dismissing excessive recordkeeping fees claim); Jones v. Dish Network

Corp., No. 22-0167, 2023 WL 2644081, at * 5 (D. Col. Mar. 27, 2023) (same); Mator v. Wesco Distrib., Inc., No. 21-

0403, 2022 WL 1046439, at *6–7 (W.D. Pa. Apr. 7, 2022) (same); Nohara v. Prevea Clinic Inc., No. 20-1079, 2022

WL 16927810, at *3–4 (E.D. Wis. Oct. 27, 2022), report and recommendation adopted, No. 20-1079, 2022 WL

16924483 (E.D. Wis. Nov. 14, 2022) (same); Cunningham v. USI Ins. Servs., LLC, No. 21-1819, 2022 WL 889164,

at *4 (S.D.N.Y. Mar. 25, 2022) (same), Tobias v. NVIDIA Corp., No. 20-6081, 2021 WL 4148706, at *14–15 (N.D.

Cal. Sept. 13, 2021) (same); but see, e.g., McDonald behalf of Lab’y Corp. of Am. Holdings Employees’ Ret. Plan v.

the Third Circuit has foreclosed Plaintiffs’ claim regarding excessive recordkeeping and

administrative fees at this time. As already stated, in Sweda, the Third Circuit held that the

plaintiffs plausibly alleged a breach of the duty of prudence regarding excessive administrative

and recordkeeping fees, where plaintiffs alleged that (i) the plan paid fees that were higher than

those paid by similar plans for the same services; (ii) fees went up as assets grew despite there

being no corresponding increase in services; (iii) the defendants failed to negotiate a cap on fees

or solicit competitive bids for recordkeeping fees, despite the fact that similarly situated fiduciaries

had taken such actions; and (iv) the defendants failed to review plan management and leverage the

plan’s size to obtain lower fees or rebates. Sweda, 923 F.3d at 330–31. Similarly, here Plaintiffs

have alleged that there are two types of recordkeeping services provided by all national

recordkeepers for large plans and that the Committee failed to use its bargaining power to obtain

services that were comparable to or superior to the typical services provided by the Plan’s

recordkeeper at a lower cost, the Plan’s recordkeeping and administrative costs increased from

year to year despite the fact that the number of participants in the Plan remained relatively

unchanged, there was a general trend towards lower recordkeeping expenses in the marketplace as

Lab’y Corp. of Am. Holdings, No. 22-0680, 2023 WL 4850693, at * 4–7 (M.D.N.C. July 28, 2023) (denying motion

to dismiss for excessive recordkeeping fees claim); Mazza v. Pactiv Evergreen Servs. Inc., No. 22-5052, 2023 WL

3558156, at *3–4 (N.D. Ill. May 18, 2023) (same); Sutter Health, 2023 WL 1868865, at *10 (same); Hagins v. Knight-

Swift Transportation Holdings Inc., No. 22-01835, 2023 WL 3627478, at *5 (D. Ariz. May 24, 2023) (same);

Rodriguez, 2022 WL 16648825, at *9–12 (same); Garcia v. Alticor, Inc., No. 20-1078, at 5–6 (W.D. Mich. Aug. 23,

2022) (same); Coyer v. Univar Sols. USA Inc., No. 22-0362, 2022 WL 4534791, at *5 (N.D. Ill. Sept. 28, 2022)

(same); Garnick, et al. v. Wake Forest Univ. Baptist Med. Ctr., No. 21-0454, 2022 WL 4368188, at *7 (M.D.N.C.

Sept. 21, 2022) (same); Monteiro v. The Children's Hospital Corp., No: 22-10069 (D. Mass Mar. 15, 2023) (D.E. No.

56) (same); Lucero v. Credit Union Ret. Plan Ass’n, No. 22-0208, 2023 WL 2424787, at *3–5 (W.D. Wis. Mar. 9,

2023) (same); Norton v. Mass General Brigham Inc., No. 22-10045 (D. Mass. Mar. 15, 2023) (D.E. No. 69) (same);

McLachlan v. Board of Trustees of The Elevator Constructors Annuity And 401(K) Retirement Plan, No. 22-4115

(E.D.P.A. June 7, 2023) (D.E. No. 35).

Having considered these authorities and for the reasons already stated above, the Court finds persuasive the

reasoning employed by other courts in this Circuit, including this Court, that have allowed similar claims for excessive

recordkeeping and administrative expenses to proceed. Silva, 2020 WL 12574912, at *8; Johnson, 2022 WL 973581,

at *6; Berkelhammer, 2022 WL 3593975, at * 4–6.

a whole, and the Committee failed to conduct an RFP at reasonable intervals. (Compl. ¶¶ 73–95).

Though Defendants argue that Sweda is highly distinguishable from the instant Complaint, the

Court finds that under Third Circuit precedent Plaintiffs have sufficiently pled that the Committee

breached its duty of prudence under 29 U.S.C. § 1104(a)(1)(B).8

Second, Defendants argue that Plaintiffs have failed to allege that the recordkeeping and

administrative fees paid by the Plan were excessive because the Complaint’s allegations are based

on demonstrably false facts. (Mov. Br. at 27–29). More specifically, Defendants contend that

while the Complaint’s calculation of the Plan’s recordkeeping and administrative fees, based on a

charge of 0.04% of total Plan assets, encompasses both recordkeeping and all administrative costs

of the Plan, the comparator figures alleged in the Complaint only encompass recordkeeping

expenses. (Id. at 28). In other words, Defendants argue that the Complaint “falsely compares

Nokia’s total Plan administrative costs to comparator plans’ recordkeeping fees.” (Id.). Further,

Defendants assert that while the Complaint alleges that the Plan’s recordkeeping and

administrative fees amounted to 0.04% of Plan assets from 2015–2020 (Compl. ¶ 87), in recent

years, the recordkeeping and administrative fees for the Plan were only 0.03% of Plan assets—

causing the Complaint to reflect artificially inflated figures for the Plan’s recordkeeping and

administrative fees. (Mov. Br. at 27–28). Defendants contend that the disparity between the Plan’s

recordkeeping fees and comparator fees would have been much lower if Plaintiffs had calculated

8 Defendants argue that the Third Circuit’s decision in Sweda has been tempered by the Supreme Court’s

decision in Hughes, which stated that “[b]ecause the content of the duty of prudence turns on ‘the circumstances . . .

prevailing’ at the time the fiduciary acts, § 1104(a)(1)(B), the appropriate inquiry will necessarily be context specific”

and “courts must give due regard to the range of reasonable judgments a fiduciary may make based on her experience

and expertise.” (Mov. Br. at 11–13); Hughes, 142 S. Ct. at 742 (quoting Dudenhoeffer, 573 U.S. at 425). Even if this

were true, here, Plaintiffs have provided the necessary context for their excessive recordkeeping and administrative

fees claim, as described above.

those fees correctly using Nokia’s Plan IRS Form 5500s.9 (Id. at 28). In opposition, Plaintiffs

contend that the Complaint plainly states that “the Plan stuck with a charge to participants based

on .04% of the Plan’s assets up to 2018 and then moved to .03% of the Plan’s assets from 2019

and forward.” (Opp. Br. at 22 (quoting Compl. ¶ 86)). Plaintiffs further contend that “[t]he

Complaint compares all-in recordkeeping and administration fees for the Plan with all-in

recordkeeping and administration fees for the comparator plans.” (Id.). Finally, Plaintiffs assert

that any miscalculation was based on the fact that they lacked access to accurate Plan data from

the Plan’s publicly filed form 5500s at the time of filing their Complaint. (Id. at 24 n.14). For the

following reasons, the Court finds Defendants’ argument unavailing.

To start, “[t]hese challenges attack the accuracy of the Plaintiffs’ factual allegations” and

“are thus not cognizable at the motion to dismiss stage, where [the Court] must accept as true all

factual allegations in the [] Complaint.” Ruilova v. Yale-New Haven Hosp., Inc., No. 22-0111,

2023 WL 2301962, at *17 (D. Conn. Mar. 1, 2023). In effect, Defendants are asking that the Court

accept an alternative set of facts than those alleged in the Complaint—Defendants’ calculation of

the Plan’s recordkeeping fees.10 However, any initial miscalculation by Plaintiffs based on lack

9 “The Form 5500 is the annual report that 401(k) plans are required to file with the [Department of Labor]

and U.S. Department of Treasury pursuant to the reporting requirements of ERISA.” (Compl. ¶ 75 n.11).

10 Defendants argue that “in the event of a contradiction between a document directly or indirectly relied upon

in a complaint and an allegation in the complaint, the document controls, not the allegation, and the allegation is not

entitled to a presumption of truth.” (Mov. Br. at 3 n.1 (citing St. Matthew’s Baptist Church v. Wachovia Bank Nat.

Ass’n, No. 04-4540, 2005 WL 1199045, at *3 (D.N.J. May 18, 2005)). Here, Defendants rely on Nokia’s Plan IRS

Form 5500s in calculating the Plan’s recordkeeping fees. (Mov. Br. at 28). Though Plaintiffs’ Complaint cites to

some of the Plan’s Form 5500s (see Compl. ¶¶ 1 n.2 & 26), Plaintiffs argue in Opposition that they did not have access

to accurate Plan data from the Plan’s publicly filed form 5500s at the time of filing their Complaint. (Opp. Br. at 24

n.14). Defendants assert that Nokia provided Plaintiffs with numerous documents pre-suit, including all fee and

expense disclosures, plan documents, and fund sheets and state that Plaintiffs appear to have drafted the Complaint in

reliance on those documents. (Reply at 9–10; Compl. ¶ 25 (“Plaintiffs did not have knowledge of all material facts

(including, among other things, total plan recordkeeping and administration cost comparisons to similarly-sized plans

or information regarding other available funds) . . . until shortly before this suit was filed.”)). Nevertheless, while

Plaintiffs bear the burden of pleading their claim, they do not bear the burden of rebutting Defendants’ competing

factual narrative at this time. And regardless, as discussed below, Plaintiffs’ claim regarding excessive recordkeeping

and administrative fees does not warrant dismissal even under Defendants’ narrative.

of information is not “enough to thwart Plaintiffs’ claim at the pleading stage,” where the Court

draws all plausible inferences in Plaintiffs’ favor, “particularly when considered alongside the

Complaint’s other allegations of imprudence” regarding the Plan’s excessive recordkeeping and

administrative fees.11 Silva, 2020 WL 12574912, at *8.

Further, Plaintiffs’ claim regarding excessive recordkeeping and administrative fees does

not warrant dismissal even if the Court were to accept what Defendants assert are the figures for

the Plan’s recordkeeping costs from the years of 2015 to 2020. (Mov. Br. at 28). Under

Defendants’ calculations, the Plan’s recordkeeping fees amounted to $37.22, $32.63, $62.71,

$38.44, $33.54, and $50.03 from 2015 to 2020, in contrast to the fees the Complaint alleges, which

range from $76.59 to $116.26 for those years. (Mov. Br. at 28; Compl. ¶ 87). The Third Circuit

has emphasized that the “reasonableness of compensation for services” is an “inherently factual

question.” Sweda, 923 F.3d at 329 (internal quotations omitted). Thus, to the extent Defendants

can “conclusively demonstrate that such fees were prudent in light of prevailing market

conditions” or otherwise show that they engaged in a prudent process in setting those fees, they

may do so on a motion for summary judgment. Silva, 2020 WL 12574912, at *8.

Defendants also direct the Court to cases that have taken judicial notice of Form 5500s and “discredit[ed]

allegations of excessive fees that are contradicted by the Form 5500s.” (D.E. No. 39 at 3). However, any initial

miscalculation by Plaintiffs based on lack of information is not “enough to thwart Plaintiffs’ claim at the pleading

stage,” where the Court draws all plausible inferences in Plaintiffs’ favor, “particularly when considered alongside the

Complaint’s other allegations of imprudence” by Defendants regarding the Plan’s excessive recordkeeping and

administrative fees. Silva, 2020 WL 12574912, at *8.

11 While not fatal to Plaintiffs’ claim, the Court agrees with Defendants that the apparent inflation of data in the

Complaint is troubling. First, while the Complaint does plainly state that the Plan stuck with a charge for

recordkeeping fees to participants “based on 0.04% of the Plan’s assets up to 2018 and then moved to 0.03% of the

Plan’s assets from 2019 and forward” (Compl. ¶ 86), the figures it provides appear to be based on a 0.04% charge in

all years. (Id. ¶ 87). Second, while Plaintiffs contend that “[t]he Complaint compares all-in recordkeeping and

administration fees for the Plan with all-in recordkeeping and administration fees for the comparator plans” (Opp. Br.

at 22), the Complaint alleges that the fees charged to comparator plans “signif[y] recordkeeping fees.” (Compl. ¶ 93

n.14). Nevertheless, the merits of these competing factual narratives cannot be decided on this procedural posture.

And as described below, Plaintiffs’ claim regarding excessive recordkeeping and administrative fees does not warrant

dismissal even under Defendants’ narrative.

Defendants contend that they can already demonstrate that the Plan’s recordkeeping fees

under their calculations were reasonable in light of allegations in Plaintiffs’ Complaint. (Mov. Br.

at 28–29). For example, Defendants point out that based on their calculations, the Plan’s

recordkeeping fees in 2019 of $33.54 per participant were on par with the recordkeeping fees

charged by two of Plaintiffs’ comparators in 2019—the Kaiser Permanente Plan ($33.00) and the

Danaher Corporation Plan ($34.00). (Id. at 29). Further, Defendants assert that in four of the six

years during the Class Period, the Plan generally paid recordkeeping fees of around $35.00 per

participant, which is reasonable under the Complaint’s allegations.12 (Reply at 10 (citing Compl.

¶ 94 (“Some authorities cited in case law dating as far back as six years ago recognized that

reasonable rates for jumbo plans typically average around $35 per participant, with costs coming

down every day. Thus, even the $35 mark is a conservative figure.”)). Plaintiffs argue that the

Plan paid excessive recordkeeping fees even according to Defendants’ own calculations. (Opp.

Br. at 23). The Court finds Defendants’ arguments unavailing at this stage. To start, the Complaint

alleges that “the Plan, with over 29,000 participants and over $8 billion dollars in assets in 2020,

should have been able to negotiate a recordkeeping cost in the low $20 range from the beginning

of the Class Period to the present.” (Compl. ¶ 93). Under Defendants’ calculations, the Plan’s

fees, ranging from $32.63 to $62.71, exceeded that $20 range during all years of the Class Period.

(Mov. Br. at 28). Further, though the Plan’s recordkeeping fees in 2019 of $33.54 under

Defendants’ calculations may have been close to the fees charged by two of Plaintiffs’ comparators

in 2019, it exceeded the fees charged by five others—the Publicis Benefits Connection 401k Plan

($21.00), Deseret 401k Plan ($22.00), The Dow Chemical Company Employees’ Savings Plan

12 Defendants explain that there were only two years when the Plan’s recordkeeping costs, under their own

calculations, exceeded the average of around $35 per participant. (Reply at 10). However, while Defendants attempt

to explain why their recordkeeping fees were higher in those two years (Mov. Br. at 28 nn.10–11), the merits of this

competing factual narrative cannot be decided on this procedural posture.

($25.00), The Savings and Investment Plan ($27.00), and The Rite Aid 401k Plan ($30.00). (See

id.; Compl. ¶ 93). Additionally, while the Complaint does state that “reasonable rates for jumbo

plans typically average around $35 per participant” it also states that such costs “are coming down

every day” making “the $35 mark [for recordkeeping fees] a conservative figure.” (Compl. ¶ 94).

And the Plan’s fees under Defendants’ calculations exceeded that “$35 mark” in 2015 ($37.22),

2017 ($62.71), 2018 ($38.44), and 2020 ($50.03). (Mov. Br. at 28). Though the differences

between the Plan’s recordkeeping fees and both the comparators and the “$35 mark” might be

smaller under Defendants’ calculations than under the calculations alleged in the Complaint, they

are not sufficient at this stage to warrant a dismissal of Plaintiffs’ claim, particularly since the

“reasonableness of compensation for services” is an “inherently factual question,” Sweda, 923

F.3d at 329 (internal quotations omitted), and “even relatively minor cost savings can add up over

the length of an investment.” Silva, 2020 WL 12574912, at *6; Sweda, 923 F.3d at 328

(“Expenses, such as management or administrative fees, can sometimes significantly reduce the

value of an account in a defined-contribution plan, by decreasing its immediate value, and by

depriving the participant of the prospective value of funds that would have continued to grow if

not taken out in fees.” (internal quotations and citation omitted)). And as already stated, to the

extent Defendants can “conclusively demonstrate that such fees were prudent in light of prevailing

market conditions” or show that they engaged in a prudent process in setting those fees, they may

do so on a motion for summary judgment. Id. at *8.

Third, Defendants argue that Plaintiffs have improperly cherry-picked only seven plans with

lower recordkeeping fees out of hundreds of thousands to create an inference that the Plan’s fees

were excessive. (Mov. Br. at 29). While Defendants may ultimately show that the seven

comparator plans Plaintiffs have included in their Complaint have been cherry-picked and “are not

representative of recordkeeping costs across the industry,” this argument is not sufficient to

dismiss Plaintiffs’ claim at the pleading stage, where inferences are to be drawn in Plaintiff’s favor.

Rodriguez, 2022 WL 16648825, at *10. This is particularly true when considered alongside the

Complaint’s other allegations of imprudence by Defendants regarding the Plan’s excessive

recordkeeping and administrative fees.13

Fourth, Defendants argue that though the Complaint alleges imprudence based on the

Committee’s failure to conduct an RFP, competitive bidding is not required under ERISA. (Mov.

Br. at 26 n.9 (citing White v. Chevron Corp., No. 16-0793, 2016 WL 4502808, at *14 (N.D. Cal.

Aug. 29, 2016))). However, while competitive bidding might not be required under ERISA, courts

have found that a defendant’s “fail[ure] to conduct a competitive bidding process” is a relevant

factor to determining whether the defendant acted imprudently. Nicolas v. Trs. of Princeton Univ.,

No. 17-3695, 2017 WL 4455897, at *4 (D.N.J. Sept. 25, 2017); see also Sweda, 923 F.3d at 330.

Accordingly, Defendants’ argument is unavailing. As such, Defendants’ motion to dismiss

Plaintiffs’ excessive recordkeeping and administrative fee claim is DENIED.

B. Failure to Monitor

Defendants also argue that Plaintiffs’ failure to monitor claim in Count II should be

dismissed because it is “derivative” of Count I, which fails to state a claim. (Mov. Br. at 29–30).

Plaintiffs contend that they have sufficiently stated a claim in Count II because they have

13 Defendants also argue that the data presented in paragraph 93 of Plaintiffs’ Complaint undercuts Plaintiffs’

theory that recordkeeping fees decrease as the number of plan participants and assets under management increase,

since two of the comparator plans with higher numbers of participants and assets under management also had higher

recordkeeping expenses. (Mov. Br. at 25–26). Plaintiffs allege that “[b]ecause recordkeeping expenses are driven by

the number of participants in a plan, the vast majority of plans are charged on a per-participant basis” such that “[p]lans

with large numbers of participants can take advantage of economies of scale by negotiating a lower per-participant

recordkeeping fee.” (Compl. ¶ 79). And in fact, the Publicis Benefits Connection 401k Plan, which had the highest

number of participants from all of the comparator plans in paragraph 93 of Plaintiffs’ Complaint, had the lowest

recordkeeping fee. (Id. ¶ 93). Accordingly, the data presented in paragraph 93 of Plaintiffs’ Complaint does not

categorically undercut Plaintiffs’ theory.

adequately pleaded the underlying fiduciary breach necessary to support their failure to monitor

claim. (Opp. Br. at 27). In Count II, Plaintiffs allege that because Nokia and the Board “had the

authority to appoint and remove members of the Committee” they had a duty to monitor the

Committee and ensure that the Committee was “adequately performing their fiduciary

obligations.” (Compl. ¶¶ 105–06).

“Persons with authority to appoint and remove plan fiduciaries have an ERISA-imposed

duty to monitor those fiduciaries.” Silva, 2020 WL 12574912, at *9. “At minimum, an appointing

authority must ‘at reasonable intervals’ review the performance of its appointees ‘in such manner

as may be reasonably expected to ensure that their performance has been in compliance with the

terms of the plan and statutory standards.’” Id. (quoting Graden v. Conexant Sys., Inc., 574 F.

Supp. 2d 456, 466 (D.N.J. 2008)). Without an underlying breach of an ERISA-imposed duty, a

failure to monitor claim cannot proceed. In Re Allergan Erisa Litig., 975 F.3d 348, 354 n.11 (3d

Cir. 2020). Conversely, “[c]ourts have been willing to find a failure to monitor claim [when] the

plaintiff has adequately alleged a breach of fiduciary duty claim.” McGowan v. Barnabas Health,

Inc., No. 20-13119, 2021 WL 1399870, at *8 (D.N.J. Apr. 13, 2021).

As discussed, Plaintiffs have adequately alleged a breach of fiduciary duty under Count I

with regards to the Plan’s excessive recordkeeping and administrative fees. Accordingly, Count

II may proceed as it relates to those fees. Garthwait v. Eversource Energy Co., No. 20-0902, 2021

WL 4441939, at *10–11 (D. Conn. Sept. 28, 2021); Ruilova, 2023 WL 2301962, at *22–23.

“However, the duty to monitor claim is only as broad as the surviving prudence claim[] and is

otherwise dismissed” without prejudice. Cunningham v. Cornell Univ., No. 16-6525, 2017 WL

4358769, at *11 (S.D.N.Y. Sept. 29, 2017).

IV. CONCLUSION

Based on the foregoing, Defendants’ motion (D.E. No. 20) is GRANTED-in-part and

DENIED-in-part. An appropriate Order follows.

Dated: August 8, 2023 s/ Esther Salas

Esther Salas, U.S.D.J.