Sigetich v. The Kroger Co.

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF OHIO

WESTERN DIVISION

LISA SIGETICH, individually, and as : Case No. 1:21-cv-697

representative of a Class of Participants :

and Beneficiaries of The Kroger Co. : Judge Timothy S. Black

401(k) Retirement Savings Account Plan, :

:

Plaintiff, :

:

vs. :

:

THE KROGER CO., et al., :

:

Defendants. :

ORDER GRANTING DEFENDANT’S MOTION TO DISMISS

This civil case is before the Court on Defendants’ motion to dismiss (Doc. 40) and

the parties’ responsive memoranda (Docs. 42, 44). Also before the Court are two notices

of supplemental authority (Docs. 46, 49) and the brief of amicus curiae Chamber of

Commerce of the United States of America (Doc. 48).

I. ERISA BACKGROUND

This case concerns fees associated with administering a retirement plan under the

Employment Retirement Income Security Act of 1974, otherwise known as ERISA.

Some initial background on retirement plans and ERISA is helpful.

“Enacted in 1974, ERISA protects participants in employee benefit plans,

including retirement plans, by establishing standards of conduct for plan fiduciaries.”

Smith v. CommonSpirit Health, 37 F.4th 1160, 1164 (6th Cir. 2022) (citing 29 U.S.C.

§ 1001(b)). “The law requires that a plan administrator discharge his 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.’” Id. (quoting 29 U.S.C.

§ 1104(a)(1)(B)). “The obligation includes ‘a continuing duty to monitor trust

investments and remove imprudent ones.’” Id. (quoting Tibble v. Edison Int’l, 575 U.S.

523, 529 (2015)).

A defined contribution plan is one type of retirement plan. “Defined-contribution

plans allow employees to save for retirement, often through a tax-advantaged account

like a 401(k) plan, sometimes with matching contributions from their employers.”

Forman v. TriHealth, Inc., 40 F.4th 443, 446 (6th Cir. 2022) (citing John Downes &

Jordan Elliot Goodman, Barron’s Dictionary of Finance and Investment Terms 168 (6th

ed. 2003)). “Employees choose how to invest their accounts from a menu of investment

options offered by the plans.” Id. “The initial contributions and any growth or decline

over time (minus fees charged) determine the eventual post-retirement payouts from

these accounts—along with any interest and dividends generated by the investments.” Id.

One type of fee associated with retirement plans are fees for services provided by

recordkeepers. “Recordkeepers help plans track the balances of individual accounts,

provide regular account statements, and offer informational and accessibility services to

participants.” Hughes v. Nw. Univ., 211 L. Ed. 2d 558, 142 S. Ct. 737, 740 (2022). The

two primary methods for retirement plans to pay for recordkeeping services are through

indirect revenue sharing or by direct payment. Stated differently, “recordkeeping fees

may be calculated as a percentage of the assets for which the recordkeeper is responsible;

alternatively, these fees may be charged at a flat rate per participant account.” Id.

Recordkeeping fees impact the amount of money a participant will have saved for

retirement. Id.; Forman, 40 F.4th 446. Thus, when selecting a recordkeeper, plan

fiduciaries must do so “with the care, skill, prudence, and diligence under the

circumstances then prevailing.” 29 U.S.C. § 1104(a)(1)(B)). An excessive

recordkeeping fee may plausibly state a duty of prudence claim if the recordkeeping fees

were excessive relative to the services rendered. CommonSpirit, 37 F.4th at 1169 (Young

v. Gen. Motors Inv. Mgmt. Corp., 325 F. App’x 31, 33 (2d Cir. 2009) (per curiam)).

II. FACTS AS ALLEGED BY PLAINTIFF

A. The Parties

Plaintiff Lisa Sigetich was a Customer Service Representative at Kroger in

Wisconsin and is currently on disability leave. (Doc. 32 at ¶ 17). She has been a

participant in The Kroger Co. 401(k) Retirement Savings Accounts Plan (the “Kroger

Plan”), since November 5, 2015. (Id. at ¶¶ 5, 16). Defendant The Kroger Co. (“Kroger”)

acted through its officers, including the Defendants, the Board of Directors of Kroger and

other appointed fiduciaries, to perform Kroger Plan-related fiduciary functions

(collectively, “Defendants”). (Id. at ¶ 23). Kroger is both the Kroger Plan sponsor and

administrator. (Id. at ¶ 24). Defendants are fiduciaries of the Kroger Plan.

B. The Kroger Plan

The Kroger Plan is a 401(k) defined contribution plan. (Doc. 32 at ¶ 4). The

Kroger Plan is considered a “mega” 401(k) plan, having over $500 million in assets. (Id.

at ¶ 21). The Kroger Plan is the largest plan in the Kroger Defined Contribution Master

Trust. (Id. at ¶ 44). In 2019, the Kroger Plan had about $5,901,895,000 in assets and

92,210 participants. (Id. at ¶ 29). At that time, the Kroger Plan had more assets than

99.98%, and more participants than 99.99%, of all defined contribution plans in the

United States that filed Form 5500’s for the 2019 plan year. (Id.)

Recordkeeping Services for ERISA Plans

Fiduciaries of large 401(k) plans hire service providers, generically referred to as

“recordkeepers,” to deliver a retirement plan benefit to employees. (Doc. 32 at ¶ 37).

Recordkeepers provide all essential recordkeeping and related administrative (“RK&A”)

services through standard bundled offerings of the same level and quality. (Id. at ¶ 38).

There are two types of “essential” recordkeeping services: “Bundled RK&A” and “Ad

hoc RK&A.” (Id. at ¶ 39-40).

For large plans with substantial bargaining power (like the Kroger Plan), Bundled

RK&A services are provided “buffet-style,” meaning these services are charged on an

“all-you-can-eat” basis. (Id. at ¶ 39). Bundled RK&A services typically include, but are

not limited to, the following standard services:

a. Recordkeeping;

b. Transaction Processing (which includes the technology to

process purchases and sales of participants’ assets as well

as providing the participants the access to investment

options selected by the plan sponsor);

c. Administrative Services related to converting a plan from

one recordkeeper to another recordkeeper;

d. Participant communications (including employee

meetings, call centers/phone support, voice response

systems, web account access, and the preparation of other

communications to participants, e.g., Summary Plan

descriptions and other participant materials);

e. Maintenance of an employer stock fund (if needed);

f. Plan Document Services which include updates to standard

plan documents to ensure compliance with new regulatory

and legal requirements;

g. Plan consulting services including assistance in selecting

the investments offered to participants;

h. Accounting and audit services including the preparation of

annual reports, e.g., Form 5500 (not including the separate

fee charged by an independent third-party auditor);

i. Compliance support which would include, e.g., assistance

interpreting plan provisions and ensuring the operation of

the plan follows legal requirements and the provisions of

the plan (which would not include separate legal services

provided by a third-party law firm); and

j. Compliance testing to ensure the plan complies with

Internal Revenue nondiscrimination rules.

(Id.).

“Ad Hoc RK&A” services are provided based on the conduct of individual

participants, and charged based on usage. (Id. at ¶ 40). Ad Hoc RK&A services typically

include, but are not limited to, the following services:

a. Loan processing;

b. Brokerage services/account maintenance;

c. Distribution services; and

d. Processing of Qualified Domestic Relations Orders

(QDROs).

(Id.).

Recordkeepers quote fees for Bundled RK&A services on a per participant basis,

without any regard for any individual differences in services requested. (Id. at ¶ 42).

According to Plaintiff, recordkeepers quote fees without any regard to differences in

services requested because minor variations in the level and quality of services are

inconsequential and immaterial. (Id. at ¶¶ 41-42.) Most fees earned by recordkeepers

typically come from the bundled fee for providing Bundled RK&A services. (Id. at ¶ 43).

Because recordkeepers offer the same bundles and combinations of services, the

market for recordkeeping services has become increasingly price competitive,

particularly for large defined contribution plans. (Id. at ¶ 46). Recordkeepers are willing,

and competitively required, to accept lower and more competitive fees because of

competitive pressures created by publicly available information and the reduction of

opaque fee structures. (Id. at ¶ 47).

A recordkeeper’s costs are primarily dependent on the number of participants. (Id.

at ¶ 49). As a plan gains more participants, the reasonable market rate for RK&A

services declines. (Id.) Recordkeepers collect their fees through: (1) direct payments

from the plan; (2) “indirect compensation,” also known as “revenue sharing;” or (3) some

combination of direct and indirect compensation. (Id. at ¶¶ 50-52).

Regardless of how a recordkeeper is compensated, prudent plan fiduciaries must

ensure that a plan is paying reasonable recordkeeping fees. (Id. at ¶ 53). According to

Plaintiff, prudent plan fiduciaries ensure reasonable fees by engaging in an independent

evaluation and soliciting competitive bids from other recordkeepers to perform the same

level and quality of services. (Id. at ¶ 62). By obtaining competitive bids, prudent plan

fiduciaries may evaluate the reasonableness of current fees, negotiate a lower fee (if

needed), or move to a new recordkeeper (if needed). (Id. at ¶ 64-70).

D. The Kroger Plan’s Recordkeeper and RK&A Services

From 2015 through 2020, the Kroger Plan used Bank of America, N.A. and

Merrill Lynch (collectively, “Merrill Lynch”) as a recordkeeper. (Doc. 32 at ¶¶ 5, 55).

Merrill Lynch provided a standard package of Bundled RK&A services, and did not

provide any services that were not part of a standard package of RK&A services. (Id. at

¶¶ 44-45, 57). From 2015 through 2020, the Kroger Plan had an average of 88,600

participants and paid $2,835,185 in Bundled RK&A services to Merrill Lynch, resulting

in a $32 per participant recordkeeping fee. (Id. at ¶ 75). During each year, the per

participant fee was split between each participant and Kroger. Kroger covered $27 of

each participant fee, while participants covered $5 each. (Doc. 32-1).

According to Plaintiff, the Kroger Plan paid excessive fees when compared to

other 401(k) plans with a similar number of participants. (Doc. 32 at ¶¶ 56-57). Plaintiff

then provides the information about comparable plans’ Bundled RK&A fees, which

information is based on publicly available information from 2018 Form 5500s:1

1 Plaintiff uses the average amounts from 2015 through 2020 for the Kroger Plan. Plaintiff then

uses only the year 2018 for her comparable plans. For consistency, the Court uses information

from 2018 for the Kroger Plan.

Plan Partici- Assets RK&A Fee RK&A Record-

pants Fee/pp keeper

Kaiser Permanente 47,358 $3,104,524,321 $1,298,775 $27 Vanguard

Supplemental Savings

and Retirement Plan

Sutter Health 403(B) 73,408 $3,681,162,013 $1,908,133 $26 Fidelity

Savings Plan

Kroger Plan 90,005 $4,891,968,000 $2,880,160 $32 Merrill

Lynch

Marriot International, 115,501 $7,760,619,525 $2,636,322 $23 Alight

Inc.

Apple 401(K) Plan 115,686 $7,400,046,748 $2,114,871 $18 GreatWest

Lowes 401(K) Plan 154,402 $5,619,838,861 $2,856,437 $19 Wells

Fargo

(Id. at ¶¶ 75, 86).2 Based on the comparable plans, Plaintiff contends that the Kroger

Plan’s per participant recordkeeping fee was excessive, suggesting a flawed and

imprudent fiduciary process. (Id. at ¶¶ 78-79, 92).

2 “The U.S. Department of Labor, Internal Revenue Service, and the Pension Benefit Guaranty

Corporation jointly developed the Form 5500 Series so employee benefit plans could utilize the

Form 5500 Series forms to satisfy annual reporting requirements under Title I and Title IV of

ERISA and under the Internal Revenue Code.” See

https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-

compliance/reporting-and-filing/form-5500 (last visited Feb. 21, 2023). Although Plaintiff relies

on Form 5500’s, she does not attach any to her Amended Complaint. (Doc. 32 at ¶¶ 45, 75)

However, “[a] court may consider certain materials outside of the pleadings without converting

the motion to one for summary judgment.” Father Flanagan’s Boys Home v. Donlon, 449 F.

Supp. 3d 739, 746 (S.D. Ohio 2020). “These materials include, ‘exhibits attached [to the

complaint], public records, items appearing in the record of the case and exhibits attached to the

defendant’s motion to dismiss so long as they are referred to in the complaint and are central to

the claims contained therein.’” Id. (quoting Rondigo, LLC v. Twp. of Richmond, 641 F.3d 673,

681 (6th Cir. 2011)) (alteration and emphasis in original). Because the Form 5500’s are referred

to in the Amended Complaint and are public records, the Court may consider the Form 5500’s

when resolving the motion to dismiss.

E. Present Lawsuit

Plaintiff seeks to bring claims individually and on behalf of the following

proposed class:

All participants and beneficiaries of The Kroger Co. 401(k)

Retirement Savings Account Plan (excluding the Defendants

or any participant/beneficiary who is a fiduciary to the Plan)

beginning November 5, 2015 and running through the date of

judgment.

(Doc. 32 at ¶ 107). Plaintiff asserts two claims under ERISA: (1) breach of the duty of

prudence related to recordkeeping fees against Defendants; and (2) failure to adequately

monitor other fiduciaries related to recordkeeping fees against Defendants. (Id. at

¶¶ 119-130, 131-137). Defendants move to dismiss the entire Amended Complaint for

lack of standing and for failure to state a claim. (Doc. 40).

III. STANDARD OF REVIEW

A. Fed. R. Civ. P. 12(b)(1)

On a 12(b)(1) motion, the plaintiff has the burden of proving jurisdiction. Moir v.

Greater Cleveland Regional Transit Auth., 895 F.2d 266, 269 (6th Cir. 1990). “A court

lacking jurisdiction cannot render judgment but must dismiss the cause at any stage of the

proceedings in which it becomes apparent that jurisdiction is lacking.” Morgan v. United

States Dep’t of Educ., 596 F. Supp. 3d 1023, 1026 (S.D. Ohio 2022) (quotation omitted).

Motions to dismiss for lack of subject-matter jurisdiction fall into two general categories:

facial attacks and factual attacks. United States v. Ritchie, 15 F.3d 592, 598 (6th Cir.

1994). In a factual attack, the Court must weigh the “evidence [before it] to arrive at the

factual predicate that subject matter jurisdiction exists or does not exist.” Ohio Nat’l Life

Ins. Co. v. United States, 922 F.2d 320, 325 (6th Cir. 1990). A facial attack goes to

whether the plaintiff has properly alleged a basis for jurisdiction, and the trial court takes

the allegations of the complaint as true. Id. When arguing Plaintiff lacks standing,

Defendants do not contest the facts in the complaint and therefore bring a facial attack.

Ball by Burba v. Kasich, 244 F. Supp. 3d 662, 672 (S.D. Ohio 2017). In deciding the

merits of a facial attack under 12(b)(1), “the court must take the material allegations of

the petition as true and construed in the light most favorable to the nonmoving party.”

United States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994). Thus, a facial attack on the

pleading under Rule 12(b)(1) mirrors the standard of review on a motion brought under

Rule 12(b)(6). Ball by Burba, 244 F. Supp. 3d at 672.

Fed. R. Civ. P. 12(b)(6)

A motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) operates to test the

sufficiency of the complaint and permits dismissal of a complaint for “failure to state a

claim upon which relief can be granted.” To show grounds for relief, Fed. R. Civ. P. 8(a)

requires that the complaint contain a “short and plain statement of the claim showing that

the pleader is entitled to relief.”

While Fed. R. Civ. P. 8 “does not require ‘detailed factual allegations,’ ... it

demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.”

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S.

544 (2007)). Pleadings offering mere “‘labels and conclusions’ or ‘a formulaic recitation

of the elements of a cause of action will not do.’” Id. (citing Twombly, 550 U.S. at 555).

In fact, in determining a motion to dismiss, “courts ‘are not bound to accept as true a

legal conclusion couched as a factual allegation[.]’” Twombly, 550 U.S. at 555 (citing

Papasan v. Allain, 478 U.S. 265 (1986) ). Further, “[f]actual allegations must be enough

to raise a right to relief above the speculative level[.]” Id.

Thus, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual

matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Iqbal,

556 U.S. at 678. A claim is plausible where a “plaintiff pleads factual content that allows

the court to draw the reasonable inference that the defendant is liable for the misconduct

alleged.” Id. Plausibility “is not akin to a ‘probability requirement,’ but it asks for more

than a sheer possibility that a defendant has acted unlawfully.” Id. “[W]here the well-

pleaded facts do not permit the court to infer more than the mere possibility of

misconduct, the complaint has alleged—but it has not ‘show[n]’—‘that the pleader is

entitled to relief,’” and the case shall be dismissed. Id. (citing Fed. Rule Civ. P. 8(a)(2)).

IV. ANALYSIS

Plaintiff plausibly alleges standing.

“[T]here are two components to any given standing inquiry: constitutional and

statutory.” Soehnlen v. Fleet Owners Ins. Fund, 844 F.3d 576, 581 (6th Cir. 2016). For

the statutory inquiry, the “question is whether the particular plaintiff has a cause of action

under the statute.” Id. (quotation omitted). ERISA creates a right of action for

participants, beneficiaries, and fiduciaries of benefit plans. See 29 U.S.C. § 1332(a).

And, at this stage, Defendants do not challenge whether Plaintiff has statutory standing.

Instead, the current standing inquiry rests on whether Plaintiff has Article III standing.

“Article III standing enforces the Constitution’s case-or-controversy requirement.”

Loren v. Blue Cross & Blue Shield of Mich., 505 F.3d 598, 607 (6th Cir. 2007). The

standing doctrine ensures that a plaintiff in federal court has “such a personal stake in the

outcome of the controversy as to warrant his invocation of federal-court jurisdiction.”

Warth v. Seldin, 422 U.S. 490, 498 (1975) (quoting Baker v. Carr, 369 U.S. 186, 204

(1962)) (quotation marks omitted); see also O’Shea v. Littleton, 414 U.S. 488, 494

(1974). “To satisfy Article III’s standing requirements, a plaintiff must show: (1) [she]

has suffered an injury in fact that is (a) concrete and particularized and (b) actual or

imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the

challenged action of the defendant; and (3) it is likely, as opposed to merely speculative,

that the injury will be redressed by a favorable decision.” Loren, 505 F.3d at 607

(quotation omitted).

A plaintiff, as the party invoking federal jurisdiction, bears the burden of

establishing standing. Lujan v. Defs. of Wildlife, 504 U.S. 555, 561, 112 S. Ct. 2130,

2137, 119 L. Ed. 2d 351 (1992). “A plaintiff must demonstrate standing ‘with the

manner and degree of evidence required at the successive stages of the litigation.’”

TransUnion LLC v. Ramirez, 210 L. Ed. 2d 568, 141 S. Ct. 2190, 2208 (2021) (quoting

Lujan, 504 U.S. at 561 (1992)). A Plaintiff suing on behalf of a respective ERISA plan

must still establish individual standing. Loren, 505 F.3d 598 at 608 (citations omitted).

If a plaintiff lacks Article III standing, the court lacks subject matter jurisdiction to hear

the case. Memphis A. Philip Randolph Inst. v. Hargett, 978 F.3d 378, 386 (6th Cir.

2020).

1. Injury-in-Fact

Defendants’ primary argument is that Plaintiff fails to allege an injury-in-fact.

Specifically, Defendants argue that Plaintiff has not suffered any injury-in-fact because

Plaintiff only paid $5 in recordkeeping fees.

“To establish injury in fact, a plaintiff must show that he or she suffered ‘an

invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or

imminent, not conjectural or hypothetical.’” Spokeo v. Robins, 578 U.S. 330, 339 (2016)

(citing Lujan, 504 U.S. at 560). “For an injury to be ‘particularized,’ it must affect the

plaintiff in a personal and individual way.” Id. (quotation and citations omitted). “A

“concrete” injury must be “de facto”; that is, it must actually exist.” Id. (citing BLACK’S

LAW DICTIONARY (9th ed. 2009)).

Plaintiff alleges that a reasonable recordkeeping fee for the relevant time period

would have been $17 per participant, that Defendants bargained for an unreasonable fee

of $32 per participant, and that Kroger and Plaintiff split the cost of the recordkeeping

fee—$27 paid by Kroger and $5 paid by Plaintiff. (Doc. 32 at ¶ 17; Doc. 32-1).

Defendants argue that this fails to allege an injury-in-fact because Plaintiff did not, in

fact, pay an unreasonable fee, since Plaintiff only paid $5. (Doc. 40-1 at 7-9).

Defendants also contend that any argument that Kroger would have covered the entire

fee, meaning Plaintiff would have paid $0 had Defendants negotiated a reasonable fee, is

hypothetical. (Id. at 9-11).

Defendants’ theory is one plausible inference. However, as Plaintiff argues,

another plausible inference is that, because Kroger agreed to pay, and did in-fact pay, $27

per participant in recordkeeping fees during the relevant timeframe, Plaintiff would have

paid less than $5, plausibly $0, in recordkeeping fees had Defendants been prudent and

negotiated a lower fee. (Doc. 42 at 12-13). At this stage in the litigation, the Court views

all plausible inferences in Plaintiff’s favor. Accordingly, based on the allegations of the

Amended Complaint, Plaintiff has alleged an injury-in-fact.

2. Traceability

Defendants also argue that, assuming Plaintiff alleges an injury-in-fact, she fails to

allege traceability. Defendants contend that the decision to subsidize a portion of the

recordkeeping fees was made by Kroger, as the employer, and is not traceable to

Defendants, as the fiduciaries. (Doc. 40-1 at 16; Doc. 44 at 9-10). Stated differently,

Defendants contend that the decision to subsidize the Kroger Plan was a business

decision that does not impact ERISA’s fiduciary duties, so any injury resulting from an

unreasonable recordkeeping fee is not traceable to Defendants.

The plaintiff must show “a fairly traceable connection between the plaintiff’s

injury and the complained-of conduct of the defendant.” Steel Co. v. Citizens for a Better

Env’t, 523 U.S. 83, 103 (1998). “[T]he standard for establishing traceability for standing

purposes is less demanding than the standard for proving tort causation.” Buchholz v.

Meyer Njus Tanick, PA, 946 F.3d 855, 866 (6th Cir. 2020) (citation omitted). “At the

pleading stage, the plaintiff’s burden of ‘alleging that their injury is “fairly traceable”’ to

the defendant’s challenged conduct is ‘relatively modest[.]’” Id. (quoting Bennett v.

Spear, 520 U.S. 154, 171 (1997). Thus, harms that flow “indirectly from the action in

question can be said to be ‘fairly traceable’ to that action for standing purposes.” Id.

(quotation omitted).

Plaintiff plausibly alleges traceability. Plaintiff’s alleged injury—that she paid an

unreasonable recordkeeping fee—is fairly traceable to Defendants’ challenged conduct—

that Defendants were imprudent by failing to solicit recordkeeper bids. Whether Kroger,

as the employer, or Defendants, as the fiduciaries, made the decision to pay a portion of

the recordkeeping fee is immaterial to the standing analysis because the challenged

conduct is fairly traceable to Plaintiff’s injury.

To be sure, the Sixth Circuit has “recognized that employers who are also plan

sponsors wear two hats: one as a fiduciary in administering or managing the plan for the

benefit of participants and the other as employer in performing settlor functions such as

establishing, funding, amending, and terminating the trust.” Hunter v. Caliber Sys., Inc.,

220 F.3d 702, 718 (6th Cir. 2000) (citations omitted). Moreover, because the “fiduciary

obligations imposed by ERISA are implicated only where an employer acts in its

fiduciary capacity,” a court “must examine the conduct at issue to determine whether it

constitutes management or administration of the plan, giving rise to fiduciary concerns,

or merely a business decision that has an effect on an ERISA plan not subject to fiduciary

standards.” Id. (cleaned up).

However, Defendants fail to explain how this analysis goes to the Court’s standing

inquiry. Moreover, whether the decision to subsidize the recordkeeping fee falls within

Defendants’ fiduciary functions is a fact dependent inquiry that the Court declines to

engage in at this stage in the proceedings based on the allegations in the Amended

Complaint. Id. (“under the facts of this case, [the conduct] was a business decision”).

Accordingly, Plaintiff has met her relatively modest burden of showing that her injury is

fairly traceable to Defendants’ challenged conduct.

3. Redressability

Finally, although the parties do not discuss it, Plaintiff’s injury will be redressed

by a favorable decision. A plaintiff who sues under Section 1132(a)(2) for breach of

fiduciary duty does so to seek recovery on behalf of the plan. Loren, 505 F.3d at 608

(“Plaintiffs cannot bring suit under § 1132(a)(2) to recover personal damages for

misconduct, but rather must seek recovery on behalf of the plan.”). Here, Plaintiff’s

injury is redressable as any favorable decision will result in recovery to the Kroger Plan,

which undoubtedly then flows to Plaintiff and other participants. Accordingly, at this

stage in the proceedings, Plaintiff has plausibly alleged standing.

Plaintiff fails to plausibly state a claim for relief.

Plaintiff asserts two claims against Defendants: (1) breach of the duty of prudence

of ERISA based on failure to ensure objectively reasonable recordkeeping fees; and

(2) failure to monitor other fiduciaries under ERISA in relation to the unreasonable

recordkeeping fees. (Doc. 32). Defendants argue that both claims should be dismissed

for failure to state a claim. (Doc. 40).

As discussed, ERISA “requires that a plan administrator discharge his 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.’” CommonSpirit, 37 F.4th

at 1164 (quoting 28 U.S.C. § 1104(a)(1)(B)). A court’s review of an ERISA pleading

“requires ‘careful, context-sensitive scrutiny of a complaint’s allegations’ in order to

‘divide the plausible sheep from the meritless goats.’” Id. (quoting Fifth Third Bancorp

v. Dudenhoeffer, 573 U.S. 409, 425 (2014)). “Because the content of the duty of

prudence turns on the circumstances prevailing at the time the fiduciary acts, the

appropriate inquiry will necessarily be context specific.” Id. (cleaned up). “In the last

analysis, ‘the circumstances facing an ERISA fiduciary will implicate difficult tradeoffs,

and courts must give due regard to the range of reasonable judgments a fiduciary may

make based on her experience and expertise.’” Id. (quoting Hughes, 142 S. Ct. at 742,

211 L.Ed.2d 558).

1. Count I (Duty of Prudence)

Defendants argue that Plaintiff fails to plead a duty of prudence claim for three

main reasons: (1) Plaintiff fails to allege that the Kroger Plan’s fees were excessive

relative to the services provided; (2) Plaintiff cannot plausibly plead her claim by

comparing the Kroger Plan to other, handpicked plans from one single year; and

(3) Plaintiff’s comparable plans are not comparable plans.3 (Doc. 40-1). Plaintiff’s

general response is that the allegations of the Amended Complaint create to a plausible

inference that Defendants were imprudent through the Kroger Plan’s excessive

3 Defendants also argue that Plaintiff fails to plausibly allege a duty of prudence claim based on

recordkeeping fees because Plaintiff did not, in fact, pay an unreasonable recordkeeping fee.

This argument fails for the similar reasons as Defendants’ standing argument.

recordkeeping fees, and Defendants’ concerns with her pleading are factual issues not

properly before the Court at this stage in the proceedings. (Doc. 42).

To allege a breach of fiduciary duty claim based on imprudent recordkeeping fees,

a plaintiff must plead facts which would allow a plausible inference that the

recordkeeping fees were excessive relative to the services rendered. Forman, 40 F.4th at

449; CommonSpirit, 37 F.4th at 1169; see also, Albert v. Oshkosh Corp., 47 F.4th 570,

580 (7th Cir. 2022), reh’g denied, No. 21-2789, 2022 WL 4372363 (7th Cir. Sept. 21,

2022) (following CommonSpirit).

In this case, Plaintiff fails to allege that the Kroger Plan’s recordkeeping fees were

excessive when compared to services rendered. Plaintiff attempts to survive this burden

by describing the “two types of essential RK&A services provided by all recordkeepers,”

and then arguing that “[f]or mega plans, like the Kroger Plan, any minor variations in the

level and quality of RK&A services described above and provided by recordkeepers has

little to no material impact on the fees charged by recordkeepers.” (Doc. 32 at ¶¶ 39, 41;

Doc. 32 at 17-19). But Plaintiff’s allegations are wholly conclusory. See Probst v. Eli

Lilly and Company, 1:22-cv-1106, 2023 WL 1782611, at *10 (S.D. Ind. Feb. 3, 2023)

(allegation that “that all mega plans receive nearly identical recordkeeping services and

that any difference in services was immaterial to the price of those services” was wholly

conclusory) (collecting cases). Indeed, Plaintiff fails to give any context to the services

rendered to the Kroger Plan or to the services rendered to her comparable plans which

may lead to the inference that the Kroger Plan’s recordkeeping fees were excessive

relative to the services rendered.

Plaintiff’s theory is also not plausible. Again, Plaintiff alleges that “any minor

variations” in recordkeeping services “have no material impact on the fees charged,”

suggesting that she need not describe the context of services rendered because any

differences in services among her comparable plans are immaterial. However, when the

Court takes a careful, context-sensitive scrutiny of the comparable plans, Plaintiff’s

suggestion that minor variations are immaterial is not plausible.

Plaintiff’s “comparable plans” receive recordkeeping services from other

providers, and the cost of those fees range from $18 to $27 per participant. Plaintiff

relies on Form 5500’s when calculating those fees. But the Form 5500’s show variations

in reported services for the comparable plans. For example, the Kroger Plan’s 2018 Form

5500 states that Merrill Lynch provided “recordkeeping and investment management

services to the [Kroger] Plan.” (Doc. 40-4 at 28).4 Sutter Health’s 2018 Form 5550

reflects that Vanguard provided services corresponding with the following codes: 37

4 In the Amended Complaint, Plaintiff alleges that “[b] y disclosing service code[] 15

[Recordkeeping and information management (computing, tabulating, data processing, etc.)]

in Schedule C of its 2020 [Kroger Defined Contribution Plan] Master Trust form, the Plan

indicates that the only service provided by Merrill Lynch was recordkeeping.” According to

Plaintiff, this shows that Bank of America and Merrill Lynch provided only Bundled RK&A

services to the Kroger Plan. (Doc. 32 at ¶ 15).

As an initial matter, the Master Trust’s 2018 Form 5500 discloses that Bank of America provided

service code 28 (investment management) and Merrill Lynch Pierce Fenner Smith provided

service codes 15 and 72 (other investment fees and expenses) to the Master Trust. See The

Kroger Co. Defined Contribution Master Trust’s 2018 Form 5500, available publicly online at

https://www.efast.dol.gov/5500search/. So, this calls into question what services were rendered

by Bank of America and Merrill Lynch throughout the relevant time period. Moreover, even if

the Court assumes that Bank of America and Merrill Lynch only provided recordkeeping

services to the Kroger Plan during the relevant time period, the variations in services provided by

the comparable plans still fail to state a plausible claim that the fees charged by Bank of America

and Merrill Lynch were excessive relative to the services rendered.

(participant loan processing), 60 (sub-transfer agency fees), 64 (recordkeeping fees), and

65 (account maintenance fees). (Doc. 40-11 at 11).5 See, e.g., Probst, 2023 WL

1782611, at *11 (questioning use of Form 5500s for comparable plans). Thus, the

differences in costs and the differences in services reported among the comparable plans

suggest that even minor variations in services impact per participant recordkeeping fees.

Moreover, even assuming variations in services have no material impact on

recordkeeping fees, Plaintiff fails to give the kind of context that creates an inference that

Defendants were imprudent when picking Merrill Lynch as a recordkeeper. Plaintiff

attempts to show that Defendants were imprudent because “comparable plans” received

similar services at a lower cost. But Plaintiff’s “comparable plans” are not comparable

plans.6 In 2018, the Kroger Plan had 90,005 participants, yet Plaintiff chooses

“comparable plans” ranging from 47,358 participants to 154,402 participants. In 2018,

5 See Doc. 40-9 at 7 (Kaiser Permanente Supplemental Savings and Retirement Plan’s 2018

Form 5500 reflecting Vanguard services for codes 15, 25, 26, and 37); Doc. 40-12 at 11 (Lowe’s

401(k) Plan’s 2018 Form 5500 reflecting Well Fargo services for codes 15, 21, 50, 62, and 64);

Marriott International, Inc. Employees’ Profit Sharing Retirement and Savings Plan and Trust’s

2018 Form 5500 reflecting Alight services for codes 15 and 50, available publicly online at

https://www.efast.dol.gov/5500search/; Apple 401(k) Plan’s 2018 Form 5550 reflecting Great

West services for codes 15, 50, and 64, available at https://www.efast.dol.gov/5500search/.

6 As another comparator, Plaintiff alleges that the recordkeeping fees are unreasonable based on

a stipulation by Fidelity in another ERISA fee case, Moitoso, et al. v. FMR LLC, et al., 1:18-cv-

12122-WGY, ECF No. 138-67 at 3 (D. Mass.). (Doc. 32 at ¶¶ 83, 89). According to Plaintiff, in

that case, Fidelity took the position that, between the years of 2014 and 2020, it could have

negotiated a fixed recordkeeping fee of $14-$21 per participant for recordkeeping services

provided by Fidelity to a Fidelity plan. However, like prior cases, Plaintiff fails to provide

context as to what services Fidelity provided to its own plan, which may make the Fidelity plan a

meaningful comparator to the Kroger Plan. So, like prior cases, the Court declines to consider it.

See e.g., Fritton v. Taylor Corp., No. 22CV00415ECTTNL, 2022 WL 17584416, at *8 (D.

Minn. Dec. 12, 2022) (declining to consider Fidelity stipulation as a “meaningful benchmark”);

Wehner v. Genentech, Inc., No. 20-CV-06894-WHO, 2021 WL 507599, at *6 (N.D. Cal. Feb. 9,

the Kroger Plan had around $4.9 billion in assets, yet Plaintiff chooses “comparable

plans” ranging from around $3.1 billion to around $7.4 billion in assets. These

differences in size call into question Plaintiff’s comparable plans and whether the Kroger

Plan’s recordkeeping fees were excessive relative the services rendered. Indeed,

common sense dictates that plans of different sizes have different bargaining power,

resulting in different services and/or fees. 16630 Southfield Ltd. P’ship v. Flagstar Bank,

F.S.B., 727 F.3d 502, 504 (6th Cir. 2013) (“The plausibility of an inference depends on a

host of considerations, including common sense and the strength of competing

explanations for the defendant’s conduct.”).

In a final attempt to support her claims, Plaintiff provides supplemental authority,

Peck v. Munson Healthcare, No. 1:22-CV-294, 2022 WL 17260807 (W.D. Mich. Nov. 9,

2022). (Doc. 49). But Peck is distinguishable from this case. In Peck, a decision not

binding on this Court, the court denied in part defendant’s motion to dismiss, keeping

plaintiff’s recordkeeping fee claim alive. First, the court found a dispute of fact on the

per participant fee that was inappropriate to consider on a motion to dismiss. Id. at *5.

Specifically, defendant, based on an unauthenticated document and based on its own

calculations, argued that the actual fee paid per participant was less than the amount

plaintiff alleged and less than the amount plaintiff argued would have been reasonable.

Id. at *4. Here, Defendants take Plaintiff’s calculations as true. Moreover, in Peck, the

2021) (declining to consider Fidelity stipulation as an adequate market comparator because

Fidelity was providing services to its own plans and plaintiff failed to explain how those services

were equivalent to the services in the present cases).

court found that, in its judgment, plaintiff had “compared sufficiently similar plans” that

could show that defendant acted as an imprudent fiduciary. Id.7 Here, and as already

discussed, that is simply not the case. Plaintiff has not compared sufficiently similar

plans to the Kroger Plan.

To state a plausible claim that Defendants were imprudent when choosing a

recordkeeper and negotiating recordkeeping fees, Plaintiff needed to allege facts that led

to the inference that the recordkeeping fees paid were excessive relative to the services

rendered. The Court has taken a “careful, context-sensitive scrutiny of [the Amended

Complaint]’s allegations,” and, for the foregoing reasons, finds that Plaintiff fails to

move her claim from “possibility to plausibility.” CommonSpirit, 37 F.4th at 1164, 1169.

Accordingly, the motion to dismiss Count I is granted.

2. Failure to Monitor Claim

Plaintiff’s second claim for relief alleges that Defendants breached their duty to

monitor other fiduciaries responsible for the Kroger Plan’s recordkeeping fees. (Doc. 32

at ¶¶ 131-37). “The sufficiency of these claims depends on the sufficiency of Plaintiff’s

breach of prudence claims.” Peck, 2022 WL 17260807, at *8 (citations omitted); see

also Saumer v. Cliffs Nat. Res. Inc., No. 1:15-CV-954-DAP, 2016 WL 8668509, at *8

(N.D. Ohio Apr. 1, 2016), aff’d, 853 F.3d 855 (6th Cir. 2017) (dismissing failure to

monitor claim because “no predicate fiduciary breach exists”); Gonzalez v. Northwell

7 In Peck, the plan at issue has 7,259 participants with around $294 million in assets. Plaintiff

then provided 16 “comparable plans,” with many plans around the same number of participants

and assets. See Amended Complaint, Peck v. Munson Healthcare, No. 1:22-CV-294, 2022 WL

17260807 (W.D. Mich. June 21, 2022), Doc. 9 at ¶ 95.

Health, Inc., No. 20CV3256RPKRLM, 2022 WL 4639673, at *12 (E.D.N.Y. Sept. 30,

2022) (monitoring and co-fiduciary breach claims “cannot survive absent a viable claim

for breach of a duty of prudence”). Accordingly, the motion to dismiss Count II is

granted.

V. CONCLUSION

Based upon the foregoing, Defendants’ motion to dismiss (Doc. 40) is

GRANTED. The Amended Complaint is DISMISSED with prejudice. The Clerk

shall enter judgment accordingly and terminate the action.

IT IS SO ORDERED.

Date: 3/9/2023 s/Timothy S. Black

Timothy S. Black

United States District Judge