The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
KEITH KRUTCHEN, ANGEL D. : CIVIL ACTION
MURATALLA, and WILLIAM BEGANI, :
individually and on behalf of all others : No. 22-678
similarly situated, :
:
v. :
:
RICOH USA, INC., THE BOARD OF :
DIRECTORS OF RICOH USA, INC., :
THE RICOH RETIREMENT PLANS :
COMMITTEE and JOHN DOES 1-30. :
MEMORANDUM
Juan R. Sánchez, C.J. November 15, 2022
In this class action brought under the Employee Retirement Income Security Act
(“ERISA”), Plaintiffs Keith Krutchen, Angel D. Muratalla, and William Begani (collectively
“Plaintiffs”) assert claims of breach of fiduciary duty against Defendants Ricoh USA, Inc., the
Board of Directors of Ricoh USA, Inc., the Ricoh Retirement Plans Committee, and John Does 1-
30 (“Defendants”). Defendants move to dismiss Plaintiffs’ Amended Complaint pursuant to
Federal Rule of Civil Procedure 12(b)(6). Because the Amended Complaint fails to provide a
reasonable inference that Defendants breached their fiduciary duty, the motion will be granted with
leave to amend.
FACTS
Plaintiffs are former employees of Ricoh USA, Inc. who participated in the company’s
Retirement Savings Plan (“the Plan”), an employer-sponsored defined contribution plan within the
meaning of ERISA, 29 U.S.C. § 1002(34). Am. Compl. ¶¶ 17-19. A “defined contribution plan”
or “individual account plan” provides for individual retirement accounts for each participant; the
plan’s value is derived from the amounts contributed to those accounts and the accounts’
performance. Id. ¶ 40. Ricoh, the Plan’s sponsor and fiduciary, appointed the Ricoh Retirement
Plans Committee (“the Committee”) to monitor investment performance and costs each year. Id.
¶¶ 22-23. The Committee’s tasks included ensuring the Plan paid fair recordkeeping and
administration fees and confirming investments were appropriate, reasonably priced, and well-
performing. Id. ¶ 23.
Recordkeeping services are generally provided as a “bundle” for a per-capita price, after
which fiduciaries can select additional individual services “a la carte.” Id. ¶¶ 65-67. Recordkeepers
offer bundled services like transaction processing and participant communications for one price,
regardless of whether a plan makes use of all or only some of the services. Id. (describing this type
of service provision as “all-you-can-eat”). A la carte services like loan processing, on the other
hand, are each added for an additional cost. Id. ¶ 67.
Plaintiffs allege Defendants’ method of paying for recordkeeping “severely reduced the
participants earning potential,” resulting in millions of dollars in losses. Id. ¶¶ 76, 90-91. Further,
they claim Defendants had “substantial bargaining power” when negotiating fees and expenses
due to the Plan’s size, but they failed to leverage that power to lower its fees. Id. ¶ 10.
Recordkeeping expenses can be paid either directly by plan participants or indirectly by a plan’s
investments, a practice also known as “revenue sharing.” Id. ¶ 71. Here, the Plan paid Hewiett
Associates for recordkeeping services directly, then added an 0.09% administration fee to every
investment option to recoup the money from those payments, as well as those for “trustee, legal,
. . . and accounting services.” Id. ¶¶ 69, 72.1 Further, two of the investment options available to
Ricoh employees—the Dodge and Cox International Stock Fund and the T. Rowe Equity Income
Fund—used revenue sharing in addition to the 0.09% fee. Id. ¶ 72. For those funds, the total
1 Hewiett was acquired by Alight in 2017. Am. Compl. ¶ 78 n.10.
recordkeeping fees were 0.19% and 0.24%, respectively. Id. The annual per-participant
recordkeeping charge for the Plan ranged from a low of $61 to a high of $103, with fees increasing
as assets grew and the number of participants declined. Id. ¶ 80.
To show that the Plan’s fees were excessive, Plaintiffs compare its recordkeeping payments
to those of other plans. Id. ¶ 84. The Amended Complaint includes information about the fees of
twelve comparator plans in 2019, with costs ranging from $23 to $36 as reported on those plans’
2018 Form 5500s.2 Id. ¶ 85. All of these “benchmark” plans had at least 13,000 participants and
$300 million in assets, but only one used the same recordkeeper as Defendants. Id. Plaintiffs also
provide data from other comparator plans from 2013-2018, as well as case law and a survey from
consultant group NEPC to support its allegations. Id. ¶¶ 86-89.
Pursuant to 29 U.S.C. §§ 1109 and 1132, Plaintiffs, on behalf of themselves, the Plan, and
a putative class of similarly-situated Plan participants, brought this action against Ricoh, the
Committee, and its Board. Id. ¶¶ 25-32. Plaintiffs also name “John Does No. 1-30” as Ricoh’s
individual Board members, Committee members, and any unknown fiduciaries of the Plan. Id.
Plaintiffs allege: (1) the Committee breached its fiduciary duty by failing to control the Plan’s
recordkeeping administration costs; and (2) Ricoh and its Board breached their fiduciary duties by
failing to monitor the Committee. Id. ¶ 13. Defendants now move to dismiss both claims pursuant
to Federal Rule of Civil Procedure 12(b)(6).
STANDARD OF REVIEW
To withstand a Rule 12(b)(6) motion to dismiss, a complaint “must contain sufficient
2 ERISA requires 401(k) plans to file an annual report, called a Form 5500, to the Department of
Labor and the Department of the Treasury. Am. Compl. ¶ 65 n.8. This form reports the plan
recordkeeper and the amount paid for their services, but not which services are selected. See,
e.g., Ricoh’s Form 5500s at 8, ECF No. 18-2.
factual matter, accepted as true, to state a claim that is plausible on its face.” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009). A complaint “does not need detailed factual allegations” but it must contain
something “more than labels and conclusions.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007). But the plausibility standard “require[s] a pleading to show more than a sheer possibility
that a defendant has acted unlawfully.” Connelly v. Lane Constr. Corp., 809 F.3d 780, 786 (3d Cir.
2016) (internal quotation marks and citation omitted). “A facially plausible claim is one that
permits a reasonable inference that the defendant is liable for the misconduct alleged.” Doe v.
Univ. of the Scis., 961 F.3d 203, 208 (3d Cir. 2020) (citing Iqbal, 556 U.S. at 678). This Court
must “accept as true all allegations in the complaint and all reasonable inferences that can be drawn
therefrom, and view them in the light most favorable to the non-moving party.” Rocks v. City of
Phila., 868 F.2d 644, 645 (3d Cir. 1989).
DISCUSSION
Taking all facts in the Amended Complaint as true and deciding all inferences in their
favor, Plaintiffs fail to plausibly allege the Committee breached its ERISA-imposed fiduciary duty
by charging unreasonable recordkeeping fees. Plaintiffs also do not state a failure to monitor claim
against Ricoh and the Board, since this second claim is derivative of the first. Accordingly,
Defendants’ motion to dismiss will be granted.
A breach of fiduciary duty under ERISA occurs when “(1) a plan fiduciary (2) breaches an
ERISA-imposed duty (3) causing a loss to the plan.” Sweda v. Univ. of Pa., 923 F.3d 320, 328 (3d
Cir. 2019) (quoting Leckey v. Stefano, 501 F.3d 212, 225-26 (3d. Cir. 2007)). Plaintiffs only contest
the second element: whether the Committee breached its duty of prudence in managing the Plan.
A fiduciary must 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). At
the pleading stage, a plaintiff must show “substantial circumstantial evidence” for the court to
“reasonably infer” that the conduct was imprudent. Sweda, 923 F.2d at 332 (internal quotation
omitted). Such evidence may include the “range of investment options,” “reasonableness of fees,”
“selection and retention of investment options,” and “practices of similarly situated fiduciaries.”
Id. at 331.
Mismanagement of plan expenses—like overcharging for recordkeeping and
administrative fees—constitutes a breach of fiduciary duty because unreasonable expenses can
“significantly reduce the value of an account in a defined-contribution plan.” Id. at 328; see also
29 U.S.C. § 1104(a)(1)(A) (requiring fiduciaries to “defray” reasonable expenses of plan
administration). For example, in Sweda, the plaintiffs alleged their employer breached its fiduciary
duty by paying excessive administrative and recordkeeping fees, compared to plans that paid less
for the same services. Sweda, 923 F.3d at 330-31. In dismissing the defendants’ 12(b)(6) motion,
the Third Circuit held that the plaintiffs plausibly alleged a breach where they used “specific
comparisons” between the plan’s choices and available alternatives and showed that the “practices
of similarly situated fiduciaries” differed from the allegedly imprudent plan. Id. at 332.
In assessing mismanagement of recordkeeping expenses after Sweda, courts in this circuit
have found relevant whether the plan engaged in competitive bidding for recordkeeping services,
the plan’s ability to leverage its size to reduce fees, how many recordkeepers the plan pays, and if
the complaint includes “a sound basis for comparison [or] meaningful benchmark” to create an
inference of imprudence. Pinnell v. Teva Pharma. USA, Inc., Civ. No. 19-5738, 2020 WL
1531870, at *4 (E.D. Pa. Mar. 31, 2020) (internal quotation omitted). A meaningful benchmark
must include both the quality and type of recordkeeping services provided by comparator plans to
show that identically situated plans received the same services for less. Mator v. Wesco Distrib.,
Inc., Civ. No. 21-403, 2022 WL 3566108, at *7 (W.D. Pa. Aug. 18, 2022). In Mator, the plaintiffs
alleged the defendants’ plan charged excessive recordkeeping fees, comparing its fees to those of
six other plans, with all facts derived from Form 5500s. Id. at *2. The court dismissed the claim,
holding that the plaintiffs’ failure to “address the types or levels of services that any plan contracted
to receive” made the benchmark an “apples to oranges comparison.” Id. at *7; see also id. at *4
(noting Form 5500 codes do not “capture all the details, nuances, and scope of different services”).
The court reasoned that a “price tag to price tag comparison” without sufficient details regarding
services was “too generalized and speculative” to state a claim. Id. at *8. Otherwise, “ERISA
plaintiffs could advance litigation on a mere averment of a monetary difference.” Id.
As in Mator, Plaintiffs’ Amended Complaint fails to include any information about the
specific services used by Defendants’ Plan or the benchmark plans. Plaintiffs actually plead fewer
facts than the plaintiff in Mator: the Amended Complaint lists the services that “all national
recordkeepers have the capability to provide,” but only notes that the Plan’s selected services “fell
within the broad range” of those available. Am. Compl. ¶ 69. Plaintiffs similarly allege nothing
about the services chosen by the benchmark plans, the plans included in the NEPC survey, or those
under review in their cited case law. Fiduciaries may select diverse services from bundled offerings
or elect additional ala carte services, prioritizing various options differently depending on their
plans’ unique needs and reasonably choosing to pay more for higher quality services. Without this
“apples to apples” information, this Court cannot assess whether the Plan even pays for the same
services as its comparators, much less what “similarly situated fiduciaries” would do. Sweda, 923
F.3d at 330. In addition to following this Circuit’s precedent in Sweda, this Court finds support in
several other circuits. See Albert v. Oshkosh Corp., 47 F.4th 570, 580 (7th Cir. 2022); Smith v.
CommonSpirit Health, 37 F.4th 1160, 1169 (5th Cir. 2022); Young v. Gen. Motors Inv. Mgmt.
Corp., 325 F. App’x 31, 33 (2d Cir. 2009); see also Matousek v. MidAmerican Energy Co., 51
F.4th 274, 280 (8th Cir. 2022) (rejecting the NEPC survey as a benchmark because it did not show
which services were selected by the survey’s plans).
Since Count I does not state a claim, neither does Count II. A failure to monitor claim
cannot survive without an underlying breach of an ERISA-imposed duty. In Re Allergan Erisa
Litig., 975 F.3d 348, 354 n.11 (3d Cir. 2020). Plaintiffs do not plausibly allege a breach of fiduciary
duty, so they do not plausibly allege a failure to monitor.
Because the Amended Complaint does not provide meaningful benchmarks by which the
Court can assess the prudency of Defendants’ actions, the motion to dismiss will be granted with
leave to amend.
An appropriate Order follows.
BY THE COURT:
/s/ Juan R. Sánchez
Juan R. Sánchez, C.J.