noting judicial notice of 5 publicly available documents such as SEC filings was proper
How later courts described this case
- noting judicial notice of 5 publicly available documents such as SEC filings was proper
Written by the judges who cited it.
The opinion
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4 UNITED STATES DISTRICT COURT
5 NORTHERN DISTRICT OF CALIFORNIA
6
7 MICHAEL S SCHUSTER, et al., Case No. 3:24-cv-04970-JSC
8 Plaintiffs,
ORDER RE: MOTION TO DISMISS
9 v. AMENDED COMPLAINT
10 SWINERTON INCORPORATED, et al., Re: Dkt. No. 27
Defendants.
11
12
13 Plaintiffs bring this Employee Retirement Income Security Act (“ERISA”) breach of
14 fiduciary duty action on behalf of a putative class of participants in a retirement savings plan
15 Swinerton Incorporated offered its employees. Defendants move to dismiss the Amended
16 Complaint for failure to state a claim. (Dkt. No. 27.1) After carefully considering the arguments
17 and briefing submitted, the Court concludes oral argument is unnecessary, see Civ. L.R. 7-1(b),
18 VACATES the April 24, 2025 hearing, and DENIES the motion to dismiss.
19 FAC ALLEGATIONS
20 Plaintiffs Michael S. Schuster and Juan C. Del Barco are former Swinerton employees and
21 participants in Swinerton’s Section 401(k) defined contribution benefit plan (“the Plan”).
22 (Amended Complaint, Dkt. No. 24 at ¶¶ 23-24, 26-27.) As a defined contribution retirement plan
23 under 29 U.S.C. § 1002(34), “the value of participants investments is ‘determined by the market
24 performance of employee and employer contributions, less expenses.’” (Id. at ¶ 6 (citation
25 omitted).) Swinerton and its Board are the Plan Sponsors, and the Swinerton 401(k) and Savings
26 Committee is the Plan Administrator; collectively these three entities are the Plan fiduciaries. (Id.
27
1 at ¶¶ 2, 7.)
2 The Plan fiduciaries, as is the practice with defined contribution plans, hired John Hancock
3 Retirement Plan Services (“John Hancock”) and Principal Life Insurance Company (“Principal”)
4 as service providers, also known as recordkeepers, to deliver retirement plan benefits under the
5 Plan. (Id. at ¶¶ 2-3, 39.) John Hancock was the recordkeeper from August 9, 2018 to January 31,
6 2019 when Principal took over as recordkeeper. (Id. at ¶¶ 3-4.) Plaintiffs refer to the fees charged
7 by John Hancock and Principal as “RFK fees” and allege these fees may include “some of all of
8 the following:”
9 a. Recordkeeping;
b. Transaction Processing (which includes the technology to
10 process purchases and sales of participants’ assets as well as
providing the participants the access to investment options
11 selected by the plan sponsor);
12 c. Administrative Services related to converting a plan from one
recordkeeper to another recordkeeper;
13 d. Participant communications (including employee meetings,
call centers/phone support, voice response systems, web
14 account access, and the preparation of other communications
to participants, e.g., Summary Plan descriptions and other
15 participant materials);
16 e. Maintenance of an employer stock fund;
f. Plan document services which include updates to standard
17 plan documents to ensure compliance with new regulatory and
legal requirements;
18
g. Compliance support which would include, e.g., assistance
19 interpreting plan provisions and ensuring the operation of the
plan follows legal requirements and the provisions of the plan;
20 h. Compliance testing to ensure the plan complies with Internal
Revenue nondiscrimination rules;
21
i. Various Plan professional services (accounting, audit,
22 appraisal, and legal fees)[;]
j. Plan-level investment advising, consulting, and management;
23
k. Usage fees (for loan fees, hardship withdrawal fees, QDROs,
24 etc.); and
l. Trustee/custodian services.
25
(Id. at ¶ 42.) These services are “fungible and commoditized, and are standard services provided
26
by all major recordkeepers for ERISA 401(k) plans.” (Id. at ¶ 43.) This action focuses of the
27
RKA fees paid to John Hancock and Principal related to recordkeeping. (Id. a ¶ 48.)
1 PROCEDURAL HISTORY
2 In August 2024, Plaintiffs filed this putative class action against Swinerton, the Swinerton
3 Board of Directors, and the Swinerton 401(k) and Savings Committee alleging two ERISA
4 violations: (1) breach of the duty of prudence by incurring excessive recordkeeping and
5 administrative fees charged by the two Plan recordkeepers, John Hancock and Principal, in
6 violation of 29 U.S.C. § 1104(a)(1)(B); and (2) failure to monitor the Plan Committee fiduciaries
7 responsible paying the excessive recordkeeping and administrative fees. After Defendants moved
8 to dismiss, Plaintiffs filed an Amended Complaint as of right under Federal Rule of Civil
9 Procedure 15(a)(1)(B). (Dkt. Nos. 19, 24.) Defendants then filed a new motion to dismiss which
10 is fully briefed. (Dkt. Nos. 27, 29, 30.)
11 JUDICIAL NOTICE
12 Judicial notice permits courts to notice an adjudicative fact if it is “not subject to
13 reasonable dispute,” meaning the fact is “generally known” or “can be accurately and readily
14 determined from sources whose accuracy cannot reasonable be questioned.” Khoja v. Orexigen
15 Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 2018) (quoting Fed. R. Evid. 201). While a court
16 may take judicial notice of matters of public record, “a court cannot take judicial notice of
17 disputed facts contained in such records.” Id.
18 Defendants request judicial notice of 20 documents, including the Swinerton Plan Form
19 5500s, the Form 5500s of the ten comparator plans, several Department of Labor Publications, and
20 a blog post. (Dkt. No. 28.) Plaintiffs agree the Form 5500s are judicially noticeable. (Dkt. No. 29
21 at 23.) The Court thus takes judicial notice of the Form 5500s submitted as Exhibits A-P to the
22 Mandhania Declaration. However, the Court cannot take judicial notice of any disputed facts in
23 the Form 5500s. Khoja, 899 F.3d at 999-1000. Thus, the Court takes judicial notice of the
24 existence of the documents, but cannot take judicial notice or infer, as Defendants request, that
25 based on the contents of the Form 5500s the comparator plans did not receive the same services or
26 that Plaintiffs incorrectly calculated the fees. Defendants may not “rel[y] on the truth of the
27 contents of the [ ] filings to prove the substance of [their] claims.” Gerritsen v. Warner Bros. Ent.
1 The Court also takes judicial notice of the Department of Labor publications and the blog
2 post which is referenced in the Amended Complaint (Exhibits Q-T) as they are publicly available
3 documents and Plaintiffs have not questioned their authenticity. See Metzler Inv. GMBH v.
4 Corinthian Colleges, Inc., 540 F.3d 1049, 1064 n.7 (9th Cir. 2008) (noting judicial notice of
5 publicly available documents such as SEC filings was proper); Threshold Enters. Ltd. v. Pressed
6 Juicery, Inc., 445 F. Supp. 3d 139, 146 (N.D. Cal. 2020) (collecting cases taking judicial notice of
7 websites and their contents).
8 DISCUSSION
9 Defendants insist Plaintiffs have not adequately alleged a breach of the duty of prudence
10 because the claim lacks the required specificity as to Plaintiffs’ proposed comparators and relies
11 on a flawed methodology. Both parties agree the failure to monitor claim is a derivative claim,
12 rising or falling with the breach of the duty of prudence claim. (Dkt. No. 27 at 24; Dkt. No. 29 at
13 24.)
14 A. The Duty of Prudence
15 Under ERISA, a plan fiduciary “shall discharge his duties with respect to a plan solely in
16 the interest of the participants and beneficiaries,” 29 U.S.C. § 1104(a)(1), and must do so “with the
17 care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man
18 acting in a like capacity and familiar with such matters would use in the conduct of an enterprise
19 of a like character and with like aims,” 29 U.S.C. § 1104(a)(1)(B). The relevant inquiry for a
20 breach of duty of prudence claim is whether a fiduciary, “at the time they engaged in the
21 challenged transactions, employed the appropriate methods to investigate the merits of the
22 investment and to structure the investment.” Donovan v. Mazzola, 716 F.2d 1226, 1232 (9th Cir.
23 1983). Fiduciaries must exercise prudence when investment decisions are made in the first
24 instance and must “incur only costs that are reasonable in amount and appropriate to the
25 investment responsibilities of the trusteeship.” Tibble v. Edison Int’l, 843 F.3d 1187, 1197 (9th
26 Cir. 2016) (citation omitted).
27 To survive a motion to dismiss, a party must make sufficient “circumstantial factual
1 Pension Ben. Guar. Corp. ex rel. St. Vincent Cath. Med. Ctrs. Ret. Plan v. Morgan Stanley Inv.
2 Mgmt. Inc., 712 F.3d 705, 718 (2nd Cir. 2013). “A plaintiff may allege that a fiduciary breached
3 the duty of prudence by failing to properly monitor investments and remove imprudent ones.”
4 Tibble v. Edison Int’l, 575 U.S. 523, 530 (2015). These allegations are evaluated under the
5 Iqbal/Twombly pleading standard. See Hughes v. Nw. Univ., 595 U.S. 170, 177 (2022); Ashcroft
6 v. Iqbal, 556 U.S. 662 (2009); Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). Plaintiffs
7 “must simply state a plausible claim, rather than one that is likely to succeed.” Produce Pay, Inc.
8 v. Izguerra Produce, Inc., 39 F.4th 1158, 1166 (9th Cir. 2022) (citing Ashcroft, 556 U.S. at 679;
9 Twombly, 550 U.S. at 555–56); see also Smith v. VCA, Inc., 2022 WL 2037116, at *3 (C.D. Cal.
10 Apr. 6, 2022) (“Because ERISA plaintiffs may generally lack inside information necessary to
11 detail their allegations, [p]laintiffs may rely on circumstantial factual allegations to show a breach
12 of fiduciary duties.”).
13 1. Excessive Recordkeeping and Administrative Fees
14 Plaintiffs contend Defendants breached their duty of prudence in failing to ensure the
15 recordkeeping and administrative fees were reasonable as an initial matter and on an ongoing
16 basis. According to the Amended Complaint, “from the years 2018 through 2023... the Plan paid
17 an effective average annual Total RKA fee of $124 annually per participant, while a reasonable
18 rate for materially similar Total RKA fungible services for a plan the size of Swinerton should
19 have been $43 annually per participant.” (Dkt. No. 24 at ¶ 91.) Plaintiffs allege $42 was a
20 reasonable per participant fee given “the Swinerton Plan’s features, the commoditized and
21 fungible nature of the Total RKA services provided by the Swinerton Plan’s recordkeepers, the
22 number of participants in the Plans (approximately 3,800), and the recordkeeping market.” (Id. at
23 ¶ 116.) Plaintiffs’ calculations are based on a survey of fees paid by ten “comparable plans of
24 similar size, receiving a materially similar level and quality of [ ] fungible services.” (Id. at ¶¶ 99-
25 102.) The following charts reflect the fees “paid by other comparable plans of similar size,
26 receiving materially similar level and quality” of services:
27
1 Comparable Plans’ Total RKA Fees Based on Publicly-Available Information - Form 5500
(Price calculations are based on 2018 Form 5500 information or the most recent Form 5500 if 2018 is not available)
2 Total Total RKA
Plan Participants Assets RKA Fee Fee /pp Recordkeepe:
Weil, Gotshal &
3 Manges Section
401(K) Savings 2,564 $469,229,171 | $146,518 S57 Transamerica
4 and Investment
Plan
Genesco Salary
5 Deferral Plan 2,695 $152,254,940 | $138,207 $51 Great-West
John
IBERIABANK
7 corporation 3,193 $150,049,361 | $127,723 $40 Prudential
Savings Plan
Under Armour
10
11
Comparable Plans’ Total RKA Fees Based on Publicly Available Information from Form 5500
(Price calculations are based on 2071 Form 5500 information or the most recent Form 5500 if 2021 is mot available)
12 Total Total RKA
Plan Participants Assets RKA Fee | Fee /pp Recordkeeper
43 Ellucian Retirement
Plan 3,208 | 635,664,530 | $156,749 $49 Vanguard
Alaska Airlines Inc.
15 AlaskaSaver Plan 3,867 688,522,635 | $174,317 $45 Vanguard
Swinerton Plan 2021 John
Fee | 3012 [srenzanoen|sseeess | $15 | ssnnc/ Pinca
Stop & Shop
17 Supermarket ao.
Retirement Savings 4,023 | 935,648,024 | $156,415] $39 Fidelity
7 18 Plan
West Pharmaceutical
1 Services, Inc. 401(K) 514,861,682 | $184,439 $37 Vanguard
9 Plan
20
21 (Dkt. No. 24 at 4] 99-100.)
22 Defendants move to dismiss arguing Plaintiffs’ analysis does not plausibly support their
23 claim because the sample size is too small and Plaintiffs fail to compare whether the plans provide
24 || same specific services; that is, Defendants insist Plaintiffs must support their allegations with an
25 apples to apples comparison of services. Defendants’ arguments overreach at the pleading stage.
26 Plaintiffs plausibly allege Defendants failed to administer the fees in a prudent manner.
27
28 * Because the fees offered are good for three years, Plaintiff's provide sampling for 2018 and
2021. (Dkt. No. 24 at J 102.)
1 Plaintiffs allege between 2018 and 2023 Plan participants paid on average $124 for recordkeeping
2 and administrative fees—nearly triple the $43 paid on average for participants in comparable
3 plans. (Dkt. No. 24 at ¶ 91.) While the comparator plans use different service codes on their
4 Form 5500, both the Swinerton Plan and the comparable plans all list “[r]ecordkeeping and
5 information management (computing, tabulating, data processing) (Code 15)” and/or
6 “recordkeeping fees (Code 64).” (Dkt. No. 24 at ¶¶ 48-53.) “The different service codes do not
7 undermine [Plaintiffs] comparisons because they apparently overlap.” Mator v. Wesco
8 Distribution, Inc., 102 F.4th 172, 186 (3d Cir. 2024) (“the record does not reveal the codes’
9 precise meanings, nor whether all plans define the codes consistently. But given that all the plans
10 received some portion of an overlapping constellation of recordkeeping services, the comparisons
11 help nudge the [Plaintiffs’] claims across the line from possible to plausible.”). Defendants
12 contend Mator is inapposite because the plaintiffs alleged that one of the comparator plans used
13 the exact same service codes. But, so too here as to the service codes Principal used and those
14 used by the comparator plan IBERIABANK Corporation Retirement Savings Plan. (Compare
15 Dkt. No. 24 at ¶ 48 with ¶ 52.)
16 Defendants’ reliance on Singh v. Deloitte LLP, 123 F.4th 88, 92 (2d Cir. 2024), is
17 unpersuasive as the allegations there—unlike here—lacked information on the number of services
18 provided either by the plan at issue or the alleged comparators and did not allege what level of
19 service was provided or whether the comparator plans provided a similar quality of service. Here,
20 in contrast, Plaintiffs allege “there is nothing in these Notes to Financial Statements to suggest that
21 there is anything exceptional, unusual, or customized, about the Total RKA services provided to
22 the Swinerton Plan participants by John Hancock or Principal” as compared to the comparator
23 plans. (Id. at ¶¶ 46-47; see also ¶ 56 (“The Swinerton Plan provided participants all the
24 commoditized and fungible RKA services provided to all other very large 401(k) plan participants.
25 The quality or type of RKA services provided by competitor recordkeepers are comparable to that
26 provided by John Hancock and Principal.”).
27 “Though some courts at this stage have opted to analyze whether plaintiffs have offered a
1 Ninth Circuit.” In re Sutter Health ERISA Litigation, 2023 WL 1868865, at *10 (E.D. Cal. Feb. 9,
2 2023) (internal citation omitted). Rather, “[i]t is sufficient at this stage that Plaintiffs allege
3 specific facts supporting their claims that the Plan’s fees and [costs] were excessive for its size.”
4 Zimmerman v. Cedars-Sinai Med. Ctr., No. 5:23-CV-01124-JLS-SP, 2024 WL 1135773, at *7
5 (C.D. Cal. Feb. 18, 2024). “Plaintiffs need not provide even more granular, micro-level “apples to
6 apples” comparisons, based on data to which they may not yet have access, in order to survive a
7 motion to dismiss.” Nagy v. CEP Am., LLC, No. 23-CV-05648-RS, 2024 WL 2808648, at *4
8 (N.D. Cal. May 30, 2024); ); see also Coppel v. SeaWorld Parks & Ent., Inc., No. 3:21-CV-
9 01430-RSH-DDL, 2023 WL 2942462, at *14 (S.D. Cal. Mar. 22, 2023) (collecting cases
10 concluding allegations comparing “similar plans involving similar numbers of participants,
11 [providing] materially similar services” sufficient to state a claim of imprudence based on
12 excessive recordkeeping fees).
13 Defendants’ other arguments are likewise unavailing. Defendants contend the switch from
14 John Hancock to Principal in 2019 demonstrates the Committee was not “asleep at the wheel” and
15 is an admission of Defendants’ prudence which means the claim fails as a matter of law. (Dkt.
16 No. 27 at 13.) But, Defendants’ argument improperly requires the Court to draw inferences in
17 their—rather than Plaintiffs’—favor. As the Amended Complaint alleges the recordkeeping fees
18 actually increased when the Plan switched to Principal, it is more plausible the reason for the
19 switch had nothing to do with Defendants seeking to mitigate excessive fees. Nor is there support
20 for Defendants’ argument that Plaintiff’s sample size of five plans for 2018 and five plans for
21 2021 is too small. See, e.g., Tsui v. Universal Servs. of Am., LP, No. 8:22-CV-01158-JWH-JDE,
22 2024 WL 4868293, at *3 (C.D. Cal. Feb. 1, 2024) (“In a chart depicting the RK&A fees of [eight]
23 comparable plans to Plaintiffs’ Plan, based upon size of plan participants, assets, and RK&A fees,
24 Plaintiffs adequately showed that Defendants breached their duty of prudence.”).
25 Finally, Defendants challenge Plaintiffs’ methodology for calculating the fees as fatally
26 flawed asking the Court to examine the Form 5500s for the comparator plans to assess the validity
27 of Plaintiffs’ alleged calculations. While the Court has taken judicial notice of the Form 5500s,
1 Orexigen Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 2018); see also Valenzuela v. Advantage
2 Sales & Mktg., LLC, No. 8:24-CV-00460, 2024 WL 5316279, at *2 (C.D. Cal. Nov. 18, 2024)
3 (“Defendants improperly ask the Court to infer from [the Form 5500s] that comparator plans
4 received different services or Plaintiff incorrectly calculated the plans’ fees”). Plaintiffs have
5 identified comparators offering substantially similar services. (Dkt. No. 24 at ¶ 114 (“The Total
6 RKA services received by these comparator plans were materially similar to the Total RKA
7 services received by the Swinerton Plan in the form of recordkeeping, trustee, loan processing,
8 hardship distribution, and other administrative fees, based on the highly similar nature of such
9 services in the marketplace and a comparison of the participant fee disclosures of the comparator
10 plans to the services received by the Swinerton Plan.”). “Although Defendants may prevail at
11 summary judgment or trial on this claim by showing that [Defendants] provided services that
12 added value beyond Plaintiffs’ chosen comparators, at the pleading stage Plaintiffs have succeeded
13 in stating a claim for breach of the fiduciary duty of prudence.” Tsui, 2024 WL 4868293, at *4;
14 see also Smith v. VCA, Inc., No. CV 21-9140-GW-AGRX, 2022 WL 2037116, at *4 (C.D. Cal.
15 Apr. 6, 2022) (“Given that there is not a set formula for calculating the per participant
16 recordkeeping fee, the Court accepts Plaintiffs’ alleged calculation as plausible at the pleading
17 stage.”).
18 B. Duty to Monitor
19 Both parties agree the failure to monitor claim is a derivative claim. (Dkt. No. 27 at 24;
20 Dkt. No. 29 at 24.) Because Plaintiffs have plausibly alleged a breach of the duty of prudence as
21 discussed above, they have also plausibly alleged their derivative breach of the duty to monitor.
22 CONCLUSION
23 For the reasons stated above, the Court DENIES Defendants’ motion to dismiss. The
24 answer is due in 21 days. The Court sets an initial case management conference for June 11, 2025
25 at 2:00 p.m. via videoconference. An initial joint case management conference statement is due
26 June 4, 2025.
27 //
1 This Order disposes of Docket No. 27.
2 IT IS SO ORDERED.
3 || Dated: April 8, 2025 ,
ne
4
JACQUELINE SCOTT CORL
5 United States District Judge
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