# Nolan

> District Court, W.D. North Carolina · May 1, 2026

URL: https://www.frixlaw.com/law-library/cases/11319423

## Case

- **Full name:** Joseph Hugh Nolan III v. Sonic Automotive, Inc. et al.
- **Court:** District Court, W.D. North Carolina
- **Decided:** May 1, 2026
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/11319423

## How later opinions describe it (automated extraction)

- explaining that ERISA § 1024(b)(4) requires disclosure of plan documents and “other instruments under which the plan is established or operated” and finding an IPS to be disclosable as a “formal document[] under which an ESOP is managed.”
- concluding that a fiduciary’s “failure to act” cannot constitute a prohibited transaction under §1106(a)(1)(D)
- explaining that the decision to continue holding employer stock “was not a ‘transaction’”

## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
CIVIL ACTION NO. 3:25-CV-00474-KDB-WCM
JOSEPH HUGH NOLAN III,
Plaintiff,
v. MEMORANDUM AND
ORDER
SONIC AUTOMOTIVE, INC. ET
AL.,
Defendants.
In this putative class action, Plaintiff Joseph Nolan III asserts that Defendants breached
their fiduciary duties and violated the Employee Retirement Income and Security Act (“ERISA”)
with respect to two defined-contribution plans sponsored by Defendant Sonic Automotive, Inc.
(“Sonic”). Now before the Court is Defendants’ Motion to Dismiss (Doc. No. 14) Plaintiff’s First
Amended Complaint (Doc. No. 12). The Court has carefully considered this motion and the
Parties’ briefs and exhibits. For the reasons discussed below, the Court will GRANT the motion.
I. LEGAL STANDARD
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for “failure to state a
claim upon which relief can be granted” tests whether the complaint is legally and factually
sufficient. See Fed. R. Civ. P. 12(b)(6); Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp.
v.Twombly, 550 U.S. 544, 570 (2007); Coleman v. Md. Court of Appeals, 626 F.3d 187, 190 (4th
Cir. 2010), aff’d, 566 U.S. 30 (2012). A court need not accept a complaint’s “legal conclusions,
elements of a cause of action, and bare assertions devoid of further factual enhancement.” Nemet
Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 255 (4th Cir. 2009).
The Court, however, accepts all well-pleaded facts as true and draws all reasonable
inferences in Plaintiff’s favor. See Conner v. Cleveland Cnty., N. Carolina, 22 F.4th 412, 416 (4th
Cir. 2022); E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 440 (4th Cir. 2011).
In so doing, the Court “must view the facts presented in the pleadings and the inferences to be
drawn therefrom in the light most favorable to the nonmoving party.” Pa. Nat’l Mut. Cas. Ins. Co.

v. Beach Mart, Inc., 932 F.3d 268, 274 (4th Cir. 2019). Construing the facts in this manner, a
complaint must contain “sufficient factual matter, accepted as true, to state a claim to relief that is
plausible on its face.” Pledger v. Lynch, 5 F.4th 511, 520 (4th Cir. 2021) (quoting Iqbal, 556 U.S.
at 678).
When deciding a motion to dismiss, “a court considers the pleadings and any materials
‘attached or incorporated into the complaint.’” Fitzgerald Fruit Farms LLC v. Aseptia, Inc., 527
F.Supp. 3d 790, 796 (E.D.N.C. 2019) (quoting E.I. du Pont de Nemours & Co., 637 F.3d at 448).
Further, “[d]etermining whether a complaint states a plausible claim for relief will ... be a context-
specific task that requires the reviewing court to draw on its judicial experience and common

sense.” Id. (citation omitted). Ultimately, a motion to dismiss under Rule 12(b)(6) determines only
whether a claim is stated; “it does not resolve contests surrounding the facts, the merits of a claim,
or the applicability of defenses.” Republican Party v. Martin, 980 F.2d 943, 952 (4th Cir. 1992).
II. FACTS AND PROCEDURAL HISTORY
Plaintiff alleges that during the “Class Period” (six years prior to the filing of this action)
he was a Sonic employee and a participant in the Sonic Automotive, Inc. 401(k) Plan & Trust (the
“Sonic Plan” or “Plan”), a defined-contribution retirement plan. Doc. No. 12, First Amended
Complaint (“FAC”) ¶¶ 1–2, 7. In addition to Sonic, the named defendants in this putative class
action include Sonic’s Northern California ULA 401(k) Plan1 (the “California Plan” and
collectively with the Sonic Plan, the “Plans”); the Echopark and Driveselect 401(k) Plan;2 the
Administrative Committee of Sonic Automotive, Inc. 401(k) Plan and Trust (the “Committee”);
and John and Jane Does 1–30 in their capacities as members of the Committee. Sonic sponsors
and administers the Plans, and the Committee and its members serve as fiduciaries responsible for

selecting and monitoring investment options. Id. ¶¶ 11–14, 38.
During the relevant period, the Plans were comprised of mutual funds and common
collective trust funds as investment options. Id. ¶ 44. In 2023, the Sonic Plan held approximately
$491 million in assets and had 7,088 participants and the California Plan had approximately $32
million in assets and approximately 499 participants. Id. ¶ 43. Plan participants are permitted to
allocate their account holdings into their choice(s) among numerous investment options and are
able to change their allocations on a daily basis. Id. ¶¶ 45–46.
Plaintiff alleges that he and other participants in the Plans suffered financial losses because
Defendants mismanaged the Plans and violated ERISA. Id. ¶¶ 1–2, 9. Specifically, Plaintiff alleges

that Defendants breached their fiduciary duties by selecting and retaining “higher cost, lower-
performing investment options” and by engaging in prohibited transactions with the Plan’s
investment advisor, the Investment Research & Advisory Group (“IRA”). Id. ¶¶ 3–4. According
to Plaintiff, the Plan’s Investment Policy Statement (“IPS”)—which was intended to guide prudent
investment selection—was “non-specific and vague” and lacked standard fund evaluation metrics
such as expense ratio requirements, style consistency, and risk-adjusted performance measures. Id.

1 Plaintiff does not allege he was a participant in the Californian Plan, but nonetheless seeks
to assert claims related to that Plan and represent its participants. FAC ¶ 17.
2 The the Echopark and Driveselect 401(k) Plan is included as a Defendant in the caption
of the Amended Complaint, but not otherwise mentioned in the body of the pleading so it will be
dismissed for lack of any asserted claim or supporting factual allegations.
¶¶ 52–60. Plaintiff further alleges that the IPS relied on “overly generous peer fund evaluation
metrics” that allowed imprudent funds to remain in the Plan despite consistent underperformance
relative to appropriate benchmarks. Id. ¶¶ 61–69.
Moreover, Plaintiff asserts that the Committee failed to follow the IPS—notwithstanding
his contention that the document was itself imprudent—by not conducting required periodic

reviews of investment performance and by choosing more expensive share classes when cheaper,
identically managed alternatives were available. Id. ¶¶ 95–103. He alleges that these failures
resulted in substantial losses to participants. Id. ¶¶ 96, 100, 103.
Plaintiff focuses on four funds in the Sonic Plan that he believes underperformed and /or
were too expensive: the MFS Growth Fund (“Growth Fund”), the MFS Value Fund (“Value
Fund”), the Putnam 25 Stable Value Fund (“Putnam 25”), and the ClearBridge “I” International
Growth Fund (“ClearBridge I”). Id. ¶ 8. Plaintiff alleges that the Committee lacked a prudent
process when selecting and retaining the Growth Fund, which “failed to generate returns above its
appropriate benchmark, the Russell 1000 Growth Index,” resulting in more than $28 million in

losses from 2019 to 2024. Id. ¶¶ 116–118, 141. Plaintiff also asserts that the fund’s information
ratio was consistently too low to justify its higher fees, and that the Committee ignored “red flags”
such as high turnover, concentrated holdings, and excessive costs compared to other funds. Id. ¶¶
120–170.
Similarly, Plaintiff alleges that the Value Fund exhibited “significant style drift” away from
value investing and consistently underperformed its appropriate benchmark, which Plaintiff
contends to be the S&P 500 Index. Id. ¶¶ 174–195, 206–219. The fund also allegedly held far
fewer stocks than the chosen benchmark and charged higher fees, causing participants to lose more
than $19 million during the Class Period. Id. ¶¶ 196–205.
Plaintiff further alleges that the Committee imprudently selected ClearBridge I despite the
availability of a cheaper, identically managed “IS” share class, resulting in unnecessary expenses
and lower returns for participants. Id. ¶¶ 220–233. Likewise, Plaintiff contends that the Committee
selected the Putnam 25 share class even though cheaper classes of the same fund were available
and would have yielded higher returns. Id. ¶¶ 249–269. Although Plaintiff does not allege that the

Sonic Plan qualified to purchase the cheaper share classes, he nevertheless asserts that minimum
deposit requirements could be waived. Id. ¶ 256.
Beyond investment selection, Plaintiff asserts a broader “pattern of plan mismanagement,”
by the Committee, including inaccurate disclosures under 29 C.F.R. § 2550.404a-5, such as
comparing the Columbia Small Cap Index Fund to the Russell 2000 Index rather than its stated
benchmark, the S&P SmallCap 600 Index. Id. ¶¶ 234–244.
In addition, Plaintiff alleges that the Committee engaged in prohibited transactions by
paying IRA unreasonable fees for services that were either unnecessary or not performed
prudently. Id. ¶¶ 270–281. According to the FAC, IRA received more than $370,000 from 2019 to

2024—far above what Plaintiff alleges to be “reasonable compensation”—yet failed to provide
adequate monitoring of the Plan’s investments. Id. ¶¶ 282–307. Finally, Plaintiff alleges that Sonic
failed to monitor the actions of the Committee. Id. ¶¶ 356–362.
As a result of these alleged actions and inactions, Plaintiff alleges that Defendants breached
their fiduciary duties of prudence and loyalty to the Plans (Counts I and II); that Defendants
breached their co-fiduciary duties (Count III); that Sonic breached its fiduciary duty of prudence
by failing to monitor the Committee and its management of the Plans (Count IV); that Defendants
engaged in prohibited transactions, in violation of 29 U.S.C. § 1106(a) (Count V); and that
Defendants failed to act in accordance with the governing plan documents, in violation of 29
U.S.C. § 1104(a)(1)(D) (Count VI).
III. DISCUSSION
A. Standing
As a threshold matter, Defendants assert that Plaintiff lacks standing to bring claims under

the California Plan, because he did not participate in it. The Court agrees.
Federal courts are limited by the United States Constitution to deciding actual “cases” or
“controversies,” and this constitutional restriction requires plaintiffs to establish Article III
standing for each claim and each form of relief they seek. U.S. Const. art. III, § 2; TransUnion
LLC v. Ramirez, 594 U.S. 413, 423, 431 (2021). To satisfy Article III, a plaintiff must clearly
allege facts showing that he “(1) suffered an injury in fact that is concrete, particularized, and
actual or imminent; (2) that the injury was caused by the defendant; and (3) that the injury would
likely be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 578 U.S. 330, 338
(2016). Courts assess standing based on the facts as they existed when the complaint was filed and

accept the merits of the plaintiff’s legal claims as valid for purposes of the standing inquiry. FEC
v. Cruz, 596 U.S. 289, 298 (2022); Wild Va. v. Council on Env’t Quality, 56 F.4th 281, 293 (4th
Cir. 2022). If a plaintiff fails to establish standing, the court lacks subject-matter jurisdiction and
must dismiss the matter. Ali v. Hogan, 26 F.4th 587, 595 (4th Cir. 2022).
“There is no ERISA exception to Article III.” Thole v. U.S. Bank N.A., 590 U.S. 538, 547
(2020). ERISA plaintiffs, like all plaintiffs, must demonstrate a concrete injury in fact, and a
statutory violation alone does not suffice. Id. at 544; TransUnion, 594 U.S. at 417 (“No concrete
harm, no standing.”). Even when suing in a representative capacity on behalf of a retirement plan,
ERISA plaintiffs “still must have suffered an injury in fact, thus giving them a sufficiently concrete
interest in the outcome of the issue in dispute.” Id. at 543. Accordingly, “participants suing under
ERISA have the burden of showing that they personally suffered some actual or threatened injury
as a result of the allegedly unlawful conduct.” David v. Alphin, 817 F. Supp. 2d 764, 781
(W.D.N.C. 2011); see also Peeler v. Bayada Home Health Care, Inc., No. 1:24-CV-00231-MR,
2026 WL 208630, at *5 (W.D.N.C. Jan. 27, 2026).

Plaintiff alleges that he participated in the Sonic Plan during the relevant period and
invested in the four funds he claims performed poorly (the Growth Fund, the Value Fund, the
Putnam 25, and ClearBridge I). FAC ¶ 8. Although he concedes that he did not participate in the
California Plan, Plaintiff nevertheless contends that he has standing to assert claims relating to that
plan because both Plans are “sponsored, maintained, and administered by Sonic and share the same
fiduciaries,” and because the alleged injuries are traceable “to the same challenged conduct.” Id.
¶¶ 17–23. Plaintiff further argues that “[t]he First, Sixth, and Fifth Circuits have found that if
Plaintiffs have standing with regard to one Plan, then the standing requirement is fulfilled [as to
other plans], and the question becomes whether the Plaintiff is an adequate representative under

Fed. R. Civ. P. 23 …” Doc. No. 21 at 20.
Notably, all of the decisions on which Plaintiff relies—none of which are binding on this
Court—predate TransUnion, which explained the narrow scope of Article III standing and made
clear that federal courts may entertain statutory claims only when the plaintiff can demonstrate a
concrete, real-world injury stemming from the alleged violation. If “the plaintiff does not claim to
have suffered an injury that the defendant caused and the court can remedy, there is no case or
controversy for the federal court to resolve.” TransUnion, 594 U.S. at 423 (quoting Casillas v.
Madison Avenue Assocs., Inc., 926 F.3d 329, 333 (7th Cir. 2019)). In other words, a plaintiff must
be able to answer the question “What’s it to you?” Id. (citation omitted). But, with respect to the
California Plan, Plaintiff has no answer because he did not participate in the plan. No alleged
ERISA violations could have caused him any injury. In sum, lacking any personal connection to
the California Plan, Plaintiff has failed to establish Article III standing and his claims relating to
that plan must therefore be dismissed.3, 4
B. Breach of Fiduciary Duty of Prudence (Count I)

Plaintiff’s first claim alleges that Defendants breached their fiduciary duty of prudence by
(1) failing to follow an adequate process for selecting, monitoring, and retaining investment
options for the Sonic Plan; (2) failing to follow Plan documents; and (3) failing to ensure that Plan
fees and expenses were reasonable and necessary. For the following reasons, the Court concludes
that Plaintiff has not plausibly alleged a claim for the breach of the duty of prudence.
An ERISA fiduciary must act “with the care, skill, prudence, and diligence that a prudent
person acting in a like capacity and familiar with such matters would use.” Tibble v. Edison Int’l,
575 U.S. 523, 528 (2015) (internal quotations omitted); see also Fifth Third Bancorp v.
Dudenhoeffer, 573 U.S. 409, 419 (2014); 29 U.S.C. § 1104(a)(1)(B). As § 1104 makes clear, the

content of this duty turns on the “circumstances then prevailing,” meaning the inquiry is
inherently context-specific. Reetz v. Aon Hewitt Inv. Consulting, Inc., 74 F.4th 171, 182 (4th
Cir. 2023) (first quoting § 1104(a)(1)(B); and then citing Fifth Third Bancorp, 573 U.S. at
425; and then citing Tatum v. RJR Pension Inv. Comm., 761 F.3d 346, 360 (4th Cir. 2014)).
In the investment context, discharging the duty of prudence generally requires fiduciaries
to “investigate, research, and review the options.” Id. (quoting Plasterers’ Loc. Union No. 96

3 Similarly, Plaintiff does not allege that he invested in the Columbia fund. Therefore,
insofar as Plaintiff alleges that Defendants breached fiduciary duties in connection with the
Columbia fund, Plaintiff lacks standing to pursue such a theory.
4 In any event, to the extent Plaintiff’s claims and allegations with respect to the California
Plan mirror the Sonic Plan, they fail for the substantive reasons discussed below.
Pension Plan v. Pepper, 663 F.3d 210, 216 n.8 (4th Cir. 2011)). A fiduciary therefore breaches its
duty of prudence “by failing to investigate and evaluate the merits of his investment
decisions,” DiFelice v. U.S. Airways, Inc., 497 F.3d 410, 420 (4th Cir. 2007) (cleaned up), or by
“fail[ing] to properly monitor investments and remove imprudent ones.” Tibble, 575 U.S. at 530.
But this duty is process-oriented, not results-oriented. Reetz, 74 F.4th at 182 (citing

DiFelice, 497 F.3d at 420 (“[A] court must ask whether the fiduciary engaged in a reasoned
decision-making process”)). That is, in evaluating prudence claims, courts focus on whether the
fiduciary engaged in a reasoned decision-making process, not whether the ultimate investment
choice proved optimal in hindsight.5 Id. (citing DiFelice, 497 F.3d at 424). “Prudence does not
mean clairvoyance.” Id. Thus, a fiduciary who “appropriately investigate[s] the merits of an
investment decision prior to acting” readily satisfies this standard. Tatum, 761 F.3d at 358.
Further, in the absence of allegations about a defendant’s fiduciary process, the plaintiff’s
claims should be dismissed unless the plaintiff alleges other “facts that permit the court to
reasonably ‘infer from what is alleged that the process was flawed.’” Kendall v. Pharm. Prod.

Dev., LLC, No. 7:20-cv-00071, 2021 WL 1231415, at *4 (E.D.N.C. Mar. 31, 2021) (quoting
Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 596 (8th Cir. 2009)) (additional citations
omitted).
Fund Selection
Plaintiff first alleges that Defendants acted imprudently when the Committee, relying
on the advice of IRA, selected the challenged funds. The initial selection of each of those
funds, however, occurred outside of ERISA’s six-year statute of limitations. See 29 U.S.C.
§ 1113 (requiring a plaintiff to file an ERISA breach-of-fiduciary-duty action no later than the
earlier o5 fF or this reason, “an investment’s diminution in value [after it was chosen] is neither
necessary, nor sufficient, to demonstrate a violation of a fiduciary’s ERISA duties.” DiFelice, 497
F.3d at 424.
six years after the last act (or, for an omission, the last date it could have been cured) or three years
after the plaintiff obtained actual knowledge of the breach).
Although Plaintiff asserts that he obtained actual knowledge of the alleged violations only
shortly before filing this action, he also concedes that the initial selection of each challenged fund
occurred before July 1, 2019—more than six years prior to the commencement of this suit. See

FAC ¶ 328; see also id. ¶¶ 115 (“In 2014, the Defendants initially selected the MFS Growth …
Fund”); 172 (“In 2016, the Defendants initially selected the MFS Value Fund”); 226 (“In 2019
Defendants added the ClearBridge International Growth … Fund”)); 252 (“In 2018, the Committee
added the Putnam Stable Value Fund”). Accordingly, Plaintiff’s claim for violation of ERISA §
406(a) based on the initial selection of the challenged funds is time-barred and must be dismissed.
Growth Fund Retention
Plaintiff next alleges Defendants acted imprudently by continuing to offer the Growth Fund
even though it “lagged” its benchmark, had a “high” expense ratio, and had a “low” information
ratio (“IR”).

Benchmark
At the outset, Defendants assert that the Russell 1000 Growth Fund (“Russell Growth”), a
passively managed index that the actively managed Growth Fund tracks, is an inappropriate
benchmark. Doc. No. 16 at 11. Relying on In re MedStar ERISA Litigation, No. CV RDB-20-1984,
2021 WL 391701 (D. Md. Feb. 4, 2021), which cites wholly out of circuit case law, Plaintiff
counters that benchmark selection cannot be resolved at the motion to dismiss stage. The Court
disagrees. Courts have routinely held that when a plaintiff claims that a prudent fiduciary would
have selected a different investment based on cost or performance, the plaintiff must provide a
“sound basis for comparison.” Meiners v. Wells Fargo & Co., 898 F.3d 820, 822 (8th Cir. 2018).
In other words, the complaint must identify a “meaningful benchmark.” Enstrom v. SAS Inst., No.
5:24-CV-105-D, 2025 WL 685219, at 3 (E.D.N.C. Mar. 3, 2025) (quoting Meiners, 898 F.3d at
822).
To survive dismissal, a plaintiff must allege facts showing that the chosen benchmark—or
comparator—is sufficiently similar to the challenged fund to render the comparison meaningful.

See Kendall, 2021 WL 1231415, at *9 (“Comparing actively-and passively-managed funds is like
comparing apples and oranges and cannot create a meaningful benchmark.”) (citation modified
and additional citations omitted); Davis v. Washington Univ. in St. Louis, 960 F.3d 478, 485 (8th
Cir. 2020) (finding actively managed funds and passively managed index funds to be comparing
apples and oranges, and concluding that “[c]omparing apples and oranges is not a way to show
that one [fund] is better or worse than the other.”); Peeler, 2026 WL 208630, at 8–9 (discussing
the “requisite like-for-like comparison” for a benchmark and expanding its application to
recordkeeping fees).
The comparison Plaintiff offers here, as in the numerous cases cited above, is plainly

“apples to oranges”—Plaintiff contrasts an actively managed fund with a passive index. Therefore,
the Court finds that Plaintiff has not plausibly alleged a meaningful benchmark.
Information Ratio
Plaintiff also contends that the Growth Fund’s IR demonstrates imprudence. As Plaintiff’s
own sources explain,6 an IR measures the degree to which a fund’s outperformance relative to a
benchmark reflects skill rather than risk, and longer measurement periods—typically at least three
years—provide more reliable insight. Peter Gratton, Information Ratio (IR): Definition, Formula,

6 The Court may properly consider these materials at the motion to dismiss stage because
they are incorporated into and explicitly relied on in the FAC.
vs. Sharpe Ratio, Investopedia (June 18, 2025).7 A positive IR indicates outperformance of the
chosen benchmark on a risk-adjusted basis, and higher IRs suggest greater consistency. How’s
That Fund Doing? Check the Information Ratio, Charles Schwab (June 20, 2024)8 (“Charles
Schwab”). Put another way, the higher the IR, the better a fund’s potential to “produce market-
beating returns with low volatility and greater consistency over time.” Id. Notably, although an IR

greater than 0.4 is “considered good,” funds with a low IR (less than 0.3) “may still be []
worthwhile,” depending on individual investment strategies, because they still generate positive
returns although they may have greater volatility and a higher tracking error (suggesting that they
may be less consistent in beating the benchmark).9 Id.
Yet, even if a fund’s IR is suspect, selective reliance on a single performance metric is
insufficient to suggest imprudence. See Hall v. Capital One Fin. Corp., No. 1:22-CV-00857-MSN-
JFA, 2023 WL 2333304, at *4–6 (E.D. Va. Mar. 1, 2023) (holding that a Plaintiff failed to allege
an imprudent process even when basing his allegations on the quarterly performance data of four
Comparator TDFs, the S&P Indices, and the Sharpe ratio (a risk-adjusted ratio similar to the IR),

and calling the Sharpe ratio “merely [an] additional measurement[] of investment performance”
that failed to alter its analysis); Tullgren v. Hamilton, No. 1:22-CV-00856-MSN-IDD, 2023 WL
2307615, at *6 (E.D. Va. Mar. 1, 2023) (same). Indeed, Plaintiff’s cited materials acknowledge
that an IR “is only one piece of a mosaic and not an on/off switch. Each ratio you incorporate gives
you a chance to see a potential investment from a different perspective.” Charles Schwab.

7 The URL is: https://www.investopedia.com/terms/i/informationratio.asp.
8 The URL is: https://www.schwab.com/learn/story/hows-that-fund-doing-check-
information-ratio.
9 The Court notes that not all funds and not all investors seek investments with low
volatility and high consistency. Indeed, some funds, including “growth” type funds, tolerate a
higher degree of volatility in an effort to achieve higher returns.
Moreover, Plaintiff alleges that for the ten years preceding the Committee’s selection of
the Growth Fund, its IR was positive, and greater than 0.3. FAC ¶ 129. Although Plaintiff asserts
that the IR declined from 2019 to 2023, he does not allege that it fell below zero, which would
indicate underperformance—on average—relative to the benchmark. And, the IPS makes clear
that it expects its chosen growth funds, such as the Growth Fund, to experience “greater volatility

than overall equity market measurements.” Doc. No. 23-1 at 10. Thus, a variable, yet positive, IR
does not alone plausibly allege imprudence.
Expense Ratio
Finally, Plaintiff alleges that the Growth Fund’s expense ratios were too high, causing it to
underperform its benchmark by an average of 2.3% between 2016 and 2019, and 3.1% between
2019 and 2024.10 FAC ¶¶ 132, 141. Even assuming that Russell Growth could be a valid
comparator—which for the reasons already explained, it is not—minimal underperformance of
one to four percent, without more, does not plausibly allege imprudence. Enstrom, 2025 WL
685219, at *5 (collecting cases). What’s more, Courts routinely hold that alleged

underperformance for three to five years is insufficient to plausibly allege imprudence. See Hall,
2023 WL 2333304, at *5 (concurring with the Sixth Circuit in Smith v. CommonSpirit Health, 37
F.4th 1160, 1164 (6th Cir. 2022), which explained three and five year periods in which three
actively managed funds trailed related index funds in their rate of return was insufficient, without
more, to plausibly allege imprudence); Kendall, 2021 WL 1231415, at *9 (quoting Davis v.
Salesforce.com, Inc., No. 20-CV-01753-MMC, 2020 WL 5893405, at *4 (N.D. Cal. Oct. 5, 2020)

10 Plaintiff alleges that the Growth Fund’s average return during that time was 18.6%, while
the benchmark, Russell Growth, returned on average 21.7%. FAC ¶ 141.
(“[a]llegations based on five-year returns are not sufficiently long enough to state a plausible
imprudence claim.”)).
Plaintiff also asserts that had Defendants chosen a fund with a lower expense ratio, such as
the Vanguard U.S. Growth Fund (“Vanguard Fund”), Plaintiffs would have had higher annual
returns. Notwithstanding that Plaintiff does not allege that the Vanguard Fund performed better

than the Growth Fund, a “fiduciary does not breach its duty of prudence by failing to offer the
cheapest investment option,” and ERISA does not require fiduciaries to “scour the market to find
and offer the cheapest possible fund.” Kendall, 2021 WL 1231415, at *6 (quoting Hecker v.
Deere & Co., 556 F.3d 575, 586 (7th Cir. 2009)) (additional citations omitted). “Thus, choosing
a fund with a higher expense ratio does not de facto breach the duty of prudence.” Id. (first
citing Hecker, 556 F.3d at 586; and then citing White v. Chevron Corp., No. 16-cv-0793-PJH,
2016 WL 4502808, at *11 (N.D. Cal. Aug. 29, 2016)). And, although “offering a mix of
options does not insulate a plan if plaintiffs plead enough facts to plausibly allege a breach of
the duty of prudence,” id. (citing Sweda v. Univ. of Penn., 923 F.3d 320, 329–32 (3d Cir. 2019));

the mere “availability of lower-cost alternatives is not enough to state a claim for a breach of the
duty of prudence, especially where the challenged plan offers diversified investment options.”
Id. (citing Divane v. Nw. Univ., 953 F.3d 980, 991–92 (7th Cir. 2020), vacated and
remanded sub nom. Hughes v. Nw. Univ., 595 U.S. 170, 211 L. Ed. 2d 558 (2022), and
opinion reinstated on reconsideration sub nom. Hughes v. Nw. Univ., 63 F.4th 615 (7th Cir.
2023)) (additional citations omitted). See also Davis, 960 F.3d at 485 (noting that it is not
“imprudent to provide options with differing features from which to choose, regardless of
whether some perform better than others.”).
In summary, after considering Plaintiff’s allegations independently and collectively, the
Court finds that he has failed to plausibly allege that Defendants acted imprudently when they
opted to retain the Growth Fund. Indeed, “ERISA does not … countenance opportunistic Monday-
morning quarter-backing on the part of lawyers and plan participants who, with the benefit of
hindsight, have zeroed in on the underperformance of certain investment options.” Patterson v.

Morgan Stanley, No. 16-CV-6568 (RJS), 2019 WL 4934834, at *17 (S.D.N.Y. Oct. 7, 2019).
Value Fund Retention
Plaintiff next alleges that Defendants acted imprudently by retaining the Value Fund on
the ground that it underperformed the benchmark he believes should apply (not the listed
benchmark, for which he makes no allegations of underperformance). Although the Value Fund
tracks the Russell 1000 Value Index, Plaintiff asserts that the “Value Fund failed to match the
Russell 1000 Value Index’s holdings or possess holdings with similar risks, aims, rewards, and
characteristics.” FAC ¶ 177. Rather, Plaintiff contends that the S&P 500 Index is a more
appropriate benchmark because, in his view, it reflects “similar risks, goals, rewards, and

characteristics.” Id. ¶¶ 179–80. Measured against that index, Plaintiff alleges that the Value Fund
underperformed year over year and, as of 2019, lagged the S&P 500 Index by 1.5% over the
preceding ten-year period. Id. ¶¶ 189–93.
While asserting that the S&P 500 Index is a meaningful benchmark because of its purported
similarity to the Value Fund, Plaintiff at the same time appears to acknowledge that the S&P 500
lacks several features that would make it a meaningful benchmark. For example, Plaintiff admits
that the Value Fund has substantially fewer holdings, a higher risk profile, and otherwise fails to
mimic the S&P 500. See id. ¶¶ 197; 199 (noting the Value Fund has substantially fewer holdings
and a higher risk profile than the S&P 500 Index);11 204 (stating, “[i]f Defendants had chosen one
of those funds that mimicked the holdings of the S&P 500 Index as a Plan option instead of the
MFS Value Fund …,” implying that the Value Fund does not). Moreover, as the Court has already
explained, comparing an actively managed fund—such as the Value Fund—to a passively
managed index, whether the S&P 500 Index or the Russell 1000 Value Index, is an “apples and

oranges” comparison that does not plausibly establish a meaningful benchmark.
Plaintiff’s allegations of underperformance fare no better. Even assuming the S&P 500
Index is an appropriate benchmark and accepting Plaintiff’s assertion that the Value Fund
underperformed the S&P 500 Index by as much as 7.03% between 2017 and 2019,
underperformance over a three or even five year period is insufficient to plausibly allege
imprudence. See Hall, 2023 WL 2333304, at *5; Kendall, 2021 WL 1231415, at *9. And over a
ten-year lookback ending in 2019, Plaintiff alleges only a 1.5% shortfall, an allegation that likewise
does not support a plausible inference of imprudence. See Enstrom, 2025 WL 685219, at *5.
Plaintiff’s “style drift” theory is also unavailing. Accepting that theory would effectively

require fiduciaries to “monitor the market and publicly available information about every holding
maintained by every mutual fund included within the Plan, [and] the concentration of all stocks
held by each mutual fund within the Plan.” In re Disney ERISA Litig., No. 16-02551, 2016 WL
8192945, at *4 (C.D. Cal. Nov. 14, 2016). “Such a duty would not be reasonable or appropriate,”
id., and Plaintiff identifies no authority imposing such an obligation.

11 Plaintiff compares the number of holdings in the Value Fund with the S&P 500 Mutual
Fund, which is not the same as the S&P 500 Index Fund. See FAC ¶¶ 179, 196.
Accordingly, Plaintiff offers no factual allegations from which the Court may reasonably
infer that Defendants’ retention of the Value Fund was imprudent or that the Value Fund was
otherwise unsuitable for the Plan’s objectives based on its ongoing performance.
Putnam 25 and ClearBridge I Retention
Finally, Plaintiff alleges that Defendants acted imprudently by retaining Putnam 25 and

ClearBridge I because “cheaper, identically managed institutional share classes were available.”
FAC ¶ 102. With respect to Putnam 25, Plaintiff asserts that three identical but less expensive
alternatives—Putnam 20, 15, and 10—were available. Id. ¶ 253. As to ClearBridge I, Plaintiff
contends that Defendants should have selected the lower-cost institutional share classes because
the “lowest cost class shares are available to larger investors, such as 401(k) and 403(b) plans like
the Plan, since institutional investors make large fund share purchases, and higher-cost share
classes are typically sold to retail investors.”12 Id. ¶¶ 221, 224.
It is true that, in some circumstances, allegations that “available alternative lower cost share
classes were ‘substantially identical,’” may plausibly allege imprudence, particularly where a

plaintiff alleges that a fiduciary selected or retained “retail class funds when institutional shares
were available.” McDonald behalf of Lab. Corp. of Am. Holdings Employees’ Ret. Plan v. Lab.
Corp. of Am. Holdings, No. 1:22CV680, 2023 WL 4850693, at *7 (M.D.N.C. July 28,
2023) (emphasis added) (citations omitted). But this is not such a case. Here, Defendants
already offered lower-cost institutional share classes for both funds, and Plaintiff does not
allege that Sonic met the eligibility
12 Plaintiff’s own source explains that institutional shares “may have some of the lowest ongoing
operating expenses, but there could be relatively high initial investment minimums and/or
transaction fees to invest directly through a brokerage account. However, many mutual funds make
these shares available to retail investors without requiring a high initial investment minimum
through various means, including through an employer (e.g., through a retirement plan).”12 U.S.
Securities and Exchange Commission, Updated Investor Bulletin: Mutual Fund Classes,
Investor.gov (Aug. 4, 2016).
requirements—such as Plan size or minimum investment requirements—for the cheaper
institutional classes he identifies. Instead, Plaintiff asserts only his belief that such requirements
could be “waived.” FAC ¶ 256. Courts, however, have been skeptical of similar arguments.
See McDonald on behalf of Lab. Corp. of Am. Holdings Employees' Ret. Plan v. Lab. Corp. of
Am. Holdings, No. 1:22CV680, 2025 WL 2325016, at *22 (M.D.N.C. Aug. 12, 2025) (affording

“little credence” to an expert opinion that it was possible for a fiduciary to negotiate its way into
a lower-cost share class).
Although Plaintiff asserts that courts routinely reject arguments that plaintiffs “must
plead that cheaper share classes were ‘actually available,’” he unconvincingly cites out of
circuit decisions that primarily address fiduciaries who offer expensive retail share classes of
funds when the cheaper intuitional shares were accessible. See Doc. No. 21 at 7. Further,
accepting Plaintiff’s position would effectively mean that a fiduciary could face liability anytime
it failed to select the absolute cheapest version of a fund (without even requiring an allegation
that it was a qualified purchaser), a result this Court declines to endorse. As this Court has now

explained multiple times, a “fiduciary does not breach its duty of prudence by failing to
offer the cheapest investment option.” Kendall, 2021 WL 1231415, at *6 (additional citations
omitted). Plaintiff’s position is particularly unwarranted where, as here, Plaintiff alleges no
deficiencies in Defendant’s decision-making process.
Advisory Fees
Plaintiff next alleges that Defendants breached their fiduciary duty of prudence
because the Plan paid excessive advisory fees to IRA. FAC ¶ 335; Doc. No. 22 at 21. According
to Plaintiff, IRA recommended adding and retaining the challenged funds, and because those
funds did not perform to Plaintiff’s satisfaction, IRA purportedly failed to provide value to
Plan participants, rendering its fees excessive and unnecessary.
The standard for pleading a plausible imprudence claim based on allegedly excessive
advisory fees mirrors the standard for claims involving excessive recordkeeping fees. Peeler, 2026
WL 208630, at *10. To state such a claim, a Plaintiff must “allege that the challenged fees were
excessive relative to the services rendered or otherwise allege factors relevant to determining
whether a fee is excessive under the circumstance.” Id. (quoting Collins v. Ne. Grocery, Inc., No.

24-2339-CV, 2025 WL 2383710, at *3 (2d Cir. Aug. 18, 2025)).
Relying on a methodology for calculating reasonable attorney’s fees,13 Plaintiff multiplies
the median hourly fee rates for one-time consulting projects for both principals and non-principal
financial professionals (FAC ¶ 287; Doc. No. 15-4 at 31) by the median number of hours spent
servicing a client by plan size14 (FAC ¶ 288; Doc. No. 15-4 at 32). From this, Plaintiff concludes
that IRA’s annual advisory fees exceeded what he considered reasonable. See FAC ¶¶ 287–95;
Doc. Nos. 15-4 Fee Benchmarker® (Advisor Fee Almanac, 6th Edition, 2017) (“Advisor
Almanac”); 15-5 WinMore Plans, Level-Up: Benchmarking Your Retirement Practice (April 4,
2024) (“WinMore”).15 Defendants respond that the very same sources demonstrate that IRA’s fees

fall well below the medial advisory fees for plans of comparable size. Doc. No. 16 at 19–20 (citing
Advisor Almanac at 98, 104; WinMore at 66).

13 As support for his “reasonable fee” formula of “reasonable hourly rate” multiplied “by
the reasonable hours expended,” Plaintiff cites Lilly v. City of New York, 934 F.3d 222 (2d Cir.
2019). However, the Lilly Court uses the formula to calculate a reasonable attorney’s fee, not the
fee of a financial services advisory firm. See Lilly, 934 F.3d at 229 (finding a reasonable attorney’s
fee “should be determined by multiplying a reasonable hourly rate by the reasonable hours
expended ….”).
14 The Advisor Almanac notes that although it presents a chart listing the median annual
hours spent servicing a client, by plan size, that “[o]nly 25% of advisors track and record the time
spent servicing each client.” Doc. No. 15-4 at 32.
15 Again, the Court may properly consider these documents at the motion to dismiss stage
because they are incorporated into and explicitly relied on in the FAC.
The Court is wholly unpersuaded by Plaintiff’s attempt to repurpose the methodology for
calculating reasonable attorney’s fees as a framework for evaluating the compensation paid to a
financial-services firm. Further, Plaintiff’s reliance on hourly rates associated with one-time
consulting projects provides an inadequate comparator for assessing the reasonableness of fees
charged for ongoing annual advisory services. Indeed, Plaintiff’s own sources don’t support his

claims. Because Plaintiff has not plausibly alleged that IRA’s fees were excessive relative to the
services provided, this claim will be dismissed.
C. Breach of Fiduciary Duty of Loyalty (Count II)
Plaintiff next alleges that Defendants breached their fiduciary duty of loyalty by (1)
selecting “economically unfavorable” fund options “in exchange for more earnings for third
parties” (here, IRA), and (2) placing IRA’s interests over those of Plan participants by paying
“unnecessary and excessive” fees. FAC ¶¶ 343–47. As with the duty of prudence, the Court finds
Plaintiff’s duty of loyalty claim falls short.
ERISA’s duty of loyalty requires that fiduciaries act “for the exclusive purpose of: (i)

providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of
administering the plan.” 29 U.S.C. § 1104(a)(1)(A)(i)–(ii); see Cunningham v. Cornell Univ., 604
U.S. 693, 696 (2025); Reetz, 74 F.4th at 181. The duty of loyalty is an “absolute command to
exclude all selfish interest,” Tillery v. WakeMed Health & Hosps., --- F. Supp.3d ---, No. 5:25-
CV-408-D, 2026 WL 125784, at *4 (E.D.N.C. Jan. 15, 2026) (quoting Reetz, 74 F.4th at 181)
(internal quotations omitted), and a fiduciary must “make any decisions in a fiduciary capacity
with an eye single to the interests of the participants and beneficiaries.” Id. (quoting DiFelice, 497
F.3d at 418–19). To be sure, a fiduciary breaches its duty of loyalty when it, in its fiduciary
capacity, acts for any purpose other than the “exclusive benefit” of plan participants and
beneficiaries. See Tillery, 2026 WL 125784, at *4 (citations omitted).
However, a loyalty claim cannot merely “piggyback” on a prudence claim; it must rest on
its own well-pleaded facts. Peeler, 2026 WL 208630, at *11 (quoting Kendall, 2021 WL 1231415,
at *11). Likewise, allegations of imprudent conduct cannot be repackaged as a disloyalty claim

absent additional, independent assertions. Id. (citation omitted).
Critically, Plaintiff’s loyalty claim simply mirrors his prudence allegations and therefore
impermissibly “piggybacks” on them. Plaintiff pleads no independent facts suggesting a disloyal
motive or self-interested conduct by Defendants. On this basis alone, dismissal is warranted. Even
setting that foundational deficiency aside, Plaintiff’s allegations concerning the selection of each
challenged fund are independently time-barred and cannot serve as the grounds for a fiduciary
breach claim. Nor does Plaintiff’s assertion that Defendants paid IRA unnecessary fees salvage
the claim. The very materials Plaintiff cites show that the fees at issue were consistent with those
charged by comparable service providers offering similar advisory services to similarly sized

plans. Compare FAC ¶¶ 287–302 (citing Advisor Almanac and WinMore), with Doc. No. 16 at
19–20 (citing the same).
Finally, to the extent Plaintiff contends the fees were “unnecessary” because IRA
recommended poorly performing funds, that argument is unavailing. The mere fact that
Defendants selected and retained certain funds does not plausibly support an inference that the
fees paid to IRA were unwarranted or that Defendants acted with an improper purpose, particularly
where, as here, there are no allegations of self-dealing or less than arms-length transactions.
Accordingly, Plaintiff has failed to plausibly allege that Defendants breached their fidcuciary duty
of loyalty and this claim will be dismissed.
D. Breach of Co-Fiduciary Duties (Count III)
In Count III, Plaintiff alleges that Defendants breached their co-fiduciary duties under
ERISA. Co-fiduciary liability arises only in limited circumstances. Reetz v. Lowe’s Companies,
Inc., No. 518CV00075KDBDCK, 2019 WL 4233616, at *7 (W.D.N.C. Sept. 6, 2019). Under 29
U.S.C. § 1105(a), a fiduciary is liable for the breach of another fiduciary if: (1) the fiduciary

“knowingly participates in or conceals” the other fiduciary’s breach; (2) the fiduciary’s own failure
to satisfy the duty of loyalty enables the other fiduciary to commit a breach; or (3) the fiduciary
has knowledge of the other’s breach and fails to make reasonable efforts under the circumstances
to remedy it. Peeler, 2026 WL 208630, at *12. To establish a claim for co-fiduciary liability
under (1) and (3), [P]laintiff[] must allege facts tending to show that the fiduciary
knew that the other party was a fiduciary, that the co-fiduciary participated in the
act constituting the breach, and that the act actually constituted a breach; under (2),
[p]laintiff[] must show that the co-fiduciary’s breach resulted from the fiduciary’s
breach of one of his duties.
Reetz, 2019 WL 4233616, at *7 (citing Brink v. DaLesio, 496 F. Supp. 1350, 1383 (D. Md.
1980), rev’d on other grounds, 667 F.2d 420 (4th Cir. 1981)).
However, co-fiduciary liability under § 1105(a) is derivative; that is, it requires a plausible
underlying breach. As the Court has already dismissed Plaintiff’s prudence and loyalty claims,
there is no predicate breach on which a co-fiduciary claim may rest. See Collins, 2025 WL 2383710
(affirming dismissal of co-fiduciary claim where the alleged breaches of prudence and loyalty were
not plausibly pleaded). On that basis alone, dismissal would be appropriate.
But the claim would fail even if Plaintiff had viable prudence or loyalty claims, because
his allegations merely restate the statutory elements of § 1105(a). Plaintiff asserts that Defendants
possessed sufficient information to uncover the alleged fiduciary breaches, yet either failed to act,
ignored, or participated in the misconduct, and made no meaningful effort to remedy it. FAC ¶¶
352–55. But “mere recitals of the elements of a claim are insufficient to state a claim for relief.”
Peeler, 2026 WL 208630, at *12 (citing Collins, 2025 WL 2383710, at *5). And courts routinely
dismiss co-fiduciary claims where, as here, the plaintiff alleges only that the fiduciaries “knew of
each breach” and either participated in or failed to remedy them. See Hainey v. SAG-AFTRA Health
Plan, No. 8:21-CV-02618-PX, 2023 WL 3645514, at *15 (D. Md. May 25, 2023) (dismissing co-

fiduciary claim where the plaintiff alleged only that the “Board of Trustees knew of ‘each breach’
stemming from ‘maladministration resulting in plan losses’ and that they either knowingly
participated in the breaches or took no steps to remedy the same.”); Atwood v. Burlington Indus.
Equity, Inc., No. 2:92CV00716, 1994 WL 698314, at *15 (M.D.N.C. Aug. 3, 1994). Accordingly,
Plaintiff has not stated a plausible co-fiduciary liability claim and Count III will be dismissed.
E. Breach of Fiduciary Duty of Prudence Against Sonic (Count IV)
Plaintiff next alleges that Defendant Sonic, as the Plan’s sponsor, breached its duty to
monitor the Committee in violation of 29 U.S.C. § 1104(a)(1)(B). Count IV is also a derivative
claim predicated on the Committee’s alleged breach of the duty of prudence. Again, because

Plaintiff has not plausibly alleged that the Committee acted imprudently, the duty to monitor
claim—dependent on an underlying breach—fails as a matter of law. Peeler, 2026 WL 208630, at
*12; Collins, 2025 WL 2383710, at *5; Jacob v. RTX Corp., --- F. Supp .3d ---No. 1:25-CV-1389
(LMB/WBP), 2026 WL 173228, at *10 (E.D. Va. Jan. 22, 2026). Therefore, Plaintiff’s duty to
monitor claim against Sonic will be dismissed.
F. Violation of 29 U.S.C. § 1106(a) Prohibited Transactions (Count V)
In Count V, Plaintiff alleges that Defendants engaged in prohibited transactions by: (1)
including and retaining the challenged funds in the Plan’s lineup; (2) using higher cost share
classes of the Putnam Stable Value and ClearBridge International Growth Funds; and (3) paying
the IRA excessive fees. FAC ¶¶ 363–75.
ERISA § 406(a)(1) prohibits fiduciaries from causing a plan to engage in certain
enumerated transactions with parties in interest. To state a claim under §406(a)(1), a plaintiff must
demonstrate that “a fiduciary caused the plan to engage in the allegedly unlawful transaction” with

a party in interest. Lockheed Corp. v. Spink, 517 U.S. 882, 888 (1996).
Inclusion and Retention of the Challenged Funds
Courts interpreting §406(a) have consistently held that the statutory term “transaction”
requires an affirmative act by the fiduciary; thus, a mere failure to act, or a decision to maintain an
existing investment, does not constitute a “transaction” within the meaning of the statute. See, e.g.,
Wright v. Oregon Metallurgical Corp., 360 F.3d 1090, 1101 (9th Cir. 2004) (explaining that the
decision to continue holding employer stock “was not a ‘transaction’”); Tibble v. Edison Int’l, 639
F. Supp. 2d 1122, 1126 (C.D. Cal. 2009) (concluding that a fiduciary’s “failure to act” cannot
constitute a prohibited transaction under §1106(a)(1)(D)).

The Fourth Circuit adopted this understanding in David v. Alphin, explaining that the
“common understanding” of the term “transaction” necessarily implies an affirmative exchange
or transfer, and therefore does not encompass a fiduciary’s even repeated inaction. 704 F.3d 327,
340 (4th Cir. 2013). The court rejected as “untenable” the argument that a fiduciary’s failure to
remove an investment option at successive committee meetings constituted a series of new
prohibited transactions. Id. at 341. Rather, the only actionable event for purposes of § 406(a)
was the initial selection of the challenged investment option, and the limitations period ran from
that point. Id. Following David, the court in Johns v. Morris, 802 F. Supp. 3d 854, 863
(E.D.N.C. 2025), likewise rejected this
“continuing violation theory,” noting in addition that a fiduciary’s repeated failure to remove an
investment option similarly does not “renew” the limitations period with each alleged failure.
Here, as already discussed in detail above, the initial selections of each of the challenged
funds occurred outside of ERISA’s six-year statute of limitations. See 29 U.S.C. ¶ 1113.
Accordingly, Plaintiff’s claim for violation of ERISA § 406(a) related to the selection and retention

of the challenged funds is time-barred and must be dismissed.
Excessive Advisory Fees & Higher Cost Share Classes
Plaintiff next alleges that Defendants engaged in a prohibited transaction by paying
excessive advisory fees to IRA. It is true that, at the motion to dismiss stage, a plaintiff “need only
allege the three elements within § 1106(a)(1)(C).” Cunningham, 604 U.S. at 702. It is equally true,
that a Rule 12(b)(6) motion tests only the sufficiency of the complaint, and courts “generally
cannot reach the merits of an affirmative defense” on a motion to dismiss. Goodman v. Praxair,
Inc., 494 F.3d 458, 464 (4th Cir. 2007). Still, the Fourth Circuit recognizes a narrow exception:
where the complaint itself alleges all facts necessary to resolve an affirmative defense, the court

may consider it on a motion to dismiss. Id. (“in the relatively rare circumstances where facts
sufficient to rule on an affirmative defense are alleged in the complaint, the defense may be reached
…. This principle only applies, however, if all facts necessary to the affirmative defense ‘clearly
appear[ ] on the face of the complaint.’” (quoting Richmond, Fredericksburg & Potomac R.R. v.
Forst, 4 F.3d 244, 250 (4th Cir.1993)). That principle remains good law even in the wake of
Cunningham. See Nichols v. Bumgarner, No. 24-7215, 2026 WL 1084251 (4th Cir. Apr. 22, 2026)
(citing Goodman post-Cunningham for the same proposition).
This case presents precisely that “rare” circumstance. As the Court explained when
dismissing Plaintiff’s imprudence claim based on the same allegations, the very materials Plaintiff
incorporates into his FAC—and selectively quotes—demonstrate the reasonableness of IRA’s
advisory fees when viewed in context.16 Because the FAC itself contains all facts necessary to
resolve the issue, the Court may properly consider the affirmative defense at this stage.
Accordingly, Plaintiff’s prohibited transaction claim for excessive advisory fees fails.
G. Failure to Act in Accordance with Governing Plan Documents (Count VI)

Finally, Plaintiff alleges that Defendants failed to follow the Plan documents—specifically,
the IPS—when they selected and retained the challenged funds.
Under ERISA, every “employee benefit plan shall be established and maintained” under
“a written instrument.” 29 U.S.C. § 1102(a)(1). And, fiduciaries “must follow” the governing plan
documents and instruments, Tillery, 2026 WL 125784, at *3, unless they conflict with another of
ERISA’s provisions. See § 1104(a)(1)(D). Put simply, ERISA’s statutory scheme “is built around
reliance on the face of written plan documents” to ensure its “principal function” of “protect[ing]
contractually defined benefits.” Tillery, 2026 WL 125784, at *3 (quoting U.S. Airways, Inc. v.
McCutchen, 569 U.S. 88, 100–01 (2013)).

As a threshold matter, Defendants assert, and Plaintiff concedes, that this claim—along
with the remedy sought—is duplicative of Plaintiff’s fiduciary duty claim in Count I. See Doc. No.
21 at 14 (“Defendants violated their plan document—and simultaneously their duty of prudence”).
“As a matter of judicial economy, courts should dismiss a claim if it is duplicative of another claim
in the same suit.” Graham v. Maryland, 738 F. Supp. 3d 644, 656 (D. Md. 2024) (quoting Wultz
v. Islamic Republic of Iran, 755 F. Supp. 2d 1, 81 (D.D.C. 2010)). Claims are duplicative if they
“stem from identical allegations, that are decided under identical legal standards, and for which

16 Specifically, the Advisor Almanac and WinMore both support Defendants’ argument
that the fees paid to IRA were reasonable.
identical relief is available.” Doe v. Cmty. Coll. of Balt. Cnty., 595 F. Supp. 3d 392, 417 (D. Md.
2022) (quoting Wultz, 755 F. Supp. 2d at 81). Accordingly, the Court may dismiss this duplicative
claim without further analysis.
But even if the claim were not duplicative, it would still fail. First and foremost, the Plan’s
IPS is not a governing plan document, as Plaintiff contends. See Doc. No. 21 at 15 (citing Faircloth

v. Lundy Packing Co., 91 F.3d 648, 653 (4th Cir. 1996) (explaining that ERISA § 1024(b)(4)
requires disclosure of plan documents and “other instruments under which the plan is established
or operated” and finding an IPS to be disclosable as a “formal document[] under which an ESOP
is managed.”)). Faircloth is readily distinguishable in this context. Although an IPS might
be disclosable under § 1024(b)(4) under Faircloth, that does not mean that an IPS is
automatically a Plan Document for purposes of 29 U.S.C. § 1104(a)(1)(D). Significantly here, the
Sonic IPS itself made clear that it, along with “the standards, guidelines, and objectives”
contained therein were “not binding.”17 Doc. No. 23-1 at 3. Indeed, the IPS explains that it
was created to “provide a framework for the selection, management, monitoring and evaluation

of the investment options” available to Plan participants to allow the Committee “sufficient
flexibility” in “fulfilling its responsibilities with respect to [the] Plan.” Id. Therefore, on its face,
the Plan’s IPS is not a written instrument that the “fiduciaries must follow.”
To the contrary, the IPS goes on to explain that “the Committee in its discretion may
determine that departure from the provisions of the Policy as well as alternate courses of action

17 Courts may consider documents attached to a motion to dismiss only when the
documents are “integral to and explicitly relied on in the complaint” and their authenticity is
undisputed. Zak v. Chelsea Therapeutics Int’l, Ltd., 780 F.3d 597, 606–07 (4th Cir. 2015) (quoting
Am. Chiropractic Ass’n v. Trigon Healthcare, Inc., 367 F.3d 212, 234 (4th Cir. 2004)). Here, the
IPS is integral to and relied on in the FAC and Plaintiff has not disputed its authenticity.
Accordingly, the Court may properly consider it.
may be necessary or appropriate from time to time.” Id. And, well after the Faircloth decision, the
Fourth Circuit determined similar non-binding language to be simply a “recommended” policy.
See Smith v. Shoe Show, Inc., No. 1:20CV813, 2022 WL 583569, at *9–10 (M.D.N.C. Feb. 25,
2022) (dismissing claim under § 1104(a)(1)(D) and explaining that allegations that the defendant
failed to follow its investment policy because the investment options “were too expensive and

insufficiently diversified” were “[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements,” particularly where the investment policy was non-
binding).
Here, as in Shoe Show, Plaintiff alleges Defendants violated a non-binding IPS when it
selected and retained the challenged funds, because the funds failed to meet any of the IPS criteria.
FAC ¶¶ 381–82. Specifically, Plaintiff alleges that the funds failed to meet the following subjective
criteria: investment objective, portfolio management structure, portfolio management tenure, asset
levels, eligible investments, expenses, risk measurements, and portfolio diversification. Id. ¶ 381.
However, such “criteria” cannot be either achieved or not achieved by a fund; rather they are

merely a list of fund attributes that the Committee monitors and that are helpful for evaluating and
may impact investment performance over time. See, e.g., Doc. No. 23-1 at 10. Thus, the Sonic IPS
simply reflects a “recommended” policy that, by its terms, does not bind the Plan Committee.
Moreover, even if the IPS could be considered a binding Plan document, Plaintiff has, as
discussed above, not established any plausible, viable claims of substantive wrongdoing by the
Committee or Sonic with respect to the selection and retention of investments, including the choice
of “more expensive funds and share classes.” FAC ¶ 95.
In sum, these allegations are not only duplicative of Plaintiff’s breach of fiduciary duty
claims, but they amount to no more than “[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements.” /gbal, 556 U.S. at 678. Therefore, this claim will also
be dismissed.
IV. ORDER
NOW THEREFORE IT IS ORDERED THAT:
1. Defendants’ Motion to Dismiss (Doc. No. 14) is GRANTED;
2. Plaintiffs First Amended Complaint (Doc. No. 12) is DISMISSED; and
3. The Clerk is directed to close this matter in accordance with this Order.
SO ORDERED ADJUDGED AND DECREED.

Signed: April 30, 2026

Kenneth D. Bell
United States District Judge % ie of

29

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/11319423. Public record. Not legal advice.