Dayak

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

MATTHEW J. DAYAK, JEFFREY S.

JACOBS and THOMAS DORE,

individually and on behalf of all others

similarly situated,

No. 22-cv-02974

Plaintiffs,

Judge John F. Kness

v.

REYES HOLDINGS, LLC, THE

BOARD OF DIRECTORS OF REYES

HOLDINGS, LLC, and REYES

HOLDINGS, LLC EMPLOYEE

BENEFITS COMMITTEE,

Defendants.

MEMORANDUM OPINION AND ORDER

Before the Court is Defendants’ Motion to Dismiss Plaintiffs’ First Amended

Class Action Complaint (Dkt. 25.). For the reasons provided in the accompanying

Memorandum Opinion and Order, Defendants’ motion, well-argued as it is, must be

denied.

I. BACKGROUND

A. The Parties

Plaintiffs Matthew J. Dayak, Jeffrey S. Jacobs, and Thomas Dore bring this

putative class action lawsuit under Sections 409 and 502 of the Employee Retirement

Income Security Act of 1974 (“ERISA”). 29 U.S.C. §§ 1109, 1132. Plaintiffs bring the

action on behalf of the Reyes Holdings 401(k) Thrift Plan1 (the “Plan”), themselves,

and all others similarly situated. (Dkt. 21 ¶ 1.) Plaintiffs are individuals who

participated in the Plan by investing in some of the options offered by the Plan. (Id.

¶¶ 19–21.) Defendants are the Plan’s fiduciaries: Reyes Holdings, LLC (“Reyes”); the

Board of Directors of Reyes and its members (the “Board”); and the Reyes Employee

Benefits Committee and its members (the “Committee”). (Id. ¶ 1.) Plaintiffs allege

that Defendants, who are fiduciaries of the Plan, have breached their fiduciary duties

of loyalty and prudence. (Id. ¶¶ 1–2.)

Defendant Reyes is a company that produces and distributes food and beverage

products. (Id. at 7 n.6, ¶ 24.) Reyes is the sponsor of the Plan at issue in this action.

(Id. ¶ 24.) Acting through the Board, Reyes appointed the Committee to manage the

Plan’s investments. (Id. ¶¶ 25, 28, 31.) Reyes instructed the Committee to “ensure

that the investments available to Plan participants are appropriate, had no more

expenses than reasonable and performed well as compared to their peers.” (Id. ¶ 25.)

Plaintiffs argue that the Committee “fell well short of these fiduciary goals.” (Id.)

B. The Plan

The Plan is a “defined contribution” or “individual account” plan that provides

retirement benefits to Reyes employes. (Dkt. 21 ¶ 41.) This means that the Plan

provides for individual accounts for each participant, and benefits are based solely on

the amount contributed to those accounts plus any income, expenses, gains, losses,

1 Plaintiffs clarify that the Plan is a legal entity that can be sued. But in breach of

fiduciary duty cases, the Plan cannot be a party. As a result, Plaintiffs bring this action on

behalf of the Plan, and the relief Plaintiffs request is for the benefit of the Plan and its

participants. (See Dkt. 21 at 1 n.3.)

and any forfeitures that may be allocated to each participant’s account. (Id.) Thus,

retirement benefits under the Plan are “based solely on the amounts allocated to each

individual’s account.” (Id.)

Participants can add several types of contributions to their account, including:

(1) salary deferral; (2) Roth 401(k); (3) after-tax; (4) catch-up; (5) rollover;

(6) discretionary profit-sharing; and (7) employer matching. (Id. ¶ 43.) With regard to

employee contributions, participants may contribute up to 50% of their annual

compensation on a pre- or post-tax basis. (Id. ¶ 44.) With regard to Reyes matching

contributions, Reyes will generally contribute “an amount equal to 50%” of

participants’ deferrals up to a maximum contribution of “up to 10%” of the

participants’ deferrals. (Id.) When participants make a contribution to the Plan, they

are immediately vested in the Plan for those contributions plus any earnings on the

contributions. (Id. ¶ 48.) Contributions made by Reyes are subject to a five-year

vesting schedule. (Id.)

Plaintiffs allege that Reyes enjoys benefits by providing matching

contributions to its Plan participants. One such benefit is that Reyes is permitted to

take tax deductions, and another benefit is that the offering of retirement plans

attracts new employees and reduces turnover. (Id. ¶¶ 45–46.)

The Committee is tasked with determining the appropriateness of the Plan’s

investment offerings, and monitoring investment performance. (Id. ¶ 49.) The

Committee made several funds available to Plan participants for investment during

each year of the Class Period.2 (Id. ¶ 50.) All administrative and recordkeeping

expenses for the Plan were paid using a “combination of charges to the participants

and Plan assets.” (Id. ¶ 52.)

According to Plaintiffs, the Plan had between $645 million and $1.4 billion in

assets during the Class Period. (Id. ¶ 10.) Plaintiffs allege that these assets qualify

the Plan as one of the largest plans in the United States, meaning it had “substantial

bargaining power regarding the fees and expenses that were charged against

participants’ investments.” (Id. ¶ 11.) Along with high assets, the Plan has a high

number of participants: between 15,779 and 24,254 during the Class Period. (Id.

¶ 12.) Accordingly, Plaintiffs argue, the Plan had “substantial bargaining power to

negotiate favorable recordkeeping and administration fees.” (Id.)

C. The Plan’s Fees

Plaintiffs allege that Defendants breached their fiduciary duties by failing to

administer the Plan in a prudent manner, leading to unreasonably high Plan fees.

(Dkt. 21 ¶¶ 53–59.) Specifically, Plaintiffs allege that Defendants’ faulty decision-

making resulted in Defendants “(1) failing to objectively and adequately review the

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

prudent, in terms of cost; (2) maintaining certain funds in the Plan despite the

availability of identical or similar investment options with lower costs and/or better

performance histories; and (3) failing to control the Plan’s recordkeeping costs, that

wasted the assets of the Plan and the assets of participants because of unnecessary

2 Plaintiffs define the Class Period as the time between June 7, 2016 through the date of

judgment. (Dkt. 21 at 1 n.3, ¶ 34.)

costs.” (Id. ¶ 59.)

1. Excessive Recordkeeping and Administrative Costs.

Plaintiffs first allege that one indication that Defendants breached their duty

of prudence was the excessive recordkeeping and administrative fees that Plan

participants were required to pay. (Id. ¶ 60.)

“Recordkeeping” is a catchall term to describe the suite of administrative

services provided to a contribution plan by the plan’s “recordkeeper.” (Id. ¶ 61.) All

national recordkeepers for large plans offer two types of recordkeeping services:

“buffet” or “a la carte.” A “buffet” style of service provides several recordkeeping

services (such as transaction processing, administrative services, participant

communications, plan document services, plan consulting services, accounting and

audit services, and compliance support) for one price regardless of what services are

chosen or utilized by the particular contribution plan. (Id. ¶¶ 62–63.) Under this

“buffet” style, which is also referred to as a “bundled” style, the services chosen by a

plan do not affect the amount charged by the recordkeepers for the services. (Id.)

Under an “a la carte” style of service, recordkeepers charge separate, additional fees

for the specific services provided to each plan depending on the “conduct of individual

participants and the usage of the services by individual participants.” (Id. ¶ 64.)

The cost of recordkeeping services usually depends on the number of

participants in a plan; thus, most recordkeeping services are charged on a per-

participant basis. (Id. ¶ 67.) These expenses can either be paid from a plan’s assets

directly, or indirectly through “revenue sharing.” (Id. ¶ 68.) Revenue sharing

payments are paid from investments within a plan directly to the recordkeeper. (Id.)

Plaintiffs allege that revenue sharing can be “devastating” for plan participants

because it is a way to hide fees that participants are never aware of. (Id. ¶ 70.)

John Hancock Retirement Plan Services (“Hancock”) served as the Plan’s

recordkeeper throughout the Class Period. (Id. ¶ 66.) Hancock provided both “buffet”

and “a la carte” style recordkeeping services. Hancock provided “ordinary” services

for the Plan during the Class Period. (Id.) These services were paid through revenue

sharing, which Plaintiffs allege “resulted in a worst-case scenario for the Plan’s

participants because it saddled [them] with above-market recordkeeping fees.” (Id.

¶ 72.)

Plaintiffs suggest that Defendants likely did not regularly conduct a Request

for Proposal (“RFP”) to determine if the recordkeeping expenses were too high in

relation to other similar plans. (Id. ¶¶ 73–74.) Plaintiffs argue that the Plan’s

recordkeeping fees were “unreasonably high” in comparison to similar plans. (See id.

¶¶ 74–79.) Plaintiffs provide charts showing that the Plan’s recordkeeping fees

ranged from $67 to $142 per participant between 2016 and 2020, whereas other

similarly situated plans’ fees were usually no more than $35 per plan participant.

(Id.) Plaintiffs contend that the Plan, at its size and bargaining power, should have

been able to negotiate a recordkeeping costs “in the low $20 range.” (Id.)

2. Underperforming Target Date Funds.

Plaintiffs next allege that the Plan’s target date funds “deprived participants

of meaningful returns and exposed them to unexpected risks.” (Dkt. 21 at 23.) A

target date suite is a group of investments commonly offered by 401(k) plans

consisting of “several funds from the same family of funds focusing on an individual’s

anticipated date of retirement.” (Id. ¶ 83.) Target date suites typically consist of funds

that consider an individual’s anticipated retirement date at five-year intervals. (Id.)

The funds in these suites are designed to manage investment risk, because as an

individual’s anticipated retirement date approaches, the fund reduces higher risk

investments so the fund is more stable as retirement approaches. (Id. ¶¶ 84–85.)

Conversely, individuals with a later retirement date have riskier target date funds

that have a potential for greater returns. (Id. ¶ 85.) There are many target date suites

commercially available for contribution plans to use that are managed by experts

with years of experience in the investment industry. (Id. ¶ 87.)

Plaintiffs allege that Defendants, instead of selecting a commercially available

target date suite, created their own suite of target date funds. (Id.) Plaintiffs allege

that these funds “failed to meaningfully change their risk return profile as an investor

grows closer to retirement age.” (Id.) Instead, the funds “appear to have a generally

similar risk return profile” across five-year intervals. (Id.) Plaintiffs provide a table

comparing the performance of “properly performing” target date suites to the Plan’s

target date suite. (Id. ¶ 88.) The table shows the Plan’s target date funds

underperforming the alternatives by “more than one percent.” (Id. ¶ 89.) Plaintiffs

point out that the Plan’s target date suite had a “minimal change in returns” between

funds with different expected retirement dates, which is unusual considering risk

profiles should be changing depending on the expected retirement date. (Id. ¶ 90.)

Plaintiffs state that the funds in the Plan had the “worst return history” of its peers.

(Id. ¶ 91.) Plaintiffs contend that Plan participants “were deprived of these greater

returns” because of the “underperforming target date suite” Defendants chose. (Id.

¶ 92.)

D. Plaintiffs’ Claims for Relief

Through their first amended complaint, Plaintiffs bring a two-count putative

class action against Defendants. In Count I, Plaintiffs allege a breach of the fiduciary

duty of prudence against the Committee. (Dkt. 21 ¶¶ 93–99.) Plaintiffs argue that the

Committee Defendants were subject to fiduciary duties including “managing the

assets of the Plan for the sole and exclusive benefit of the Plan’s participants and

beneficiaries, and acting with the care, skill, diligence, and prudence under the

circumstances that a prudent person acting in a like capacity and familiar with such

matters would use in the conduct of an enterprise of like character and with like

aims.” (Id. ¶ 95.) Plaintiffs allege that the Committee breached those duties by failing

to make investment decisions based on the best interest of the Plan’s participants,

failing to investigate the availability of lower-cost funds, and failing to negotiate

reasonable recordkeeping fees. (Id. ¶ 97.)

In Count II, Plaintiffs allege that Reyes and the Board breached their duty to

monitor the Committee. (Id. ¶¶ 100–06.) Specifically, Plaintiffs contend that Reyes

and the Board failed to (1) monitor and evaluate the Committee’s performance or

have a system for doing so; (2) monitor the processes by which Plan investments were

evaluated; and (3) remove Committee members whose performance was inadequate.

(Id. ¶ 104.)

Defendants now move to dismiss Plaintiffs’ first amended class action

complaint for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil

Procedure. (Dkt. 25.)

II. LEGAL STANDARD

A motion under Rule 12(b)(6) “challenges the sufficiency of the complaint to

state a claim upon which relief may be granted.” Hallinan v. Fraternal Ord. of Police

of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). Each complaint “must contain

sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible

on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 570 (2007)). These allegations “must be enough to raise a

right to relief above the speculative level.” Twombly, 550 U.S. at 555. Put another

way, the complaint must present a “short, plain, and plausible factual narrative that

conveys a story that holds together.” Kaminski v. Elite Staffing, Inc., 23 F.4th 774,

777 (7th Cir. 2022) (cleaned up).

As the Seventh Circuit has emphasized, a plaintiff need not “lay out every

element or ingredient” of a claim to survive a Rule 12(b)(6) motion. Thomas v. JBS

Green Bay, Inc., 120 F.4th 1335, 1336 (7th Cir. 2024). Such “details and proof” come

later, and all a plaintiff must do is “state a grievance.” Id. at 1338. In evaluating a

motion to dismiss, the Court must accept as true the complaint’s factual allegations

and draw reasonable inferences in the plaintiff’s favor. Iqbal, 556 U.S. at 678. But

even though factual allegations are entitled to the assumption of truth, mere legal

conclusions are not. Id. at 678–79.

III. DISCUSSION

In ERISA class actions such as this one, Rule 12(b)(6) motions are an

“important mechanism for weeding out meritless claims.” Albert v. Oshkosh Corp., 47

F.4th 570, 577 (7th Cir. 2022) (quoting Fifth Third Bancorp v. Dudenhoeffer, 573 U.S.

409, 425 (2014)). Courts must apply a “careful, context-specific scrutiny” of the

complaint. Id. But a plaintiff alleging a breach of fiduciary duty need not plead that

claim “with a degree of precision only possible after discovery,” because the plaintiff

generally lacks “the inside information necessary to make out their claims in detail

unless and until discovery commences. Coyer v. Univar Sols. USA Inc., No. 22 CV

0362, 2022 WL 4534791, at *3 (N.D. Ill. Sept. 28, 2022) (citing Allen v. GreatBanc Tr.

Co., 835 F.3d 670, 678 (7th Cir. 2016)). Courts must also “give due regard to the range

of reasonable judgments a fiduciary may make based on her experience and

expertise,” because the “circumstances facing an ERISA fiduciary will implicate

difficult tradeoffs.” Albert, 47 F.4th at 577 (quoting Hughes v. Nw. Univ., 595 U.S.

170, 177 (2022)).

A. Count I: Breach of Duty of Prudence

ERISA’s duty of prudence requires a plan fiduciary to “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.” 29 U.S.C. § 1104(a)(1)(B). The duty of prudence first requires a fiduciary to

regularly review funds at regular intervals to determine whether they are prudent

investments. See Hughes, 63 F.4th at 626. This duty also requires a fiduciary to

ensure incurred costs are “reasonable” and “appropriate.” Id. at 627. Plaintiffs allege

in Count I that the Committee breached its duty of prudence by charging excessive

recordkeeping fees and selecting underperforming target date funds. (Dkt. 21 ¶¶ 93–

99.)

Defendants first argue that Count I must be dismissed because Plaintiffs have

not sufficiently pleaded allegations providing enough context to show Defendants

have plausibly breached their duty of prudence. As to Plaintiffs excessive

recordkeeping fee allegations, Defendants argue that Plaintiffs used incorrect

calculations, compared plans without meaningful benchmarks, and speculated about

Defendants’ actions. (Dkt. 26 at 10–15.) As to Plaintiffs’ target date funds allegations,

Defendants argue that Plaintiffs’ “threadbare,” “hindsight-based,” and “cherry-

picked” allegations cannot support an inference of imprudence. (Id. at 15–18.) But as

explained below, the Court holds that Plaintiffs have plausibly alleged Defendants

breached their duty of prudence.

1. Recordkeeping Fee Allegations

(a) Incorrect Recordkeeping Fee Calculations

Plaintiffs allege that participants of the Plan paid between $67.64 and $142.27

annually for recordkeeping fees. (Dkt. 21 ¶ 75.) Plaintiffs state that they calculated

these numbers from Defendants’ publicly available Form 5500, which is a report that

401(k) plans must file annually with the federal government. (Id. at 16 n.8, 20 n.9,

¶¶ 66, 75.) In a footnote, Plaintiffs explain that Defendants revised their Form 5500

for 2018 and 2019 to reduce the amount of direct costs reported, but that it was

unclear from these revisions how the costs were actually redistributed. (Id. at 20 n.9.)

Plaintiffs argue that even though they do not clearly know how the revisions affected

the recordkeeping costs, “the per participant fees [after the revisions] would still be

excessive when compared to fees paid by comparable plans.” (Id.)

Defendants challenge Plaintiffs’ reliance on “wrong” recordkeeping fee

calculations, arguing that Plaintiffs do not provide any support for their “baseless”

allegations about how the revisions to the Form 5500s affect the distribution of the

fees. (Dkt. 26 at 11.) Plaintiffs readily concede that they cannot properly calculate the

recordkeeping fees based on the Form 5500s.

But as Plaintiffs argue, a miscalculation based on lack of information does not

defeat Plaintiffs’ otherwise well-pleaded claim. (See Dkt. 28 at 13.) Plaintiffs add that

they lacked details on the proper calculations, and they allege that the proper

calculations would have still resulted in excessive recordkeeping fees. A

miscalculation thus will not defeat Plaintiff’s excessive recordkeeping fees claim. See

Pinnell v. Teva Pharms. USA, Inc., No. 19-5738, 2020 WL 1531870, at *6 (E.D. Pa.

Mar. 31, 2020) (excessive recordkeeping fees allegation deemed plausible “despite the

participants’ initial miscalculation based on lack of information”).

Defendants add that any indirect compensation Plaintiffs argue are included

in the Plan’s fees should not be counted because these “revenue sharing fees are

frequently rebated back to Plan participants.” (Id.) But Defendants do not argue that

such a rebate happened here. Plaintiffs’ inclusion of indirect compensation is thus

appropriate at this stage. Accordingly, Defendants’ motion to dismiss Count I is

denied to the extent Defendants rely on miscalculated recordkeeping fees.

(b) Comparator Plans as Benchmarks

Defendants next argue that the six other retirement plans cited by Plaintiffs

“do not provide meaningful benchmarks” to compare to the Plan. (Dkt. 26 at 11.)

Defendants contend that Plaintiffs do not show how the recordkeeping services

provided by Hancock to the Plan are equivalent to the six comparator plans with six

different recordkeepers. (Id. at 12.)

Defendants support this argument by citing Albert v. Oshkosh Corp., 47 F.4th

570 (7th Cir. 2022). Albert upheld the dismissal of a duty of prudence claim where

the plaintiff compared its plan to nine other plans that had supposedly more prudent

recordkeeping fees. Id. at 579. As the Seventh Circuit concluded, the plaintiff did not

provide enough context about the comparator plans’ fees in relation to the services

they provided as compared to the fees and services provided by the plaintiff’s plan.

Id. at 579–80. Albert’s plaintiff thus failed to plausibly assert a breach of duty of

prudence claim. See also Baumeister v. Exelon Corp., No. 21-cv-6505, 2022 WL

4477916, at *2 (N.D. Ill. Sept. 22, 2022) (dismissing duty of prudence claim because

plaintiffs “plead[ed] no facts to show whether the selected comparators receive

recordkeeping services of a similar nature and quality to those offered by the

[plaintiffs’] recordkeeper”); Smith v. CommonSpirit Health, 37 F.4th 1160, 1169 (6th

Cir. 2022) (same); Matousek v. MidAmerican Energy Co., 51 F.4th 274, 280 (8th Cir.

2022) (same). Defendants argue that, as in Albert, Plaintiffs’ failure to compare the

services provided to the Plan by Hancock to the services provided to other plans by

other recordkeepers means that Plaintiffs have insufficiently pleaded a breach of the

duty of prudence.

Plaintiffs do not dispute that Albert and the other cases Defendants cite

provide the correct standard to determine whether a recordkeeping-fee-based claim

has been adequately pleaded. But Plaintiffs contend that Defendants’ argument is a

“red herring” because Plaintiffs have alleged facts sufficiently comparing Hancock

and the Plan to the comparator plans. (Dkt. 28 at 14.) Plaintiffs cite several

allegations they argue sufficiently compare the plans. First, Plaintiffs compare codes

corresponding to general recordkeeping services listed in the Plan’s Form 5500 to

those same codes found in other similar 401(k) plan Form 5500s. (Dkt. 21 at 21 n.11,

¶¶ 66, 78; Dkt. 28 at 15.) Plaintiffs explain that they rely on this “circumstantial

evidence” and could not make more detailed comparisons between plans because

“recordkeeping service agreements are not publicly available.” (Dkt. 28 at 15–16.)

Second, Plaintiffs allege that the Plan had high assets and thousands of participants,

making it a large plan with “substantial bargaining power.” (Dkt. 21 ¶¶ 10–12, 67,

73; Dkt. 28 at 16–17.) This bargaining power, according to Plaintiffs, should have

enabled the Plan to “negotiate low record keeping and administration fees.” (Dkt. 28

at 17.) Third, Plaintiffs allege that the cost of recordkeeping services often depends

on the number of participants in a plan, regardless of services provided. (Id.; Dkt. 21

¶ 67.)

These allegations provide enough context to suggest plausibly that the

comparator plans provide an appropriate benchmark for the Plan’s recordkeeping

fees. Albert requires a “context-sensitive scrutiny” of the allegations that provide

enough “context [to] move th[e] claim from possibility to plausibility.” Albert, 47 F.4th

at 580. Plaintiffs’ allegations meet this standard. Compare Hughes, 63 F.4th at 632

(plaintiff sufficiently pleaded that comparator plans provided similar quality

services, which are commoditized), and Mazza v. Pactiv Evergreen Servs. Inc., No. 22

C 5052, 2023 WL 3558156, at *3–4 (N.D. Ill. May 18, 2023) (sufficiently pleaded

comparisons between plans, including allegations that comparator plans provide

same level and quality of services), and Coyer, 2022 WL 4534791, at *4 (comparing

recordkeeping fees by comparing Form 5500s was sufficient to plausibly allege breach

of duty), with Baumeister, 2022 WL 4477916 at *2 (plaintiffs pleaded “no facts”

showing that the comparator plans received similar recordkeeping services), and

Mateya v. Cook Grp. Inc., No. 22-cv-1271, 2023 WL 4608536, at *7 (S.D. Ind. June 16,

2023) (plaintiff did not allege facts “plausibly suggesting a different recordkeeper

could provide the same mix of services . . . for less”), and Probst v. Eli Lilly & Co., No.

22-cv-01106, 2023 WL 1782611, at *7–12 (S.D. Ind. Feb. 3, 2023) (finding plaintiff’s

comparisons between plans to be “wholly conclusory,” non-specific, and inconsistent).

Accordingly, Defendants’ motion to dismiss Count I is denied to the extent

Defendants argue that the comparative plans Plaintiffs cite do not, at this pleading

stage, provide meaningful benchmarks for the Plan’s recordkeeping fees.

(c) Conducting a Request for Proposal

Finally, Defendants argue that Plaintiffs’ allegation that Defendants did not

conduct an RFP is “speculative” and “insufficient to create an inference of imprudent

conduct.” (Dkt. 26 at 14–15.) Defendants argue that their duty of prudence does not

compel them “to regularly solicit quotes or competitive bids from recordkeepers.” (Id.

at 14.) It may be true that Defendants are not required to regularly solicit quotes or

bids. But Plaintiffs’ allegation that Defendants did not do so here and should have

done so to reduce recordkeeping fees is, in combination with Plaintiffs’ other

allegations, sufficient to support a claim for breach of the duty of prudence.

Accordingly, Defendants’ motion to dismiss Count I is denied to the extent

Defendants argue that their failure to conduct an RFP does not plausibly suggest

imprudence.

2. Target Date Suite Allegations

Defendants next argue that Plaintiffs’ “threadbare” and “hindsight-based”

allegations concerning the Reyes target date funds’ performance “do not support an

inference of imprudent conduct.” (Dkt. 26 at 15.) Defendants make three arguments

in support of this position: (1) Plaintiffs do not allege enough detailed information

about the comparator funds; (2) Plaintiffs’ underperformance argument is based on

hindsight; and (3) Plaintiffs do not provide any information about the target date

funds’ risk return profile. (Id. at 15–18.)

Plaintiffs contend that they have alleged facts supporting that the comparison

target date suites are meaningful comparators to the Reyes target date suite.

Plaintiffs point to an allegation that the comparator target date suites met guidelines

set by the Financial Industry Regulatory Authority for “investment strategies, target

date glide paths, and risk profiles.” (Dkt. 21 ¶ 84; Dkt. 28 at 20.) Plaintiffs argue that

they compared the Reyes funds to these “better performing” commercial funds. (Dkt.

28 at 20.) Plaintiffs also allege that the comparator funds are “commercially

available,” managed by experts, and maintain “expected stability.” (Dkt. 21 ¶ 87.)

These allegations, although thin, are enough to meet the plausibility standard at the

pleading stage. And they are sufficient to infer reasonably that the comparator funds

selected by Plaintiffs are sufficiently comparable to the Reyes target date fund.

As to Defendants’ argument that Plaintiffs’ allegations are based on hindsight

knowledge, the Court can reasonably infer that Plaintiffs have alleged Defendants

failed to act prudently based on investment information available to them at the time.

Plaintiffs allege that the Plan’s target date funds underperformed at multiple

intervals over time, including at the three-year mark and then again at the five-year

mark. These allegation support a plausible inference—at least at this preliminary

pleading stage—that Defendants acted imprudently by failing to make changes to the

Reyes target fund date after the funds underperformed at the three-year mark.

Accordingly, Defendants’ motion to dismiss Count I is denied as to Defendants’

argument concerning the target date funds. Count I alleging that the Committee

breached its duty of prudence therefore survives Defendants’ motion to dismiss.

B. Count II: Breach of Duty to Monitor

Plaintiffs allege in Count II that Reyes and the Board of Directors breached

their fiduciary duty by failing to monitor and evaluate the performance of other Plan

fiduciaries. (Dkt. 21 100-06.) Defendants argue that Count II must be dismissed

because “it is merely derivative of’ Claim I. (Dkt. 26 at 19.) Because Count I must

fail, Defendants argue, Count IJ must also fail. Ud.) But the Court has held that

Count I does not fail, so Count IT does not fail either. Accordingly, Defendants’ motion

to dismiss Count II is denied.

IV. CONCLUSION

For the foregoing reasons, Defendants’ motion to dismiss Plaintiffs’ first

amended class action complaint (Dkt. 25) is denied.

SO ORDERED in No. 22-cv-02974.

Date: March 31, 2026 _ Lead osme

JOHN F. KNESS

United States District Judge

18