Michelle Mills v. Molina Healthcare, Inc.

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

MICHELLE MILLS et al., Case No. 2:22-cv-01813-SB-GJS

Plaintiffs,

v. FINDINGS OF FACT AND

CONCLUSIONS OF LAW

MOLINA HEALTHCARE, INC. et al.,

Defendants.

Following the Court’s orders granting in part Defendants’ motions to

dismiss and for summary judgment, Dkt. Nos. 123, 189, the Court held a six-day

bench trial on the remaining claims, beginning on November 6 and ending on

November 14, 2023. After evaluating the evidence at trial and considering the

parties’ written submissions, the Court issues the findings of fact and conclusions

of law set forth below.1

FINDINGS OF FACT

Introduction

1. This case is a class action alleging that Defendants breached their fiduciary

duties and engaged in prohibited transactions in violation of the Employee

Retirement Income Security Act of 1974 (ERISA).

2. Plaintiffs were participants in the Molina Salary Savings Plan (the Plan), a

defined-contribution, individual-account, employee pension plan that

Defendant Molina Healthcare, Inc. (Molina) sponsors for its employees

1 The characterization of a finding as one of “fact” or “law” is not controlling. To

the extent that a finding is characterized as one of “law” but is more properly

characterized as one of “fact” (or vice versa), substance shall prevail over form.

under the Employee Retirement Income Security Act of 1974. Plaintiffs

challenge the selection and retention of the flexPATH Index target date

funds (TDFs) as the Plan’s qualified default investment alternative

(QDIA)—the investment that would be selected for a Plan member who did

not choose a different option.

3. Molina is the Plan’s sponsor under 29 U.S.C. § 1102(a)(1) and the Plan’s

administrator under 29 U.S.C. § 1002(16).

4. Named Plaintiffs Michelle Mills, Coy Sarell, Chad Westover, Brent

Aleshire, Barbara Kershner, Paula Schaub, and Jennifer Silva were

employed by Molina or its affiliates and invested in the flexPATH Index

TDFs during the class period.

5. On January 17, 2023, pursuant to the parties’ stipulation, the Court certified

a class consisting of all participants of the Molina Salary Savings Plan from

March 18, 2016 through October 26, 2020 (the Class Period) who invested

in a flexPATH Index TDF through an individual Plan account, and their

beneficiaries, excluding Defendants. Dkt. No. 127.

The Molina Defendants

6. Molina provides managed health care services under Medicare and Medicaid

and through state insurance programs.

7. Molina established the Plan through a written plan document, a version of

which was in effect during the Class Period.

8. Defendant Molina Salary Savings Plan Investment Committee (the

Committee) is a committee within Molina charged with overseeing the Plan.

9. Defendant the Board of Directors of Molina (the Board) established the

Committee and appointed its members.

10. The Board adopted an Investment Committee Charter that was in effect at

the start of the Class Period and that was later amended during the Class

Period. The charter required the Committee to follow the policies and

procedures in the Plan’s Investment Policy Statement (the IPS), to hold

regular meetings, and report at least annually to the Board.

11. At all relevant times, the Committee held meetings on at least a quarterly

basis.

12. The Committee’s members for the most part had no special expertise in

finance or investment and were primarily focused on other job

responsibilities. At least one member typically did not even read the

materials that were distributed in advance of the quarterly meetings. At trial,

most former Committee members who testified could not remember basic

information about what they were told or the decisions they made. The

Court concludes that their lack of recollection is attributable in part to the

passage of time but also that most members lacked a deep understanding of

the Plan’s investments. Based on the testimony at trial, the Committee

members’ level of engagement and lack of expertise appears to be within the

normal range for similar committees overseeing ERISA plans in other

companies that worked with investment advisors.

13. The Court finds that the Committee’s members acted in good faith but

largely deferred to the advice and guidance of their investment advisors.

The IPS

14. The Committee adopted an IPS that was operative during the Class Period.

The IPS provided criteria for selecting and monitoring Plan investment

options. The Committee’s members understood that the IPS provided the

framework for their decision-making and that they were required to adhere

to the IPS.

15. The IPS provided that “[t]he selection of investment options offered under

the Plan is among the Committee’s most important responsibilities.”

16. The IPS required the Committee to select an investment or set of

investments to serve as the QDIA—the designated investment into which all

funds not directed elsewhere would be invested.

17. The IPS directed that all investment options included in the Plan’s menu

should meet certain standards for selection, including that “[i]nvestment

performance should be at least competitive with an appropriate style-specific

benchmark and the median return for an appropriate, style-specific peer

group (where appropriate and available, long-term performance of an

investment manager may be inferred through the performance of another

investment with similar style attributes managed by such investment

manager).”

18. The IPS also required that “[s]pecific risk and risk-adjusted return measures

should be reviewed by the Committee and be within a reasonable range

relative to appropriate, style-specific benchmark and peer group.”

19. The Committee was required to monitor investments on an ongoing basis,

although the IPS stated that “[f]requent change of investments is neither

expected nor desired.”

20. The IPS provided for the maintenance of “scorecards” to monitor

performance history. Funds were to be scored on a scale of 0 to 10, with 80

percent of the score based on quantitative factors and 20 percent based on

qualitative factors. Funds that scored below 7 out of 10 would be placed on

a watch list. The IPS directed that a fund that remained on the watch list for

four consecutive quarters or five out of eight consecutive quarters should be

considered for possible removal.

NFP Retirement, Inc. and flexPATH Strategies, LLC

21. NFP Retirement, Inc., f/k/a 401(k) Advisors, Inc. (NFP), a subsidiary of

NFP Corporation (NFP Corp.), is a registered investment advisor that

provides retirement plan consulting, investment advice and fiduciary due

diligence services, employee plan and investment education, asset allocation

services, and plan service provider research and analysis.

22. Molina signed an Investment Advisory Agreement (IAA) with NFP, then

named 401(k) Advisors, on March 1, 2010.

23. Pursuant to the IAA, NFP became the Plan’s investment consultant under

§ 3(21) of ERISA, 29 U.S.C. § 1002(21)(A)(ii). As a 3(21) investment

advisor, NFP was a fiduciary who rendered investment advice to the Plan for

a fee but did not have authority to manage, acquire, or dispose of assets.

24. From July 1, 2016 through June 30, 2020 (a span covering most of the Class

Period), the Plan paid NFP $509,917 pursuant to the terms of the IAA.

25. Solomon Stewart and Veronica Lee were NFP’s investment consultants

assigned to advise the Plan. Stewart and Lee replaced previous consultants

in 2014 and attended Committee meetings from then until NFP was replaced

as the Plan’s investment consultant in 2020.

26. Defendant flexPATH Strategies, LLC (flexPATH) is a registered investment

advisor. flexPATH registered with the Securities and Exchange

Commission in February 2015.

27. During the Class Period, flexPATH offered delegated fiduciary services to

corporate retirement plans under § 3(38) of ERISA, 29 U.S.C. § 1002(38).

A 3(38) investment manager is a fiduciary who, among other things, has

authority to manage, acquire, or dispose of plan assets.

28. On March 31, 2016, Molina signed the Investment Manager Agreement

(IMA) for flexPATH to serve as the 3(38) investment manager to the Plan

for purposes of selecting and monitoring the Plan’s QDIA. flexPATH

signed the IMA the next day.

29. flexPATH and NFP are closely related. Vincent Giovinazzo was the Chief

Executive Officer of NFP and flexPATH. Nicholas Della Vedova was the

President of NFP and flexPATH. Jeffrey Elvander was the Chief Investment

Officer of NFP and flexPATH. Joel Shapiro was Senior Vice President of

both NFP and flexPATH.

30. Giovinazzo founded NFP in 2000 and developed the business together with

Della Vedova. Giovinazzo, Della Vedova, and Elvander founded flexPATH

in 2014 to complement their work at NFP.

31. flexPATH and NFP operated out of the same office in Aliso Viejo,

California.

32. As of February 2014, Giovinazzo owned 27.78% of flexPATH, Della

Vedova owned 22.22% of flexPATH, and NFP Corp. owned 50% of

flexPATH.

The flexPATH Target Date Funds

33. TDFs are designed to offer a diversified option for investors who do not

want to manage the allocation of their investment portfolio over time. TDF

suites typically consist of a series of diversified investment vehicles that

correspond to different target retirement years (e.g., 2030) with asset

allocations that adjust as the target retirement date approaches. A TDF will

begin with more aggressive, riskier investments and gradually shift to more

conservative funds as the target date approaches.

34. A “glidepath” refers to how a TDF’s asset allocations among a mix of

investments—such as stocks, bonds, and cash equivalents—change over

time. Glidepaths may be “to retirement,” meaning the composition of the

fund becomes more conservative until the target date and then remains

static, or “through retirement,” meaning the TDF continues to adjust its asset

allocation after the target date.

35. The flexPATH Index Target-Date Funds (the flexPATH TDFs) are

collective investment trusts (CITs) that invest in underlying funds and

follow a to-retirement glidepath. During the Class Period, the flexPATH

TDFs were maintained by Wilmington Trust, N.A. (Wilmington Trust).

36. flexPATH first made the flexPATH TDFs available to investors in

December 2015, and all vintages were made available to investors by

January 2016.

37. The flexPATH TDFs offered vintages in ten-year increments: 2025, 2035,

2045, and 2055.

38. Each ten-year vintage of the flexPATH TDFs offered three glidepaths—

conservative, moderate, and aggressive—to accommodate investors’ varying

risk tolerances.

39. Through a partnership with BlackRock, the flexPATH TDFs invested in

underlying TDFs offered and managed by BlackRock. The flexPATH Index

Moderate TDF invested 100 percent in the corresponding vintage of the

BlackRock LifePath Index TDF. The flexPATH Index Aggressive TDF

invested in one or more BlackRock LifePath Index TDFs. The flexPATH

Index Conservative TDF invested in the corresponding vintage of the

BlackRock LifePath Conservative TDF, which invested in BlackRock

LifePath Index TDFs.

Molina’s Decision to Adopt the flexPATH TDFs as the Plan’s QDIA

40. In 2014 and 2015, the Plan’s QDIA was the Vanguard Target Retirement

Funds (Vanguard TDFs). NFP classified the Vanguard TDFs as aggressive

based on their relatively high equity allocation at retirement.

41. In part because of Vanguard’s practice of regularly rotating lead portfolio

managers, the Vanguard TDFs received scores that caused it to be placed on

the Plan’s watch list for most of 2013 and 2014.

42. NFP’s Stewart and Lee not only attended all meetings of the Committee;

they also prepared the minutes and other materials for the meetings.

43. At the November 2014 quarterly meeting of the Committee, Lee and Stewart

introduced the Committee to the flexPATH TDFs, which at the time were

still in development. The meeting minutes prepared by NFP emphasize the

benefits of the flexPATH TDFs, although NFP avoided characterizing its

presentation as a recommendation:

NFP Retirement introduced the Committee to a custom

target date fund solution called FlexPATH Strategies. The

series provides three different risk levels that participants

can choose from rather than a single glidepath option in

most target date funds. This allows participants to

customize both their expected retirement date and level of

risk. The FlexPATH funds are available in either Index or

Index+ versions and the underlying manager selection is

overseen by NFP Retirement, providing for a multi-

manager, open architecture approach. The Committee

agreed to maintain the existing target date funds for now, but

continue to evaluate the options available to the plan.

44. Stewart testified that he disclosed to the Committee the relationship between

flexPATH and NFP. To the extent he did so, he did not emphasize the

closeness of the relationship or the conflict of interest inherent in any

recommendation of flexPATH by NFP. NFP did not make the Committee

aware, for example, that flexPATH and NFP were owned and managed by

the same people and worked out of the same office.

45. flexPATH benefited from obtaining new clients and having a larger sum of

assets under management, as well as from having more funds invested in its

TDFs. Because flexPATH was owned by NFP Corp. and NFP’s principals,

NFP was also incentivized to increase flexPATH’s business.

46. NFP recognized the inherent conflict of interest in promoting the flexPATH

TDFs to its clients. In an internal January 6, 2015 email, Giovinazzo noted

that “[t]here are inherent potential conflicts of interest (again potential) that

exist within flexPATH, including . . . NFP Retirement adding flexPATH to

our clients.”

47. Nevertheless, NFP and flexPATH wanted to obtain more clients for

flexPATH, and it made the flexPATH TDFs available to NFP’s investment

consulting clients and members of Retirement Plan Advisory Group

(RPAG), a subsidiary of NFP Corp. To mitigate conflicts, flexPATH

created a separate share class for NFP clients to remove fees that would

otherwise be paid to flexPATH, and RPAG instructed that investment

advisors could not “[r]ecommend flexPATH Strategies or the flexPATH

CITs to existing clients.”

48. On the other hand, NFP created an incentive program in which investment

advisors would receive additional compensation when flexPATH was

implemented into one of their client plans. Although this incentive program

had not been finalized when Molina adopted the flexPATH TDFs, Lee and

Stewart later received thousands of dollars in extra compensation as a result

of the Plan’s adoption of the flexPATH TDFs.

49. Following NFP’s initial presentation about the flexPATH TDFs at the

November 2014 meeting, it raised the issue again at the June 2015

Committee meeting. This time, NFP gave a marketing presentation for the

flexPATH TDFs, which presented them as the latest stage in the evolution of

TDFs and contrasted them with the drawbacks of other types of TDFs, as

shown in the following graphic that was part of the presentation:

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50. NFP reintroduced the flexPATH TDFs again at the September 2015

Committee meeting and stated in the minutes that “[i]t seems prudent to re-

evaluate the most appropriate level of risk in the plan’s QDIA glidepath”

and that NFP would prepare an analysis of “both off-the-shelf target date

funds as well as flexPATH as a custom solution.”

51. At the next Committee meeting, on November 19, 2015, Stewart and Lee

presented a “TDF Fit Analysis” and suggested adoption of flexPATH as the

Plan’s QDIA. The Committee followed this advice and agreed to remove

the Vanguard TDFs as the Plan’s QDIA and replace them with the

flexPATH TDFs, with the moderate glidepath as the default.

52. At trial, Stewart and Lee testified that they did not recommend adoption of

the flexPATH TDFs and characterized their role as merely providing

information. But their own notes, which they prepared and reviewed shortly

after the meeting, state that the Committee decided to add the flexPATH

TDFs “[o]n the recommendation of NFP Retirement.” Moreover, their

repeated presentations to the Committee about the flexPATH TDFs,

including marketing materials that portrayed the flexPATH TDFs as an

improvement over all other TDFs on the market, at four consecutive

meetings—until the Committee finally agreed to adopt the flexPATH

TDFs—go well beyond disinterested provision of information to the

Committee. On this record, it is clear that Lee and Stewart intended to

persuade the Committee to adopt the flexPATH TDFs as the Plan’s QDIA,

and that they succeeded in doing so (and were later compensated for that

success).

53. NFP’s self-interested promotion of the flexPATH TDFs raises concerns.

However, because NFP is no longer a defendant in this case, the Court need

not determine whether its conduct breached the duty of loyalty that it owed

to Molina.2

2 After the conclusion of the bench trial in this case, another judge in this district

issued findings of fact and conclusions of law in a different ERISA case

challenging the adoption of the flexPATH TDFs as the QDIA for a different plan.

See Lauderdale v. NFP Ret., Inc., No. 8:21-CV-00301-JVS, 2024 WL 751005

(C.D. Cal. Feb. 23, 2024) (Selna, J.). Judge Selna found no breaches of fiduciary

duty or prohibited transactions. Id. at *1. His findings are based on the evidence

presented at the bench trial before him. With respect to the duty of loyalty, the

facts in Lauderdale differed in significant respects from the facts here. The plan in

Adoption of the flexPATH TDFs

54. After the Committee decided to adopt the flexPATH TDFs as the Plan’s

QDIA, there were several steps required to implement that change, which

was not effective until several months into 2016.

55. On March 31, 2016, Molina signed the IMA appointing flexPATH to serve

as the 3(38) investment manager. flexPATH signed the IMA the next day.

56. As a formal matter, the IMA delegated to flexPATH authority to select the

Plan’s QDIA. Defendants contend that flexPATH conducted an independent

evaluation, determined that the flexPATH TDFs were the best option for the

Plan, and selected the flexPATH TDFs as the Plan’s QDIA. However, the

documentation purporting to support that analysis does not identify who

made the decision or when it was made, and none of the witnesses at trial

were involved in any such evaluation by flexPATH or knew of someone else

within flexPATH who had engaged in any independent determination that

the flexPATH TDFs best fit Molina’s needs.

57. As a practical matter, Molina’s decision to adopt the flexPATH TDFs as the

Plan’s QDIA resulted in the hiring of flexPATH as the Plan’s 3(38)

investment manager, which in turn led inevitably to the selection by

flexPATH of its own TDFs. There is no record in any of the Committee’s

minutes of a separate decision-making process by the Committee to hire

flexPATH, and some of the Committee’s members did not even remember

or understand that flexPATH was a separate entity distinct from the TDFs.

Moreover, the testimony at trial established that in every instance in which

an NFP client adopted the flexPATH TDFs, it hired flexPATH as a 3(38)

manager, and every time flexPATH has been hired as a 3(38) manager, it has

determined that its own funds are the best fit for the plan.

Lauderdale selected NFP and flexPATH at the same time through a request for

proposals after retaining an independent advisor. When it did so, the plan

understood that NFP and flexPATH “were ‘basically the same’ and ‘joined at the

hip,’” and it “hired NFP in part because of its ability to offer the flexPATH TDFs

through flexPATH.” Id. at *10–11. Thus, it does not appear that NFP promoted

flexPATH to the plan while serving as a plan fiduciary with a duty to act only in

the plan’s interest, nor that there was any failure by NFP to adequately disclose its

close relationship to flexPATH in Lauderdale.

58. On March 31, 2016, the same day it signed the IMA, the Molina Committee

took another step toward adopting the flexPATH TDFs when it entered into

a Participation Agreement with Wilmington Trust, which caused the Plan to

“become a Participating Plan (as such term is defined in the Trust) in the

Trust.” The Participation Agreement authorized Wilmington Trust to pay

flexPATH 10 basis points from the flexPATH TDFs.

59. On April 5, 2016, Molina sent Fidelity Investments (the Plan’s

recordkeeper) a letter of direction instructing it to replace the Vanguard

TDFs with the flexPATH TDFs on the Plan’s investment menu.

60. In April 2016, a communication from Fidelity Investments notified Plan

participants of forthcoming changes to the Plan’s investment lineup. This

included replacing the Vanguard TDFs with the flexPATH TDFs.

Participants were given an opportunity to submit a new fund selection prior

to May 16, 2016, when all existing balances were to be transferred to the

new funds if participants did not elect otherwise.

61. On May 16, 2016, the Plan’s assets invested in the Vanguard TDFs were

transferred to the flexPATH TDFs.

62. Ultimately, more than half of the Plan’s investments were transferred into

the flexPATH TDFs. The vast majority of this money—between 96 and 99

percent—was invested in the moderate TDFs.

Replacement of NFP and flexPATH

63. Through February 2020, the Molina Committee continued to meet quarterly

and to receive scorecards from NFP. flexPATH did not separately send

representatives to the Committee meetings.

64. Because the flexPATH TDFs were brand new when added to the Plan, they

lacked the five-year history typically used to evaluate performance. Thus,

the scorecards the Committee reviewed, both initially and throughout the

time the flexPATH TDFs were in the Plan, did not contain scores for the

flexPATH TDFs themselves, but rather relied on scores of the underlying

funds in which the flexPATH TDFs invested.

65. Eventually, in late 2019, Molina sent a request for proposals (RFP) for

investment advisory services to seven companies.

66. Five companies returned an RFP response in February 2020. Multiple

companies recommended replacement of the flexPATH TDFs.

67. In April 2020, the Committee decided to replace NFP with SageView

Advisory Group as the Plan’s 3(21) investment advisor.

68. Molina and SageView entered into a Master Services Agreement for

investment advisory services effective May 1, 2020, and Molina notified

NFP on June 8, 2020 that Molina was terminating its IAA with NFP

effective June 30, 2020.

69. In August 2020, SageView recommended that the flexPATH TDFs be

replaced with the Fidelity Freedom Index Premier Suite. The Committee

approved the fund changes on August 25, 2020.

70. On September 1, 2020, Molina appointed SageView as the 3(38) investment

manager for the Plan’s TDFs, effective August 18, 2020.

71. The Fidelity Freedom Index TDFs were added to the Plan on October 26,

2020, and all assets in the flexPATH TDFs were transitioned to the new

Fidelity Freedom Index TDFs.

72. For its services as a 3(38) investment manager during the time the flexPATH

TDFs were the Plan’s QDIA, flexPATH was paid approximately $543,000.

This payment was for flexPATH’s fees as a 3(38) investment manager and

was owed to flexPATH regardless of whether the flexPATH TDFs remained

in the Plan’s investment options.

Litigation History

73. On March 18, 2022, Plaintiffs filed this putative class action alleging ERISA

claims against Molina. Dkt. No. 1.

74. On July 21, 2022, after Molina moved to dismiss the complaint, Plaintiffs

filed a First Amended Complaint (FAC) that added claims against the other

Molina Defendants and NFP. Dkt. No. 43.

75. Defendants moved to dismiss the FAC, and on September 9, 2022, Plaintiffs

filed the Second Amended Complaint (SAC), adding claims against

flexPATH. Dkt. No. 79.

76. The Court granted in part Defendants’ motions to dismiss the SAC and

motion for summary judgment, dismissing all claims against NFP and some

claims against the remaining defendants. Dkt. Nos. 123, 189.

77. After the Court’s rulings, the following claims in the SAC remained for trial:

Count 1, alleging that the Molina Defendants breached their fiduciary duty

of prudence and flexPATH breached its fiduciary duties of prudence and

loyalty by causing the causing the flexPATH TDFs to be added and retained

in the Plan; Count 3, alleging that Molina and the Board failed to monitor

their delegated fiduciaries; and Count 4, alleging that the Molina Defendants

engaged in prohibited transactions in violation of 29 U.S.C. § 1106(a)(1)(A),

(C), and (D), and that flexPATH engaged in prohibited transactions in

violation of § 1106(a)(1)(D) and § 1106(b)(1)–(2) when they caused the Plan

to use the flexPATH TDFs.

78. Pursuant to a stipulated motion, the Court certified a class of “[a]ll

participants of the Molina Salary Savings Plan from March 18, 2016 through

October 26, 2020 who invested in a flexPATH Index target date fund

through an individual Plan account, and their beneficiaries, excluding

Defendants.” Dkt. No. 127.

Loss Experts

79. At trial, the parties offered competing expert opinions on the loss, if any,

caused by Defendants’ selection of the flexPATH TDFs as the Plan’s QDIA.

80. Defendants’ expert Dr. John Chalmers compared the returns of the

flexPATH TDFs during the Class Period to the median among all other to-

retirement TDFs and also to three indices—the Dow Jones Target Date Total

Return Index, the S&P Target Date Total Return Index, and the S&P Target

Date To Retirement Index.

81. For every vintage, the aggressive and moderate flexPATH TDFs

outperformed the median to-retirement TDFs, while the conservative

flexPATH TDFs generally underperformed the median. Because the

overwhelming majority (between 96% and 99%) of the Plan’s funds

invested in the flexPATH TDFs were invested in the high-performing

moderate funds, the Plan’s investment in the flexPATH TDFs obtained

greater returns during the Class Period than did the median to-retirement

TDF in the market.

82. Dr. Chalmers’s comparison of the flexPATH TDFs to the three indices he

selected shows a similar pattern of strong performance. For every vintage,

the aggressive and moderate flexPATH TDFs outperformed at least two of

the three indices. For the 2035 vintage, the aggressive and moderate

flexPATH TDFs outperformed all three indices, and for the 2055 vintage, all

three flexPATH TDFs outperformed all three indices. For the 2025 vintage,

the S&P Target Date Total Return Index slightly outperformed the moderate

flexPATH TDFs (7.17% annualized cumulative return versus 7.10%). For

the 2045 vintage, the Dow Jones Target Date Total Return Index—which in

all other vintages underperformed both the aggressive and moderate

flexPATH TDFs—slightly outperformed both (8.72% annualized cumulative

return versus 8.71% and 8.65%).

83. Dr. Chalmers calculated that, over the Class Period, the Plan’s investment in

the flexPATH TDFs earned more than each of the three indices: $8,485,915

more than the Dow Jones Target Date Total Return Index, $3,276,260 more

than the S&P Target Date Total Return Index, and $9,709,591 more than the

S&P Target Date To Retirement Index.

84. Thus, if any of the three indices identified by Dr. Chalmers is the appropriate

comparator, the Plan suffered no loss as a result of the selection or retention

of the flexPATH TDFs.

85. Taking a different approach, Plaintiffs’ expert Dr. Gerald Buetow identified

four other investment options that he determined were alternatives a prudent

fiduciary would have selected as the Plan’s QDIA instead of the flexPATH

TDFs: TDFs offered by American Funds, T. Rowe Price, State Street, and

Vanguard. The Vanguard TDFs are the same funds that were replaced by

the flexPATH TDFs as the Plan’s QDIA.

86. The four funds selected by Dr. Buetow as comparators outperformed both

the market and the flexPATH TDFs during the Class Period. Dr. Buetow

was aware before selecting the comparator funds that they had performed

extraordinarily well during the Class Period, but he opines that a prudent and

loyal fiduciary would have selected them ex ante without the benefit of Dr.

Buetow’s knowledge of their actual performance. Dr. Buetow testified that

he attempted not to let his knowledge of their actual returns influence him

when performing his analysis, but he acknowledged that it was difficult to

do so.

87. Plaintiffs’ expert Dr. Brian Becker calculated the difference in investment

returns between the flexPATH TDFs and the four comparator TDFs

identified by Dr. Buetow from May 16, 2016 through October 26, 2020,

with losses brought forward through August 31, 2023, to account for lost

investment opportunity. Based on that comparison, he calculated the Plan’s

net losses from investing in the flexPATH TDFs relative to each of the other

plans as follows:

Comparator

Net Losses

TDF

American Funds $28,079,430

T. Rowe Price $22,748,128

State Street $17,057,559

Vanguard $9,790,540

88. Dr. Becker did not independently determine that the four comparator TDFs

selected by Dr. Buetow were prudent alternatives that a prudent fiduciary

would have selected as the Plan’s QDIA. Dr. Becker merely calculated

losses on the assumption that the other TDFs were appropriate comparators.

Appropriate Comparators and Daubert Motions

89. Plaintiffs do not challenge the accuracy of Dr. Chalmers’s calculations, and

Defendants do not challenge the accuracy of Dr. Becker’s calculations. The

parties’ dispute instead focuses on which expert used appropriate

comparators to calculate the amount of any losses to the Plan.

90. Defendants move to exclude as unreliable Dr. Buetow’s opinion that a

prudent and loyal fiduciary would have favored the TDFs offered by

American Funds, T. Rowe Price, State Street, and Vanguard.3 Dkt. No. 218.

Relatedly, they move to exclude Dr. Becker’s loss calculations because they

3 The Court assumes without deciding that individual funds rather than market

indices may under some circumstances be legally permissible comparators for

purposes of determining whether a fiduciary breach caused a loss and calculating

the amount of such loss.

are predicated on Dr. Buetow’s selection of the comparator funds. Dkt. No.

217.

91. Dr. Buetow testified that he employed quantitative analysis to select his

comparator funds based on information that was available to a reasonable

investor ex ante. Dr. Buetow began by collecting the available TDFs that

had at least a five-year performance history as of September 2015.4 He

identified 24 TDFs available to mutual funds and 19 TDFs available to CITs.

He then generated a composite score for each TDF based on a combination

of eight measures of performance: four based on a five-year history and four

based on a three-year history.

92. Investment professionals frequently use composite scores based on similar

performance metrics to evaluate the performance history of an investment.

The precise formula Dr. Buetow used, however, is his own, and he is not

aware of anyone else who uses exactly the same methodology for calculating

composite scores.

93. Dr. Buetow assumed that a higher composite score reflecting stronger past

performance is predictive of future performance, but he conducted no

investigation whether his composite scores actually correlated with

performance.

94. Dr. Buetow did not select as comparator TDFs the funds that received the

highest composite scores based on his quantitative analysis. Instead, he

considered several factors he identified as “qualitative” before selecting four

comparator TDFs in what he claimed was an exercise of his professional

judgment. In making these selections, Dr. Buetow chose funds that he knew

had actually performed well during the Class Period over funds that received

4 Dr. Buetow used information available as of September 30, 2015 to conduct his

analysis. This approach appears to assume that the relevant time for determining

what investment opportunity a reasonable fiduciary would select was in the fall of

2015, when Molina first decided to replace the Plan’s QDIA with the flexPATH

TDFs. Any decisions made in the fall of 2015 are outside the statute of repose.

Dr. Buetow does not appear to have conducted a similar analysis based on the

information available to a reasonable fiduciary within the repose period (i.e., in the

spring of 2016 or later). However, Defendants have not objected to his analysis on

that basis, and the Court assumes that any differences in Dr. Buetow’s analysis

based on the changed date would be immaterial.

higher quantitative scores based on the performance history available in

2015 but that Dr. Buetow knew had ultimately performed more poorly

during the Class. Indeed, some of the funds Dr. Buetow selected as

comparators had below-average composite scores based on the information

available in September 2015.

95. Dr. Buetow’s explanations for not selecting as comparators some of the

funds that received higher composite scores are unpersuasive. For example,

Dr. Buetow stated that he did not use the top-scoring fund (Putnam) in part

because it was labeled as a sustainable fund, even though only the mutual

fund version of the TDF included that word, and it was added in 2022, well

after the Class Period.5 Dr. Buetow’s stated reason for not selecting the top-

scoring fund as an option that a prudent investor would have chosen in 2015

was therefore based in part on information that no prudent investor could

possibly have considered in 2015 (or at any time during the Class Period).

96. Two of the comparator TDFs Dr. Buetow selected—those offered by

American Funds and T. Rowe Price—rely primarily on actively managed

underlying funds. The Molina Committee, however, expressed a strong

preference for a TDF that relied on passively managed funds. Dr. Buetow’s

suggestion that the Committee would have selected American Funds or T.

Rowe Price in the absence of a fiduciary breach is entirely speculative and

unmoored from the Committee’s stated preferences.

97. The Vanguard TDFs that were replaced as the QDIA scored poorly on Dr.

Buetow’s composite scoring rubric. In its quarterly meetings, the

Committee repeatedly received scorecards placing the Vanguard TDFs on a

watchlist. While NFP may have been incentivized to overstate the weakness

of the Vanguard funds to increase the likelihood that the Committee would

select the flexPATH Funds as a replacement, the scorecards were based

largely on objective data. Moreover, the Committee wanted to replace the

Vanguard TDFs because it believed the Vanguard TDFs were too

aggressive. Even apart from the Committee’s subjective preferences, which

may have been influenced by NFP’s salesmanship, there were reasons to be

concerned about the Vanguard TDFs based on both the information in the

5 Dr. Buetow testified that he also did not select Putnam because he knew that

Putnam (like other funds he identified) had faced legal issues between 2004 and

2008. On cross-examination, he acknowledged that he had not mentioned these

issues in his expert report.

scorecards presented to the Committee and the publicly available

information used by Dr. Buetow to generate his scoring rubric.

Accordingly, the Court cannot assume that a prudent fiduciary would have

retained the Vanguard TDFs as the Plan’s QDIA throughout the Class

Period.6

98. The Court finds Dr. Buetow’s explanations for the funds he selected as

comparators to be unreliable. Dr. Buetow appears to have been influenced

in his selection of comparators by his knowledge of how the funds actually

performed during the Class Period, leading to his choice of the best

performers as comparators. The flaws in his methodology—such as

ignoring the fund with the highest quantitative score based in part on

information that did not exist in 2015—are more readily explainable as the

product of result-oriented analysis than as human error. This impression is

consistent with Dr. Buetow’s testimony at trial, which not only highlighted

the implausibility of some of his justifications for selecting or not selecting

certain comparators, but also veered into what appeared to be advocacy at

times.

99. In sum, the Court finds it speculative, at best, to conclude that prudent, loyal

fiduciaries in 2015 would have selected as the Plan’s QDIA the TDFs

6 Addressing Defendants’ summary judgment argument that Plaintiffs had merely

cherry-picked comparators that in hindsight outperformed the flexPATH TDFs, the

Court stated, “it is not clear that [Plaintiffs] have done so here. In particular, a

reasonable factfinder might conclude that Plaintiffs’ evidence that the flexPATH

TDFs underperformed the Vanguard TDFs they replaced provides a nonspeculative

basis for calculating damages based on the profits the Plan would have obtained if

Defendants had not switched to the flexPATH TDFs.” Dkt. No. 189 at 15–16.

The Court also noted that “Defendants cite no cases holding that a plaintiff alleging

the imprudent replacement of one fund with another fund cannot use the

performance of the replaced fund as a measure of loss resulting from the breach.”

Id. at 16 n.10. After reviewing the full trial record and applicable law, it does not

appear—at least under the circumstances present here—that the Court can assume

that a prudent investor would have retained for years a fund that scored poorly on

both the scorecards presented to the Committee and the composite score prepared

by Dr. Buetow based on publicly available information, simply because it was the

status quo. Such inaction may be consistent with human nature (and therefore

nonspeculative in one sense), but it is not consistent with prudence. The Court did

not intend to suggest otherwise in its summary judgment ruling.

offered by American Funds, T. Rowe Price, State Street, or Vanguard

instead of the flexPATH TDFs (or other TDFs that scored higher on Dr.

Buetow’s quantitative analysis). Plaintiffs have not shown that the funds

suggested by Dr. Buetow are appropriate comparators for evaluating

whether any fiduciary breaches in selecting or retaining the flexPATH TDFs

caused losses to the Plan. See Brotherston v. Putnam Invs., LLC, 907 F.3d

17, 34 (1st Cir. 2018) (whether expert picked suitable comparators for loss

calculation is a question of fact).

100. In contrast, the Court finds the opinions rendered by Dr. Chalmers to be

persuasive. The indices he selected provide appropriate comparators for

assessing whether the selection and retention of the flexPATH TDFs caused

losses to the Plan. Indeed, Dr. Buetow’s own report used the S&P Target

Date Index series as the benchmark for the performance of the TDFs he

evaluated, and Plaintiffs’ Second Amended Complaint uses it as a

benchmark for the flexPATH TDFs. Dkt. No. 79 ¶ 105; see also id. ¶ 105 n.

22 (“The S&P Target Date Fund benchmark is used by Morningstar and the

Plan’s current investment consultant (SageView) to benchmark target date

fund strategies. Morningstar, a leading provider of investment research and

investment services, is relied upon by industry professionals.”). The Dow

Jones Target Benchmark Index is also identified in Plan disclosures as a

benchmark for the flexPATH TDFs.

101. Because the Court finds Dr. Buetow’s selection of comparators unpersuasive

and does not rely on it (or on Dr. Becker’s calculations using those

comparators), it is unnecessary to decide whether Dr. Buetow’s opinion is so

unreliable that it should be excluded under Daubert.7 Instead, the Court

rejects his opinions in its role as a fact finder.

CONCLUSIONS OF LAW

Jurisdiction and Venue

1. Plaintiffs’ claims all arise under ERISA, a federal statute. The Court has

subject-matter jurisdiction under 28 U.S.C. § 1331 and 29 U.S.C.

§ 1132(e)(1).

7 Defendants’ Daubert motions are therefore DENIED as moot.

2. Defendants have appeared and have not disputed that they are subject to

personal jurisdiction.

3. Venue is proper to 29 U.S.C. § 1132(e)(2) because the Plan was

administered in this district and at least one defendant resides in this district.

Fiduciary Duties

4. Defendants are all undisputedly fiduciaries for purposes of ERISA.

5. ERISA imposes three duties on fiduciaries that Plaintiffs invoke in this case.

First, “a fiduciary shall discharge his duties with respect to a plan solely in

the interest of the participants and beneficiaries and—(A) 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). This duty of loyalty prohibits fiduciaries from “engaging

in transactions that involve self-dealing or that otherwise involve or create a

conflict between [their] fiduciary duties and personal interests.’” Terraza v.

Safeway Inc., 241 F. Supp. 3d 1057, 1069 (N.D. Cal. 2017) (quoting

Restatement (Third) of Trusts § 78 (2007)). “When it is possible to question

the fiduciaries’ loyalty, they are obliged at a minimum to engage in an

intensive and scrupulous independent investigation of their options to insure

that they act in the best interests of the plan beneficiaries.” Howard v. Shay,

100 F.3d 1484, 1488–89 (9th Cir. 1996) (cleaned up).

6. Second, ERISA requires fiduciaries to act “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). “[E]ven in a defined-contribution plan where participants

choose their investments, plan fiduciaries are required to conduct their own

independent evaluation to determine which investments may be prudently

included in the plan’s menu of options.” Hughes v. Nw. Univ., 595 U.S.

170, 176 (2022) (citing Tibble v. Edison Int’l, 575 U.S. 523, 529–30 (2015)).

In assessing prudence, courts evaluate whether the fiduciary “employed the

appropriate methods to investigate the merits of the investment” at the time

of the challenged transaction. Wright v. Oregon Metallurgical Corp., 360

F.3d 1090, 1097 (9th Cir. 2004). Thus, “the court focuses not only on the

merits of the transaction, but also on the thoroughness of the investigation

into the merits of the transaction.” Tibble v. Edison Int’l, 843 F.3d 1187,

1197 (9th Cir. 2016) (en banc) (quoting Howard, 100 F.3d at 1488).

7. Third, and related to the duty of prudence, ERISA requires fiduciaries to act

“in accordance with the documents and instruments governing the plan.” 29

U.S.C. § 1104(a)(1).

Liability for Breach by Co-Fiduciaries

8. In addition to these primary duties, fiduciaries may be liable under ERISA

for breaches by co-fiduciaries under at least two circumstances.

9. First, a fiduciary “shall be liable for a breach of fiduciary responsibility of

another fiduciary with respect to the same plan” if (1) “he participates

knowingly in, or knowingly undertakes to conceal, an act or omission of

such other fiduciary, knowing such act or omission is a breach, (2) “by his

failure to comply with [his fiduciary duties] in the administration of his

specific responsibilities which give rise to his status as a fiduciary, he has

enabled such other fiduciary to commit a breach,” or (3) “he has knowledge

of a breach by such other fiduciary, unless he makes reasonable efforts under

the circumstances to remedy the breach.” Id. § 1105(a).

10. Second, while ERISA permits the delegation of fiduciary duties under

certain circumstances, id. § 1105(c), it imposes a “limited duty” upon the

primary fiduciaries to monitor and review the performance of their

appointed fiduciaries to ensure that they are fulfilling their fiduciary

obligations. Lauderdale v. NFP Ret., Inc., No. 8:21-CV-301-JVS, 2022 WL

17260510, at *24 (C.D. Cal. Nov. 17, 2022); In re Computer Scis. Corp.

ERISA Litig., 635 F. Supp. 2d 1128, 1144 (C.D. Cal. 2009). “An appointing

fiduciary ‘must act with prudence in supervising or monitoring the agent’s

performance and compliance with terms of delegation’” and “should ‘review

the performance of [its] appointees at reasonable intervals and in such a

manner as may be reasonably expected to ensure that their performance has

been in compliance with the terms of the plan and statutory standards.’”

Lauderdale, 2022 WL 17260510, at *24 (quoting Restatement (Third) of

Trusts § 80 cmt. D(2); In re Computer Scis. Corp., 635 F. Supp. 2d at 1144).

Delegating fiduciaries cannot “abdicate their duties under ERISA merely

through the device of giving their lieutenants primary responsibility for the

day to day management” of the plan. Leigh v. Engle, 727 F.2d 113, 135 (7th

Cir. 1984). When delegating fiduciaries know that their delegees have

conflicting loyalties with respect to investments, they must “take prudent

and reasonable action to determine whether the administrators were fulfilling

their fiduciary obligations,” although they need not examine every action

taken by the delegees. Id.

11. A claim for breach of the duty to monitor is derivative of the underlying

claim for breach of fiduciary duty. Lauderdale, 2022 WL 17260510, at *24.

Thus, if the underlying claim fails, the claim for violation of the duty to

monitor also fails. In re Computer Scis. Corp., 635 F. Supp. 2d at 1144.

Prohibited Transactions

12. In addition to the imposition of the general fiduciary duties described above,

ERISA prohibits fiduciaries from engaging in specific transactions

irrespective of whether the plaintiff can independently establish a breach of

fiduciary duty. These prohibited transactions are codified in 29 U.S.C.

§ 1106(a) and (b).

13. Relevant to Plaintiffs’ surviving claims, § 1106(a)(1) prohibits a fiduciary

from “caus[ing] the plan to engage in a transaction, if he knows or should

know that such transaction constitutes a direct or indirect—(A) sale or

exchange, or leasing, of any property between the plan and a party in

interest; . . . (C) furnishing of goods, services, or facilities between the plan

and a party in interest; [or] (D) transfer to, or use by or for the benefit of a

party in interest, of any assets of the plan.”

14. Subsection (b), in turn, prohibits a fiduciary from (1) “deal[ing] with the

assets of the plan in his own interest or for his own account” or (2) “act[ing]

in any transaction involving the plan on behalf of a party . . . whose interests

are adverse to the interests of the plan or the interests of its participants or

beneficiaries.” Id. § 1106(b).

Loss

15. Under ERISA, a fiduciary who breaches his duties “shall be personally

liable to make good to [the] plan any losses to the plan resulting from each

such breach.” 29 U.S.C. § 1109(a). Section 1109(a) also permits recovery

of losses caused by a prohibited transaction. See Kim v. Fujikawa, 871 F.2d

1427, 1430 (9th Cir. 1989) (affirming award under § 1109(a) for prohibited

transaction).

16. A fiduciary must pay only the damages resulting from the portion of the

investment that was imprudent, not the entire amount of the investment.

Cal. Ironworkers Field Pension Tr. v. Loomis Sayles & Co., 259 F.3d 1036,

1047 (9th Cir. 2001).

17. In determining loss, “the measure of damages is the amount that affected

accounts would have earned if prudently invested.” Graden v. Conexant

Sys. Inc., 496 F.3d 291, 301 (3d Cir. 2007); see also Donovan v. Bierwirth,

754 F.2d 1049, 1056 (2d Cir. 1985) (“[W]e hold that the measure of loss

applicable under [§ 1109] requires a comparison of what the Plan actually

earned on the [imprudent] investment with what the Plan would have earned

had the funds been available for other Plan purposes. If the latter amount is

greater than the former, the loss is the difference between the two; if the

former is greater, no loss was sustained.”).

18. “When precise calculations are impractical, trial courts are permitted

significant leeway in calculating a reasonable approximation of the damages

suffered.” Cal. Ironworkers, 259 F.3d at 1047. Where several alternative

investment options were equally plausible, courts “should presume that the

funds would have been used in the most profitable of these.” Donovan, 754

F.2d at 1056.

19. “[T]o determine whether there was a loss, it is reasonable to compare the

actual returns on [the improperly selected] portfolio to the returns that would

have been generated by a portfolio of benchmark funds or indexes” not

affected by the fiduciary breach. Brotherston, 907 F.3d at 34; accord Cal.

Ironworkers, 259 F.3d at 1047 (approving reliance on benchmark as

appropriate basis for comparison).8

Plaintiffs’ Failure to Prove Loss

20. During the Class Period, the flexPATH TDFs outperformed most other to-

retirement TDFs and all three of the benchmark indices that are appropriate

comparators in this case: the Dow Jones Target Date Total Return Index,

the S&P Target Date Total Return Index, and the S&P Target Date To

Retirement Index. Using any of these indices as a comparator, the Plan

earned more through its investment in the flexPATH TDFs than it would

have earned if the Plan’s funds had been otherwise invested in a prudent

8 The Court in its summary judgment ruling used the term “benchmark”

imprecisely as a synonym for “comparator” when discussing Brotherston. Dkt.

No. 189 at 16 n.10. Brotherston appears to use “benchmark” more narrowly,

adopting its meaning as a term of art in the investment industry to refer to a

composite measure of the average returns of a relevant subset of the investible

universe (e.g., the S&P 500) against which performance may be measured.

alternative selected by a prudent and loyal fiduciary. Accordingly, even

using the most profitable reasonable benchmark, the selection and retention

of the flexPATH TDFs as the Plan’s QDIA did not cause a loss to the Plan.

21. Plaintiffs summarily suggest that payment of fees to flexPATH constituted

an additional loss to the Plan because the money paid as fees could

otherwise have been invested in other opportunities. Dkt. No. 244-1 at 109.

The funds paid to flexPATH for its services as a 3(38) investment manager

total less than $550,000. The flexPATH TDFs earned $3,276,260 more

during the Class Period than the best-performing benchmark index (the S&P

Target Date Total Return Index). Thus, even assuming that Plaintiffs’

theory is otherwise legally viable, which the Court does not decide, and that

the investment manager fees paid to flexPATH should be considered as part

of the loss calculation, the Plan still outearned the strongest benchmark by

more than $2.7 million during the Class Period. The Plan therefore suffered

no losses even if the investment manager fees are considered.

22. The Court’s determination that the selection and retention of the flexPATH

TDFs caused no loss to the Plan does not turn on who bears the burden of

proof on causation. It is undisputed that the flexPATH TDFs outperformed

all three benchmark indices, and the Court has determined as a factual matter

that those indices—rather than the TDFs identified by Dr. Buetow—provide

the appropriate comparators for loss determination.

23. Because the Plan did not suffer any loss, the Court need not resolve the

parties’ dispute over who bears the burden of establishing causation. See

Brotherston, 907 F.3d at 35 (“Our sister courts are split on who bears the

burden of proving or disproving causation once a plaintiff has proven a loss

in the wake of an imprudent investment decision.”) (collecting cases); Dkt.

No. 189 at 14–15 (declining to resolve the parties’ dispute because fact

issues precluded summary judgment regardless of who bears the burden).

24. The absence of any loss to the Plan precludes Plaintiffs from recovering

under § 1109(a) on any of their claims.

25. Because Plaintiffs have not shown any loss to the Plan from the selection or

retention of the flexPATH TDFs as the Plan’s QDIA, there is no need for the

Court to determine whether any Defendant breached its fiduciary duties of

prudence, loyalty, or compliance with plan documents or engaged in a

prohibited transaction, whether any such breach or prohibited transaction

occurred within the repose period, or whether any defendant may be

vicariously liable for a co-defendant’s breach.

Other Remedies

26. Plaintiffs assert that if the Court does not accept their theory of damages, it

has an obligation to fashion its own remedy. See Tussey v. ABB, Inc., 850

F.3d 951, 959–60 (8th Cir. 2017) (explaining that district court should have

considered alternative approaches to calculating damages). But this is not a

case in which Plaintiffs have merely failed to provide an appropriate

damages model for measuring the loss to the Plan. Instead, the Court finds

based on the trial record that there was no loss to the Plan. Absent a loss,

there are no damages to measure—and thus no basis under § 1109(a) to

order that fiduciaries “make good to [the] plan any losses to the plan

resulting from [their] breach.”

27. Plaintiffs also briefly request that flexPATH be ordered to disgorge either

the fees it received for its investment management services or other

unspecified profits for which Plaintiffs seek an accounting. The precise

remedy Plaintiffs seek appears to be a moving target. In their closing

argument, Plaintiffs asserted that they had “pursued disgorgement in terms

of the amount that’s been paid to flexPATH, which is, in our view, a

prohibited transaction.” Dkt. No. 252 at 1301:16–18. In their rebuttal

argument, they referred again briefly to “the disgorgement of the fees,”

contending that, “[i]f nothing else, we have established that flexPATH did

not earn the 543-some-odd-thousand dollars that it received in fees from

participants. And those can be ordered to be disgorged and that lost

investment opportunity would come into play.” Dkt. No. 253 at 1443:9–14.

In their proposed findings of fact and conclusions of law (both before and

after trial), however, they appear to seek unspecified profits other than the

investment manager fees paid to flexPATH, claiming that “[b]ecause

information regarding flexPATH’s profits is in its sole possession, an

accounting is needed to ascertain the amount that flexPATH must restore to

the Plan. . . . All such profits must be restored to the Plan.” Dkt. No. 196-1

at 77; Dkt. No. 244-1 at 109–110.

28. Under 29 U.S.C. § 1109(a), a fiduciary that breaches its duties to an ERISA

plan may be required to “restore to such plan any profits of such fiduciary

which have been made through use of assets of the plan by the fiduciary.”

29. To the extent Plaintiffs seek disgorgement of the 3(38) investment manager

fees paid to flexPATH, they have not shown that flexPATH received those

fees for selecting the flexPATH TDFs as the Plan’s QDIA, nor that the fees

are profits that flexPATH “made through use of assets of the plan.” Molina

was required by the IMA to pay these fees to flexPATH for its services as

the investment manager, regardless of whether the flexPATH TDFs were the

Plan’s QDIA.9 Moreover, the payment of flexPATH’s required fees for

these services was not itself a fiduciary act but rather a “purely ministerial”

act that does not give rise to fiduciary liability. See Santomenno v.

Transamerica Life Ins. Co., 883 F.3d 833, 840 (9th Cir. 2018) (“[A]t least

with respect to withdrawing its formula-driven fee from the pooled accounts,

[the plan administrator’s] actions were purely ministerial.”).

30. To the extent Plaintiffs seek disgorgement of other unspecified profits

flexPATH received apart from its investment manager fees, Plaintiffs have

not identified any such profits to be disgorged, nor any nonspeculative basis

for ordering an accounting.

31. Because the Plan suffered no loss from any Defendant’s alleged breach of

fiduciary duty or prohibited transaction, and Plaintiffs have not identified

9 Plaintiffs’ SAC alleged a separate claim against the Molina Defendants for breach

of fiduciary duties based on their selection of FlexPATH as the 3(38) investment

manager. Dkt. No. 79 ¶¶ 160–67. The Court granted the Molina Defendants’

motion to dismiss this claim because “Plaintiffs ha[d] not plausibly alleged any

losses caused by the selection of flexPATH as an investment advisor, separate

from the losses allegedly caused by the selection of the flexPATH Funds.” Dkt.

No. 123 at 26. Since the SAC alleged that the hiring of flexPATH as an

investment manager was caused by the decision to add the flexPATH TDFs to the

Plan, and the only losses it alleged were those caused by investment in the TDFs,

the Court found that “[i]n the absence of any identified losses independently

caused by the hiring of flexPATH, Plaintiffs have not alleged a plausible claim to

recover separately for that breach.” Id. The 3(38) fees paid to flexPATH for its

services arguably could have been alleged as losses resulting from the hiring of

flexPATH as an investment manager. However, the SAC did not mention the

3(38) fees and instead described additional fees charged based on investment in the

flexPATH TDFs, Dkt. No. 79 ¶¶ 59–60, as well as from using higher-cost versions

of investments, id. ¶¶ 107–18.

any remedy to which they are entitled, Plaintiffs cannot recover on any of

their claims in the Second Amended Complaint.

32. Defendants are therefore entitled to judgment in their favor on all claims.

DISPOSITION

In light of the above-stated findings of fact and conclusions of law, the Court

finds that Plaintiffs are not entitled to recover on any of their claims. Plaintiffs’

claims against all Defendants are therefore DISMISSED on the merits with

prejudice.

Defendants shall meet and confer with Plaintiffs and no later than March 27,

2024 shall file a proposed final judgment that is agreed as to form.

Date: March 20, 2024 ___________________________

Stanley Blumenfeld, Jr.

United States District Judge