Davis v. Washington University in St. Louis, No. 18-3345 (8th Cir. 2020)
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Three retirement-plan participants field suit against WashU for breach of its fiduciary duties under the Employee Retirement Income Security Act (ERISA). The district court dismissed the complaint for failure to state a claim.
The court held that plaintiffs sufficiently alleged that fees were too high and that WashU should have negotiated a better deal. The court held that a failure of effort or competence is enough to state a claim for breach of the duty of prudence. In this case, two inferences of mismanagement are plausible from the WashU's failure to offer more institutional shares. However, the court held that plaintiffs' claims that WashU had several underperforming investments in the plan for too long was properly dismissed, because the allegations failed to establish a meaningful benchmark for evaluating the challenged options. Accordingly, the court affirmed in part, reversed in part, and remanded.
Court Description: [Stras, Author, with Kelly and Melloy, Circuit Judges] Civil case - ERISA. In action alleging defendant mismanaged its section 403(b) retirement savings plan, thereby breaching its fiduciary duties to plaintiffs, its employees, the district court erred in dismissing for failure to state a claim plaintiffs' claims that fees charged for managing the investments were too high and that defendant should have negotiated a better deal with the investment firms; giving the claims the inferences plaintiffs were entitled to, the allegations were sufficient to allege actionable failure of effort or competence and thereby stated a claim for breach of the duty of prudence; plaintiffs' other claim that defendant should have dropped certain investment options as overly expensive and poor performers was properly dismissed as the allegations failed to establish a meaningful benchmark for evaluating the challenged options.
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