243 F. Supp. 3d 179
D.D.C.2017Background
- Plaintiffs are low‑wage Colonial Parking employees whose employer-funded benefits are held in a plan administered by FCE; the plan is subject to ERISA.
- Before Oct. 2006 FCE charged a nominal per‑participant fee (~$4.50); thereafter FCE began charging a percentage of contributions, producing large fee increases (one plaintiff’s fee rose to ~$108.91).
- Plaintiffs allege Colonial routed employer‑paid insurance premiums through the Plan and converted FCE’s fee to a percentage basis to shift costs to the Plan and increase FCE’s revenue.
- Plaintiffs allege Colonial and FCE concealed the fee change and failed to satisfy ERISA reporting, disclosure, and claims‑procedure obligations; they also allege account irregularities and deficient administration.
- Defendants moved to dismiss; the court denied FCE’s motion, granted judicial notice of plan documents, granted in part and denied in part Colonial’s motion, and dismissed Plaintiffs’ §1133 claim against Colonial without prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FCE is an ERISA fiduciary for fee-setting | FCE exercised discretion over compensation by switching to percentage fees and benefitted from the arrangement | FCE says fees were set by an arm’s‑length contract and it had no discretionary control | Court: Plaintiffs plausibly alleged FCE exercised discretion over fees and so may be a fiduciary for compensation |
| Whether Colonial is a fiduciary for fee oversight | Colonial appointed/retained FCE and failed to monitor; it benefitted from fee structure | Colonial says plan design/fee terms are settlor functions (non‑fiduciary) | Court: Plaintiffs plausibly alleged Colonial retained discretionary authority/monitoring duty and thus fiduciary liability may attach |
| Whether fees were excessive (breach of prudence/loyalty) | Fees increased dramatically while administration was poor (missing statements, deficient claims process), suggesting breach | Defendants say plaintiffs do not plead facts showing fees unreasonable relative to services | Court: Allegations of huge fee spikes plus poor services are sufficient at pleading stage to state a plausible breach claim |
| Whether reporting/claims procedure/prohibited transactions claims survive | Plaintiffs allege failure to file SPD/annual reports, no claims process, and that payments to FCE were improper transactions | Defendants argue either they were not plan administrator or plaintiffs failed to plead denials/prohibited transaction specifics | Court: Plaintiffs stated plausible reporting/disclosure and prohibited‑transaction claims; §1133 claims conceded and dismissed without prejudice; administrator identity and some factual disputes deferred to discovery |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard: plausibility requirement)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility and pleading law)
- Lockheed Corp. v. Spink, 517 U.S. 882 (plan‑sponsor settlor functions not fiduciary acts)
- Santomenno ex rel. John Hancock Trust v. John Hancock Life Ins. Co., 768 F.3d 284 (arm’s‑length service contracts and fiduciary status)
- Hecker v. Deere & Co., 556 F.3d 575 (service provider fee‑setting and fiduciary duty analysis)
- Coyne & Delany Co. v. Selman, 98 F.3d 1457 (duty to monitor appointed fiduciaries)
- F.H. Krear & Co. v. Nineteen Named Trustees, 810 F.2d 1250 (service provider discretion over compensation can create fiduciary duties)