47 F.4th 570
7th Cir.2022Background:
- Plaintiff Andrew Albert, a former employee of an Oshkosh Corporation subsidiary, sued plan fiduciaries under ERISA alleging imprudent management of the Oshkosh 401(k) plan (2014–present), challenging recordkeeping, investment‑management, and investment‑advisor fees and related monitoring/disclosure practices.
- The Plan used Fidelity as recordkeeper and SAI (a Fidelity subsidiary) as investment advisor; the Plan has ~ $1.1 billion AUM and ~12,000 participants.
- Albert alleged at least 29 investment options charged excessive fees, relying on Form 5500 comparator data and a novel “net investment expense to retirement plans” / share‑class theory.
- District court dismissed the amended complaint for failure to state claims as to recordkeeping, investment‑management, and advisor fees, duty‑of‑loyalty, monitoring, prohibited transactions, and disclosure; Albert appealed.
- The appeal occurred alongside the Supreme Court’s decision in Hughes v. Northwestern Univ., which rejected a categorical safe‑harbor based on the presence of low‑cost funds and emphasized context‑sensitive prudence review; the Seventh Circuit here affirms dismissal after applying Hughes and existing precedent.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Recordkeeping fees excessive | Albert: Plan paid ~$87/participant vs comparators $32–$45 and fiduciaries failed to solicit bids | Oshkosh: Comparator list lacks service/quality context; higher price alone not enough; fiduciaries need not pick cheapest vendor | Dismissed — complaint fails to allege fees excessive relative to services; comparators insufficiently contextualized |
| Investment‑management fees — net‑expense / share‑class theory | Albert: Fiduciary should have selected share classes/alternatives that minimize net fees after revenue‑sharing; novel metric shows imprudence | Oshkosh: Theory is novel and unsupported; Form 5500 doesn’t show net fees actually borne by participants | Dismissed — allegation implausible and unsupported; no authority requires fiduciaries to use this metric |
| Investment‑management fees — actively managed vs passive funds | Albert: Plan offered expensive actively managed funds rather than cheaper passive alternatives | Oshkosh: Higher fees alone insufficient; active funds may justify fees with superior performance; plaintiffs must plead a meaningful benchmark | Dismissed — bare allegation active funds were ‘‘too expensive’’ lacks sound basis for comparison |
| Investment‑advisor fees / duty of loyalty re: SAI (Fidelity affiliate) | Albert: Fidelity urged use of SAI, enriching related entities; SAI fees were excessive and provided little value | Oshkosh: No allegations of kickbacks/self‑dealing; Fidelity/SAI not named fiduciaries; no comparator advisors or showing of unreasonable fees | Dismissed — no plausible allegation of disloyal self‑dealing or unreasonable compensation relative to alternatives |
| Duty to monitor / derivative claims | Albert: Fiduciary failed to monitor other fiduciaries about fees | Oshkosh: Monitor claims are derivative of the dismissed prudence/loyalty claims | Dismissed — derivative claims fail with underlying counts |
| Prohibited transactions via payments to parties in interest | Albert: Payments to Fidelity/SAI (parties in interest) were prohibited transactions under §1106 | Oshkosh: Literal reading would bar ordinary service payments and is implausible; affirmative exemptions and statutory context matter | Dismissed — routine service payments are not per se prohibited; complaint fails to plead a cognizable prohibited transaction |
| Duty to disclose revenue‑sharing method | Albert: Fiduciaries failed to disclose revenue‑sharing allocations and calculation methods | Oshkosh: ERISA disclosure jurisprudence (Hecker) and Form 5500 practice show internal post‑collection allocations need not be disclosed; total fees are the material figure | Dismissed — no duty to disclose internal revenue‑sharing allocation pleaded plausibly |
Key Cases Cited
- Hughes v. Northwestern Univ., 142 S. Ct. 737 (Sup. Ct.) (ERISA prudence inquiry must be context‑specific; availability of low‑cost options does not categorically defeat imprudence claims)
- Tibble v. Edison Int’l, 575 U.S. 523 (Sup. Ct.) (fiduciaries have ongoing duty to monitor and remove imprudent investments)
- Divane v. Northwestern Univ., 953 F.3d 980 (7th Cir.) (earlier Seventh Circuit decision vacated in part by Hughes; addressed menu‑of‑funds reasoning)
- Hecker v. Deere & Co., 556 F.3d 575 (7th Cir.) (total fee disclosure by plan administrator is material; internal revenue‑sharing allocations need not be disclosed)
- Loomis v. Exelon Corp., 658 F.3d 667 (7th Cir.) (fiduciaries not required to find the absolute cheapest fund)
- Dudenhoeffer (Fifth Third Bancorp v. Dudenhoeffer), 573 U.S. 409 (Sup. Ct.) (Rule 12(b)(6) standards in ERISA fiduciary suits require careful, context‑sensitive pleading)
- Allen v. GreatBanc Tr. Co., 835 F.3d 670 (7th Cir.) (prohibited transaction claim discussion; exemptions are affirmative defenses but certain transactions clearly fall within §1106)
- Smith v. CommonSpirit Health, 37 F.4th 1160 (6th Cir.) (claims that fees are excessive relative to services require plausible allegations that fees exceed services provided)