74 F.4th 171
4th Cir.2023Background
- Lowe’s administered a $~5 billion, 401(k)-type defined-contribution plan managed by an Administrative Committee; the Committee hired Aon as an investment consultant in 2008.
- While consulting, Aon sought to cross-sell delegated‑fiduciary services (outsourcing of plan investment decisionmaking) to Lowe’s and had consultants with revenue/cross‑selling incentives.
- Aon advised the Committee to streamline the plan’s investment menu (presenting Alternative and Emerging structures); Aon’s sales pitch about delegated services was presented in proximity to the menu recommendations.
- After the Committee adopted the Emerging structure and engaged a delegated fiduciary, Aon moved roughly $1 billion of plan equity assets into Aon’s proprietary Growth Fund (a collective trust/manager‑of‑managers fund with a short track record).
- The Growth Fund underperformed many peers during the relevant period; Reetz (a plan participant) sued on behalf of a class alleging breaches of ERISA duties of loyalty and prudence.
- Following a five‑day bench trial, the district court found for Aon; the Fourth Circuit affirmed the judgment (majority opinion by Richardson), but Judge King dissented in part on the loyalty issue.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Aon’s pitching/cross‑selling of delegated services constituted fiduciary "investment advice" (duty of loyalty attaches) | Reetz: cross‑selling was tied to investment strategy decisions and thus was fiduciary conduct subject to the absolute loyalty duty | Aon: pitching/selling services is an arm’s‑length commercial negotiation, not investment advice, so no fiduciary duty attached to the sale | Held: Pitching/cross‑selling was not investment advice; no loyalty duty attached to the sales effort |
| Whether Aon’s recommendation to streamline the plan menu was tainted by self‑interest (breach of loyalty) | Reetz: Aon pushed a streamlined menu to increase likelihood Lowe’s would hire a delegated fiduciary (and Aon), so advice was motivated by self‑interest | Aon: menu advice was motivated by participant interests and recommended consistently over time; any incidental benefit to Aon did not drive the advice | Held: Menu recommendation was fiduciary advice but was not motivated by self‑interest; no breach of loyalty |
| Whether selecting Aon’s proprietary Growth Fund for the plan’s Growth option violated the duty of prudence (selection) | Reetz: Aon failed to consider alternatives after becoming delegated fiduciary and simply dumped assets into its under‑record fund | Aon: it had performed market review and created the Growth Fund after rejecting available alternatives; pre‑existing, reasoned analysis supported selection | Held: Selection was prudent—the pre‑fiduciary investigation into market options and the Fund’s design satisfied the reasoned‑process requirement |
| Whether Aon breached the continuing duty to monitor and remove imprudent investments (retention/monitoring) | Reetz: Aon failed to adequately monitor the Growth Fund after allocating plan assets | Aon: it established an oversight committee, tracked benchmarks/peers, adjusted asset allocation and underlying managers over time | Held: Aon satisfied the continuing monitoring duty by ongoing review and manager/asset adjustments; no prudence breach |
Key Cases Cited
- Pegram v. Herdrich, 530 U.S. 211 (2000) (ERISA fiduciary status is functional — ask whether party acted in a fiduciary capacity for the challenged conduct)
- Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. 409 (2014) (duty of prudence is context‑specific; courts must consider circumstances then prevailing)
- Tibble v. Edison Int’l, 575 U.S. 523 (2015) (ERISA fiduciaries have a continuing duty to monitor and remove imprudent investments)
- Bedrick v. Travelers Ins. Co., 93 F.3d 149 (4th Cir. 1996) (duty of loyalty is absolute; fiduciary must exclude selfish interest)
- DiFelice v. U.S. Airways, Inc., 497 F.3d 410 (4th Cir. 2007) (apply a functional analysis; fiduciary may wear one hat at a time)
- Darcangelo v. Verizon Commc’ns, Inc., 292 F.3d 181 (4th Cir. 2002) (ERISA fiduciary status is not all‑or‑nothing; examine specific conduct)
- Plasterers’ Loc. Union No. 96 Pension Plan v. Pepper, 663 F.3d 210 (4th Cir. 2011) (prudence inquiry contemplates investigation, research, and review of options)
- Santomenno v. Transamerica Life Ins. Co., 883 F.3d 833 (9th Cir. 2018) (selling or negotiating for services is not rendering ERISA investment advice)
- Leigh v. Engle, 727 F.2d 113 (7th Cir. 1984) (advice given at least in part to enhance advisor’s position can violate fiduciary loyalty)