Loomis v. Exelon Corp.
658 F.3d 667
| 7th Cir. | 2011Background
- Exelon's defined-contribution plan offers 32 investment options, including 24 mutual funds, with no-load shares and expense ratios from 0.03% to 0.96%.
- Plaintiffs allege ERISA fiduciary duties were violated by offering retail funds and having the plan bear the expenses rather than accessing lower-cost wholesale/institutional vehicles.
- Hecker v. Deere & Co. held that offering a broad range of retail funds can satisfy ERISA, and that requiring only institutional funds is not mandated.
- The Seventh Circuit in Hecker addressed whether plan sponsors must pursue wholesale/institutional access and discussed the safe harbor under § 1104(c).
- Plaintiffs appeal the district court’s dismissal on the pleadings and later raise issues about costs and fees under ERISA § 1132(g)(1) vs Rule 54(d).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ERISA requires wholesale/institutional funds | Plaintiffs argue plan should offer wholesale/institutional funds to lower costs. | Exelon argues retail funds are permissible and competition among funds suffices. | Retail funds may be offered; not required to choose only institutional funds. |
| Whether plan design must pay expenses directly to benefit participants | Plan should cover expenses to ensure higher gross returns for participants. | ERISA does not require employers to fund expenses; plan design decisions are permissible. | ERISA does not impose a fiduciary duty to increase plan value by subsidizing expenses. |
| Effect of § 1104(c) safe harbor on the case | Safe harbor would support limiting to lower-cost options. | Safe harbor encourages participant choice; not limited to institutional funds. | Safe harbor supports broad choice; not required to eliminate retail funds. |
| Whether ERISA § 1132(g)(1) supersedes Rule 54(d) regarding costs and fees | § 1132(g)(1) provides a different standard, potentially superseding Rule 54(d). | Rule 54(d) creates a presumption of costs for prevailing parties; § 1132(g)(1) is discretionary. | Remains discretionary; Hardt standard applies; not resolved to override Rule 54(d) here. |
| Whether the district court abused discretion on costs given no success on the merits | Plaintiffs claim costs should be denied because they failed on the merits. | Costs may be awarded under discretionary standards of Rule 54(d) and § 1132(g)(1). | Affirms discretionary decision on costs; plaintiffs did not succeed on any issue. |
Key Cases Cited
- Hecker v. Deere & Co., 556 F.3d 575 (7th Cir. 2009) (retail funds can be an acceptable ERISA portfolio; not required to scour for cheapest funds)
- Jones v. Harris Associates, L.P., 130 S. Ct. 1418 (U.S. 2010) (fiduciary duties of investment advisers; conflict of interest considerations clarified)
- Hardt v. Reliance Standard Life Insurance Co., 130 S. Ct. 2149 (U.S. 2010) (fee-shifting discretion: prevailing party may receive fees and costs if some success on merits)
- Nichol v. Pullman Standard Inc., 889 F.2d 115 (7th Cir. 1989) (precedent on costs/fee considerations in ERISA matters)
- Quinn v. Blue Cross & Blue Shield Association, 161 F.3d 472 (7th Cir. 1998) (ERISA fee/cost considerations and discretion)