Lorenz v. Safeway, Inc.
241 F. Supp. 3d 1005
N.D. Cal.2017Background
- Plaintiff Dennis Lorenz invested in Safeway 401(k) Plan’s JPMCB SmartRetire Passiveblend target-date funds (offered 2011–July 2016) and alleges lower returns due to fees and revenue-sharing.
- Safeway, Inc. and Safeway Benefit Plans Committee (the Safeway Defendants) sponsor/administer the Plan; JP Morgan RPS (later Great‑West/Empower) served as recordkeeper under a master services agreement.
- Master services agreement provided a contingent per‑participant fee ($67 then $65) paid via credits from asset‑based fees; excess credits accrued in a PEA and later an ERISA Spending Account with different terms.
- Lorenz’s SAC asserts (1) breach of ERISA fiduciary duty for selecting/retaining higher‑fee, underperforming JPM target‑date funds and (2) a prohibited transaction claim based on revenue sharing that allegedly caused excessive compensation to the recordkeeper.
- Court took judicial notice of plan documents and master services agreement amendments; motions to dismiss brought by Safeway and Great‑West challenged standing, timeliness, and sufficiency of the claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Article III standing to bring prohibited transaction claim | Lorenz: he suffered concrete financial injury because revenue sharing reduced his returns | Great‑West: no plausible theory that it received excessive compensation; statutory violation alone insufficient for Article III injury | Court: Lorenz has standing — at pleading stage assume merits; alleged concrete financial harm suffices |
| Timeliness of breach of fiduciary duty claim | Lorenz: continuing duty to monitor; retention through 2016 makes claim timely | Defs: disclosures in 2011/2012 gave actual knowledge and start the limitations period | Court: Breach claim timely under 6‑year repose and not barred under 3‑year rule because mere notice of funds/fees did not give actual knowledge of imprudent process |
| Timeliness of prohibited transaction claim | Lorenz: claim accrues continuously / continuing wrong | Defs: participant disclosures (2011) gave actual knowledge by 2012; suit filed in 2016 so beyond 3‑year limit | Court: Claim is barred by the 3‑year statute of limitations; dismissed with prejudice; Great‑West terminated from action |
| Failure to state breach of fiduciary duty (fees & revenue sharing) | Lorenz: JPM funds charged higher fees, underperformed vs. Vanguard; revenue sharing grew while participants declined, suggesting imprudence/excess compensation | Defs: fees were collected to credit a capped per‑participant fee; master agreement shows cap and permissible use of accruals; expense ratios within reasonable range | Court: Denied dismissal — taking pleadings and plan documents together, allegations plausibly infer imprudent process and potentially excessive revenue sharing; factual dispute for discovery |
Key Cases Cited
- Navarro v. Block, 250 F.3d 729 (9th Cir. 2001) (pleading-stage standards for considering documents incorporated by reference)
- Twombly v. Bell Atl. Corp., 550 U.S. 544 (plausibility standard for pleadings)
- Ashcroft v. Iqbal, 556 U.S. 662 (application of Twombly plausibility to individual allegations)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (constitutional standing requirements)
- Tibble v. Edison Int’l, 135 S. Ct. 1823 (continuing duty to monitor plan investments)
- Tibble v. Edison Int’l, 729 F.3d 1110 (9th Cir.) (actual‑knowledge/limitations and prudence analysis in ERISA context)
- Braden v. Wal‑Mart Stores, 588 F.3d 585 (8th Cir.) (inferring flawed fiduciary process from circumstantial allegations)
- Tussey v. ABB, Inc., 746 F.3d 327 (8th Cir.) (revenue sharing can support imprudence claims where it benefits fiduciaries/recordkeeper)