Ramos v. Banner Health, 1 F.4th 769

Background

Banner Health sponsored a large (mega) 401(k) plan and from 1999–2017 used an uncapped revenue‑sharing recordkeeping agreement with Fidelity (fees rose with plan assets).
Plan fiduciaries never ran a market RFP over nearly two decades despite plan growth; plaintiffs alleged this failure to monitor breached ERISA fiduciary duties and caused overpayment to Fidelity.
Plaintiffs’ damages expert Martin Schmidt estimated ~$19.4 million in losses; the district court found his damages methodology unreliable after trial but relied on his breach evidence.
The district court instead approximated damages using the revenue‑credit payments Fidelity made to Banner, awarding $1,661,879.83 plus prejudgment interest at the IRS underpayment rate.
The district court denied injunctive relief (because Banner later moved to a $42 per‑participant fee) and entered judgment for Banner on the prohibited‑transaction claim; the class appealed.
The Tenth Circuit affirmed: it upheld exclusion of Schmidt’s damages testimony, approved the revenue‑credit damages approximation and IRS interest rate, affirmed denial of injunctive relief, and affirmed judgment for Banner on the prohibited‑transaction claim.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Admissibility of expert damages opinion	Schmidt’s experience‑based ranges suffice for ERISA damage approximation	Schmidt’s numbers lack a reliable, replicable methodology under Rule 702/Daubert	District court did not abuse discretion in rejecting Schmidt’s damages testimony but permitted his testimony on breach; affirmed
Measure of damages	District court should not substitute revenue credits; Schmidt’s (or other market) measure better captures losses	Court can craft a reasonable approximation when plaintiff’s proof is unreliable; revenue credits reflect amounts Fidelity itself returned	Court affirmed use of Fidelity’s revenue credits as a permissible, reasonable approximation ($1.66M)
Prejudgment interest rate	Interest should reflect plan/market returns (plaintiff suggested S&P or plan average)	IRS underpayment rate reasonably approximates lost investment opportunity and is non‑punitive	Court affirmed district court’s discretionary choice of the IRS underpayment rate
Prohibited transaction under §1106	Fidelity is a party‑in‑interest as a service provider; paying it is a prohibited transaction unless exempt	Service agreements at arm’s length do not automatically become prohibited transactions; §1106 targets transactions involving pre‑existing relationships or uses of plan assets likely to harm the plan	Court held initial arm’s‑length service contracts do not automatically constitute prohibited transactions; affirmed district court judgment for Banner

Key Cases Cited

FTC v. Kuykendall, 371 F.3d 745 (10th Cir. 2004) (Rule 52(a) findings must provide adequate basis for appellate review)
Sw. Stainless, LP v. Sappington, 582 F.3d 1176 (10th Cir. 2009) (factual findings reviewed for clear error)
Teets v. Great‑West Life & Annuity Ins. Co., 921 F.3d 1200 (10th Cir. 2019) (overview of ERISA fiduciary framework and prohibited‑transaction principles)
Eaves v. Penn, 587 F.2d 453 (10th Cir. 1978) (ERISA/duty‑of‑trust damages principles; courts may approximate losses)
Donovan v. Bierwirth, 754 F.2d 1049 (2d Cir. 1985) (district courts may fashion their own measures of loss when plaintiff’s proof is inadequate)
Cal. Ironworkers Field Pension Trust v. Loomis Sayles & Co., 259 F.3d 1036 (9th Cir. 2001) (significant leeway to approximate damages when precise calculation is impractical)
Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993) (Rule 702 reliability requirement for expert testimony)
Bitler v. A.O. Smith Corp., 400 F.3d 1227 (6th Cir. 2005) (expert opinions unsupported by data may be excluded)
Lockheed Corp. v. Spink, 517 U.S. 882 (1996) (§1106 enacted to categorically bar transactions likely to injure the plan)
Weber v. GE Group Life Assur. Co., 541 F.3d 1002 (10th Cir. 2008) (prejudgment interest awards reviewed for abuse of discretion)