Ronald Tussey v. ABB
850 F.3d 951
8th Cir.2017Background
- ABB-sponsored 401(k) plans offered tiered investment options; committee adopted policy to include "managed allocation" funds as defaults for some participants.
- ABB’s staff director (Cutler) recommended replacing the Vanguard Wellington Fund (static allocation) with Fidelity Freedom Funds (managed allocation/target-date family); ABB mapped about $123 million from Wellington to Freedom as a default for affected participants.
- Participants sued under ERISA, alleging ABB fiduciaries breached duties by favoring ABB/Fidelity interests (pricing concessions, excessive revenue sharing, poor monitoring) and by mapping Wellington assets to Freedom Funds.
- The district court found multiple breaches and awarded damages and attorneys’ fees; this Court in a prior opinion vacated the mapping damages as speculative and instructed the district court to "reevaluate" the damage methodology on remand while affirming other liabilities.
- On remand the district court again found fiduciary breaches (motivated by self-interest) but concluded participants failed to prove plan losses under the Court’s earlier guidance; the district court reduced but reaffirmed a substantial fee award and granted $25,000 incentive awards to each named plaintiff.
- This appeal: the Eighth Circuit upholds breach findings but vacates the judgment on damages and the attorney-fee award, directing the district court to determine loss measurement in the first instance and to adjust fees accordingly; incentive awards should be paid from the class recovery.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ABB fiduciaries breached ERISA duties by replacing Wellington with Freedom Funds and mapping assets | ABB acted for participants’ benefit? Plaintiffs: fiduciaries acted for ABB/Fidelity self‑interest (pricing deals), so breached duties | ABB: decisions were within plan discretion; panel’s prior comments bounded damages methodology | Court: No clear error in district court’s finding that fiduciaries acted on improper motives; breach affirmed |
| Proper method to measure plan losses from the mapping | Compare Freedom Funds’ returns to (a) Wellington returns or (b) other reasonable managed allocation alternatives based on trust-law presumptions favoring most profitable plausible strategy | ABB: prior opinion established a specific comparator (subset of managed allocation funds) and district court was bound by that mandate; also apples-to-oranges comparison is improper | Court: Prior opinion only suggested approaches; district court must reevaluate loss measurement in first instance and may consider multiple reasonable comparators; vacated judgment on damages |
| Whether comparison to Wellington is permissible | Plaintiffs: comparison may be relevant to show effect of owning one fund vs. another; causation of return differences irrelevant to measure of loss | ABB: such comparison is apples-to-oranges and should be excluded | Held: Comparison is not per se inappropriate; relevance depends on whether it shows losses; district court should assess on remand |
| Attorney fees and incentive awards | Plaintiffs: fees for trial and appeal reasonable; incentive awards appropriate | ABB: fee rates derived from another case are excessive; fees should be reduced; incentive awards should be paid from class recovery, not by defendants | Court: Vacates and remands fee award for adjustment if plaintiffs ultimately prevail on damages; district court did not abuse discretion in using prior rates for appellate fees; incentive awards must be paid from class recovery, not directly by defendants |
Key Cases Cited
- Tussey v. ABB, Inc., 746 F.3d 327 (8th Cir. 2014) (prior panel opinion guiding remand on damages methodology)
- Metro. Life Ins. Co. v. Glenn, 554 U.S. 105 (U.S. 2008) (conflict-of-interest principles for fiduciary review)
- Donovan v. Bierwirth, 754 F.2d 1049 (2d Cir. 1985) (trust-law presumption that, among equally plausible strategies, fiduciaries must account for the most profitable one)
- Martin v. Feilen, 965 F.2d 660 (8th Cir. 1992) (district court’s duty to fashion equitable remedies where damages proof is imperfect)
- Little Rock Sch. Dist. v. Arkansas, 127 F.3d 693 (8th Cir. 1997) (standard of review for appellate-fee awards is abuse of discretion)
- Koenig v. U.S. Bank Nat'l Ass'n, 291 F.3d 1035 (8th Cir. 2002) (incentive awards compensate lead plaintiffs and are paid from class recovery)
- Roth v. Sawyer-Cleator Lumber Co., 16 F.3d 915 (8th Cir. 1994) (breach without harm may be non-actionable if no effect on result)
- Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555 (U.S. 1931) (damages can be approximate if supported by just and reasonable inference)
- Garnatz v. Stifel, Nicolaus & Co., 559 F.2d 1357 (8th Cir. 1977) (approach to measuring damages when precise proof lacking)