Ronald Tussey v. ABB, Inc.
746 F.3d 327
8th Cir.2014Background
- ABB sponsored large 401(k) plans (union and non‑union) with open‑architecture investment menus; Fidelity served as recordkeeper and many funds were Fidelity mutual funds.
- Beginning in 2000 Fidelity was mostly paid via revenue‑sharing; an outside consultant warned ABB the Plan might be overpaying and subsidizing Fidelity’s non‑Plan corporate services, but ABB did not adequately act on that advice.
- ABB replaced the Vanguard Wellington balanced fund with Fidelity Freedom target‑date (managed allocation) funds and "mapped" participants who did not choose alternatives into age‑appropriate Freedom Funds.
- Fidelity handled contributions through depository and redemption accounts and earned ‘‘float’’ interest on overnight holdings; Fidelity allocated float interest to the underlying funds, not retained by Fidelity.
- Participants sued under ERISA for fiduciary breaches (failure to monitor recordkeeping fees; excessive revenue sharing/subsidization; improper selection/mapping to Freedom Funds; misallocation of float), the district court found multiple breaches and awarded damages and attorney fees after a bench trial.
- On appeal the court affirmed some findings (recordkeeping breach) but reversed or vacated others (mapping damages, Fidelity’s float breach), remanding parts for further proceedings and vacating attorney fees as to Fidelity.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standard of review for discretionary Plan decisions | Participants: fiduciary acts outside benefit denials should be reviewed de novo to prevent abuse | ABB: broad Plan discretion requires Firestone deferential review (abuse of discretion) | Court: Firestone deference applies beyond benefit denials; district court should have applied abuse‑of‑discretion to many Plan administrator decisions. |
| Recordkeeping / revenue sharing (duty to monitor, subsidization) | Participants: ABB breached duties by failing to quantify/benchmark revenue sharing, negotiating rebates, and preventing subsidization | ABB: revenue sharing and bundling are common and permissible; broad investment menu defeats fee claims | Court: AFFIRMED breach for failure to monitor/control recordkeeping and prevent subsidization; damages based on expert testimony upheld. |
| Selection of investment options & mapping (Wellington → Freedom Funds) | Participants: replacement and mapping harmed Plan; mapping damages for losses caused by switch | ABB: selection and mapping were reasonable; district court used hindsight and failed to defer to Plan discretion; statute of limitations | Court: TIMELINESS OK but VACATED district rulings on selection/mapping due to improper standard (hindsight + lack of deference); remanded to apply abuse‑of‑discretion and revisit damages calculation. |
| Float ownership and fiduciary duty (overnight/depository & redemption float) | Participants: float and float income were Plan assets and Fidelity breached loyalty by not crediting Plan | Fidelity: float belonged to fund/investment options; Plan had no property interest; Fidelity earned no fee from float | Court: REVERSED district finding against Fidelity—on these facts float was not a Plan asset and Fidelity did not breach; dissent would have held otherwise under DOL regulation/field guidance. |
| Attorney fees allocation | Participants: entitlement to fees after success; seek substantial national blended rate | ABB/Fidelity: rate too high, included non‑attorney work; Fidelity objects to joint‑and‑several liability | Court: Vacated fee award as to Fidelity (no liability); remanded to recalculate fees against ABB consistent with vacatur and to exclude non‑attorney clerical work from attorney rates. |
Key Cases Cited
- Conkright v. Frommert, 559 U.S. 506 (deferential review to plan administrators when plan confers discretion)
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (trust principles justify deferential standard for discretionary plan decisions)
- Braden v. Wal‑Mart Stores, Inc., 588 F.3d 585 (ERISA duties of loyalty and prudence; fee/monitoring context)
- Hecker v. Deere & Co., 556 F.3d 575 (limitations on fee‑challenge theories where broad menu of options exists — fact‑specific)
- Peabody v. Davis, 636 F.3d 368 (method of calculating ERISA damages reviewed de novo; calculations for clear error)