Sacerdote v. N.Y. Univ.
328 F. Supp. 3d 273
S.D. Ill.2018Background
- Plaintiffs (NYU employees, class certified Aug. 9, 2010–present) sued NYU under ERISA § 404(a)(1)(B) claiming the Retirement Plan Committee breached its fiduciary duty of prudence concerning recordkeeping fees and monitoring two investment options (TIAA Real Estate Account and CREF Stock Account).
- Plaintiffs alleged imprudence in: (1) RFP and vendor-monitoring processes that left recordkeeping fees excessive (arguing consolidation to a single recordkeeper and different pricing would have reduced fees); and (2) failing to remove or properly benchmark the two TIAA funds, causing plan losses.
- The Committee used Cammack as an investment advisor; much of the Committee relied on Cammack, though some members (notably NYU’s CIO Surh) actively challenged recommendations; several Committee members displayed limited technical knowledge.
- Major factual features: ~75% of plan assets were in legacy TIAA annuities; TIAA annuities historically have only been recordkept by TIAA (making consolidation or mapping technically and contractually difficult); NYU undertook large institutional IT system upgrades that affected timing and feasibility of consolidation.
- The Court held an eight-day bench trial with testimony from plaintiffs, Committee members, vendor reps, and competing experts; after weighing credibility and the record, the court found plaintiffs failed to prove imprudence or causally related plan losses and entered judgment for NYU.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Recordkeeper selection & RFP process | NYU ran deficient RFPs, failed to consolidate recordkeepers sooner, and accepted uncapped revenue-sharing, causing excessive fees | NYU ran appropriate RFPs limited to non-annuity assets (because TIAA annuities were not recordkept by others), negotiated rate reductions, and consolidation was delayed by technical/contractual constraints | Court: Committee's process was adequate under circumstances; plaintiffs failed to show imprudence or resulting losses |
| Consolidation / "mapping" of TIAA annuities | Committee should have put all assets up for bid or forced mapping of legacy TIAA annuities to achieve lower fees | TIAA annuities are contractually/technically different; no vendor had experience recordkeeping them; mapping without participant consent was effectively infeasible | Court: Limiting RFP to non-annuity assets was reasonable; mapping was not a practicable alternative |
| Fee model (revenue-sharing vs per-participant cap) | Revenue-sharing without a cap produced excessive fees; per-participant flat fee would be prudent | Revenue-sharing is common for 403(b) plans; flat fees often higher or exclude services; NYU negotiated lower basis-point rates and secured retroactivity/credits | Court: Use of revenue-sharing was not imprudent here; plaintiffs’ fee model and damages evidence were unreliable |
| Monitoring & removal of TIAA Real Estate and CREF Stock Accounts | Committee used improper benchmarks and failed to remove objectively underperforming funds | Committee and advisor (Cammack) provided regular, detailed reviews; benchmarks are difficult for these unique funds; independent experts showed performance appropriate for risk | Court: Benchmarks and monitoring were adequate; reliable expert evidence showed funds’ performance was not imprudently poor and removal was not warranted |
Key Cases Cited
- Tibble v. Edison Int'l, 135 S. Ct. 1823 (2015) (affirming ERISA fiduciary duty to periodically review trust investments)
- Donovan v. Bierwirth, 680 F.2d 263 (2d Cir. 1982) (ERISA fiduciary duties characterized as trustee duties)
- PBGC v. Morgan Stanley Inv. Mgmt. Inc., 712 F.3d 705 (2d Cir. 2013) (prudence standard focuses on fiduciary process, not results)
- Katsaros v. Cody, 744 F.2d 270 (2d Cir. 1984) (prudent-person standard requires appropriate investigatory methods)
- In re Unisys Sav. Plan Litig., 74 F.3d 420 (3d Cir. 1996) (to rely on an expert, fiduciaries must review and test the expert’s analysis)
- Krinsk v. Fund Asset Mgmt., Inc., 875 F.2d 404 (2d Cir. 1989) (facts about fiduciaries’ independence and conscientiousness matter in fee challenges)
- Silverman v. Mutual Ben. Life Ins. Co., 138 F.3d 98 (2d Cir. 1998) (plaintiff bears burden to prove plan losses causally linked to breach)