Sacerdote v. New York University, 9 F.4th 95

Background:

Plaintiffs are participants in two NYU defined-contribution §403(b) retirement plans (Faculty and Medical) administered by an NYU Retirement Plan Committee; plans offered options from TIAA‑CREF and Vanguard.
Plaintiffs sued under ERISA §1132(a)(2), alleging breaches of fiduciary duty for (inter alia) offering higher‑cost retail mutual‑fund share classes instead of lower‑cost institutional shares (the “share‑class” claim), excessive recordkeeping fees, use of revenue‑sharing, failure to consolidate recordkeepers, and retention of certain proprietary accounts.
The district court dismissed several claims at Rule 12(b)(6) stage (including the share‑class claim), allowed limited imprudence claims to proceed (recordkeeping, revenue‑sharing, and retention of two TIAA/CREF accounts), and later conducted a bench trial on the surviving claims, entering judgment for NYU.
Plaintiffs moved to amend to add individual Committee members as defendants; the district court denied leave to amend under Rule 16(b), and later denied post‑trial motions (including for individual removal and for a new trial based on judge disqualification).
On appeal the Second Circuit: (a) held the share‑class claim was adequately pled and reinstated it (vacating its dismissal), (b) vacated the denial of leave to amend (applied the wrong standard), and (c) affirmed the district court on plaintiffs’ jury, trial‑management (written direct declarations), bench‑trial findings (recordkeeper consolidation and investment‑retention), and recusal/new‑trial rulings.

Issues:

Issue	Plaintiff's Argument	Defendant's Argument	Held
1. Dismissal of the share‑class claim	Sacerdote: pleadings show retail shares (higher fees) were used though institutional shares were available; plausible inference of imprudence	NYU: offering retail shares can be prudent (liquidity, legitimate choices); dismissal harmless after trial findings	Reversed dismissal; claim plausibly pled and reinstated; dismissal not shown harmless on current record
2. Denial of leave to amend to add individual Committee members	Plaintiffs: district court applied wrong legal standard (used Rule 16 good‑cause rather than Rule 15 liberal leave)	NYU: scheduling order effectively cut off amendments and Rule 16 governs	Vacated denial; district court applied wrong rule; remanded for reconsideration under correct standard; related post‑trial rulings vacated as possibly prejudiced
3. Jury demand struck	Plaintiffs: Seventh Amendment right to jury	NYU: plaintiffs waived jury by failing to oppose motion to strike and proceeding to bench trial	Affirmed — plaintiffs waived jury right (did not timely oppose, did not move for reconsideration, and proceeded to bench trial)
4. Use of written declarations for direct testimony in bench trial	Plaintiffs: practice violated the Federal Rules and denied fair trial	NYU: court management practice; standard bench‑trial procedure; parties had notice	Affirmed — no abuse of discretion; plaintiffs effectively consented by participation
5. Trial findings: recordkeeper consolidation and investment retention	Plaintiffs: district court erred in crediting NYU and sustaining retention/consolidation choices	NYU: relied on credible testimony re IT/system constraints and appropriate benchmarks/deliberative monitoring	Affirmed — factual findings not clearly erroneous; NYU did not breach prudence on these claims
6. Motion for new trial based on Judge Forrest’s alleged disqualification	Plaintiffs: Judge Forrest’s association with Cravath and a NYU trustee created appearance of bias requiring new trial	NYU: relationship was remote/attenuated; plaintiffs waived or belatedly raised conflict	Affirmed — no reasonable, fully informed observer would doubt impartiality; motion denied

Key Cases Cited

Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading plausibility standard)
Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard and disregard of conclusory allegations)
Tibble v. Edison Int'l, 575 U.S. 523 (ERISA duty of prudence measured by trust law and focus on process)
Pension Benefit Guar. Corp. v. Morgan Stanley Inv. Mgmt. Inc., 712 F.3d 705 (2d Cir.) (prudence assessed in context; holistic portfolio consideration)
Donovan v. Bierwirth, 754 F.2d 1049 (2d Cir. 1985) (measure of loss and burden shifting on fiduciary)
LaRue v. DeWolff, Boberg & Assocs., Inc., 552 U.S. 248 (ERISA individual relief under §1132(a)(2))
Sweda v. Univ. of Pa., 923 F.3d 320 (3d Cir. 2019) (reinstating share‑class claim where cheaper institutional shares available)