2:20-cv-01645
E.D. Wis.Jan 26, 2022Background
- Plaintiff Sharita Shaw filed a putative ERISA class action alleging defendants (Quad/Graphics, Inc., et al.) breached fiduciary duties by failing to monitor fees and investments, failing to move participants into the most prudent share classes, and failing to disclose participant fees.
- Defendants moved to dismiss under Fed. R. Civ. P. 12(b)(1) and 12(b)(6), relying heavily on the Seventh Circuit’s decision in Divane and related Seventh Circuit precedent.
- Plaintiff opposed, relying principally on the Supreme Court’s decision in Tibble v. Edison International to argue that the complaint sufficiently alleges a continuing duty to monitor.
- The motion was fully briefed by February 16, 2021.
- The Supreme Court granted certiorari in Divane (Hughes v. Northwestern Univ.) and on January 24, 2022 vacated the Seventh Circuit’s decision, holding the categorical rule in Divane conflicted with Tibble’s content-specific, continuing-duty inquiry.
- Because defendants’ motion relied extensively on Divane and similar categorical rulings, the district court denied the motion without prejudice and ordered defendants to file a status report by February 11, 2022 indicating how they would proceed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the complaint plausibly alleges ERISA fiduciary breaches for imprudent monitoring, excessive fees, and failure to use cheaper share classes | Complaint alleges continuing failures to monitor fees/investments and not moving participants to prudent share classes | The complaint is insufficient under Seventh Circuit precedents (Divane, Loomis, Hecker); dismissal is warranted | Denied without prejudice because the Supreme Court vacated Divane and required content-specific inquiry under Tibble |
| How to proceed after the Supreme Court’s vacatur of Divane | Tibble supports that monitoring-duty claims can survive pleading-stage review | Defendants sought dismissal but need to reassess post-Hughes | Court ordered defendants to state whether they need more time, will answer/respond, or propose another option by Feb. 11, 2022 |
Key Cases Cited
- Divane v. Northwestern Univ., 953 F.3d 980 (7th Cir. 2020) (Seventh Circuit decision applying a categorical rule on ERISA monitoring claims relied on by defendants)
- Tibble v. Edison Int'l, 575 U.S. 523 (2015) (Supreme Court holding ERISA fiduciaries have a continuing, content-specific duty to monitor plan investments)
- Loomis v. Exelon Corp., 658 F.3d 667 (7th Cir. 2011) (Seventh Circuit precedent addressing pleading standards for imprudence claims)
- Hecker v. Deere & Co., 556 F.3d 575 (7th Cir. 2009) (Seventh Circuit precedent on inferring imprudence from investment outcomes)