Baird v. BlackRock Institutional Trust Company, N.A.

Background

The plaintiffs were participants in BlackRock’s Retirement Savings Plan. The court had certified a class consisting of participants and beneficiaries in the plan during the period from April 5, 2011, through the date of judgment or settlement.

The plaintiffs alleged that the BlackRock defendants violated the Employee Retirement Income Security Act (ERISA) and their fiduciary duties by improperly favoring BlackRock’s proprietary funds when selecting investment options for the plan. They also alleged that BTC, a BlackRock subsidiary, paid itself excessive securities-lending fees from ERISA-protected assets, causing unfavorable returns for plan participants.

Plaintiffs’ Motion for Partial Summary Judgment

The plaintiffs sought partial summary judgment on defendants’ liability. They argued that no genuine dispute of material fact existed about whether defendants failed to follow the plan’s Investment Policy Statement and whether defendants violated 29 U.S.C. § 1106(b)(1) by paying themselves securities-lending fees.

The court denied the motion. It found a genuine dispute about whether defendants complied with the Investment Policy Statement’s requirement to obtain an opinion of counsel before including BlackRock-affiliated funds in the plan. The plan document did not define what qualified as an opinion of counsel. Defendants presented evidence that counsel attended investment committee meetings and that the committee relied on counsel regarding whether its investment selections complied with ERISA. The court could not weigh that evidence or decide witness credibility on summary judgment.

The court also found genuine factual disputes concerning the legality and reasonableness of BTC’s compensation. Those disputes included whether the relevant plan contracts established the fee split and whether BTC acted as a fiduciary regarding its fees. The court therefore concluded that summary judgment was inappropriate on the plaintiffs’ § 1106(b)(1) theory.

Defendants’ Motion for Summary Judgment

The defendants sought summary judgment on the plaintiffs’ fiduciary-duty claims, prohibited-transaction claims under 29 U.S.C. § 1106, and disclosure claim.

The court denied the motion. For the fiduciary-duty claims, it found a genuine dispute about whether defendants followed the Investment Policy Statement’s direction to obtain an opinion of counsel concerning the application of a prohibited-transaction exemption to BlackRock-affiliated funds. The court also declined to resolve defendants’ loss-causation arguments because doing so would require weighing the credibility of competing experts and their methods.

The court rejected defendants’ argument that the plaintiffs’ § 1106 claims were barred by ERISA’s six-year statute of repose. The court stated that the plaintiffs’ claims were not based only on the initial inclusion of challenged funds in the plan lineup. Instead, the plaintiffs challenged affirmative purchases by the plan of interests or units in BlackRock funds and fees paid to BlackRock affiliates. At this stage, the court found a genuine factual issue about whether those purchases and payments were affirmative actions covered by § 1106(a)(1)(A) and § 1106(a)(1)(D).

The defendants also argued that prohibited-transaction exemptions applied. The court found that those exemptions required an examination of whether defendants’ compensation was reasonable, which presented disputed factual issues. Regarding the disclosure claim, the court declined to revisit its earlier legal ruling and denied summary judgment on that claim.

The defendants also sought summary judgment on claims against individual defendants. The court noted that the evidence concerning those individuals appeared thin, but held that evaluating the persuasiveness of that evidence was not appropriate at the summary-judgment stage. The court denied defendants’ motion, with the caveat stated in the opinion’s footnote 3.

Motion to Strike or Exclude Expert Testimony

The plaintiffs moved to strike or exclude testimony from defendants’ fiduciary-process expert, Eileen Kamerick, arguing that she was not qualified to testify about ERISA-related fiduciary duties.

The court denied the motion. It explained that Kamerick was not being offered as an expert on ERISA law, but on the processes that fiduciaries of 401(k) plans use to select and monitor funds. The court found that her qualifications provided a reliable basis for that testimony and that the testimony was relevant to the plaintiffs’ fiduciary-duty claims.

Motions to Seal

The court granted the parties’ administrative motions to file documents under seal. For materials connected to the dispositive summary-judgment motions, the court applied the “compelling reasons” standard; for materials connected to the motion to strike, it applied the lower “good cause” standard.

The court found that the materials sought to be sealed contained confidential and proprietary information about BlackRock’s operations, securities-lending business, finances, and confidential client relationships. It also found that the requests were limited to the portions containing that information.

Disposition

The court denied plaintiffs’ motion for partial summary judgment, denied defendants’ motion for summary judgment, denied plaintiffs’ motion to strike, and granted the parties’ administrative motions to file documents under seal. The opinion did not resolve the underlying ERISA claims on their merits; it held that disputed facts required the claims to proceed beyond summary judgment.