Fritton v. Taylor Corp.

Background

Five named plaintiffs, identified as Jason C. Fritton, Marea Gibson, Brian W. Motzenbeeker, Dawn Duff, and Christopher Shearman, sued Taylor Corporation, its Board of Directors, its Fiduciary Investment Committee, and unidentified individual defendants. They brought claims under the Employee Retirement Income Security Act of 1974, or ERISA, concerning Taylor’s defined-contribution 401(k) and profit-sharing plan.

The plaintiffs alleged that the plan’s fiduciaries breached their duty of prudence by: (1) allowing excessive recordkeeping expenses; (2) offering investment options with excessive management fees; (3) selecting more expensive share classes instead of less expensive institutional classes; and (4) retaining the Victory Integrity Small Cap Value Fund Class Y despite alleged underperformance. The complaint asserted one fiduciary-duty claim against the Committee and its members and one claim against Taylor, the Board, and their members for failing to monitor other fiduciaries.

Standing

The defendants argued that the plaintiffs lacked Article III standing, meaning the constitutional authority to bring a case in federal court, because they had not adequately alleged a personal injury caused by the alleged ERISA violations. The court treated this as a facial challenge based on the complaint itself.

The court held that the plaintiffs plausibly alleged an economic injury from paying allegedly excessive recordkeeping fees. The complaint alleged that every plan participant paid recordkeeping expenses, so the plaintiffs did not need to identify the precise periods or funds in which each person participated to allege injury from that theory.

The court held that the complaint did not plausibly allege injury from the other theories. Those theories concerned particular investment funds or share classes, but the plaintiffs did not allege that any of them had invested in any of the funds involved. Without that allegation, a judgment concerning those funds would not have shown that any named plaintiff personally benefited or was harmed.

Failure to State a Claim

The defendants also moved under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint alleges enough facts to support a legally plausible claim. The court concluded that the excessive-recordkeeping-fees claim did not meet that standard.

The court explained that an ERISA prudence claim generally requires allegations supporting a reasonable inference that the fiduciary’s decision-making process was flawed. For a claim based on excessive recordkeeping fees, a plaintiff ordinarily must identify similar plans receiving comparable services for lower fees, creating a meaningful, like-for-like benchmark.

The court found the plaintiffs’ comparisons inadequate. The complaint calculated Taylor’s fees using both direct and indirect compensation, including revenue sharing, but calculated comparator plans’ fees using only direct compensation. The court therefore found that the comparison did not provide a meaningful basis for concluding that Taylor’s fees were excessive.

The court also found that reports showing industry averages did not explain how the fees were calculated or what services they covered. The allegations concerning fees paid by the University of Chicago plan and a fee range mentioned in another lawsuit likewise did not plausibly establish that those figures were meaningful comparisons to Taylor’s plan. Finally, the allegation that there was “nothing to suggest” that the defendants conducted a request-for-proposal process was treated as speculation rather than a factual allegation showing a fiduciary breach.

Disposition

The court granted the defendants’ Motion to Dismiss. It dismissed the excessive-recordkeeping-fees claim without prejudice under Rule 12(b)(6). It dismissed the remaining claims without prejudice under Rule 12(b)(1), the rule addressing lack of subject-matter jurisdiction, because the plaintiffs had not plausibly alleged Article III injury connected to those theories.

The court allowed the plaintiffs to file an amended complaint within 30 days of the order, or by January 11, 2023. The court stated that if no amended complaint were filed by that deadline, the excessive-recordkeeping-fees claim would be dismissed with prejudice and on the merits, while the remaining claims would be dismissed without prejudice for lack of subject-matter jurisdiction.