Dionicio v. U.S. Bancorp
- Patrick Schiltz
- 0:23-cv-00026
- U.S. District Court · District of Minnesota
- 17
In Dionicio v. U.S. Bancorp, Judge Schiltz granted in part and denied in part U.S. Bancorp’s motion to dismiss ERISA claims.
The ruling affects Ana L. Dionicio and Alejandro M. Wesaw, the proposed class of U.S. Bank 401(k) Savings Plan participants and beneficiaries, U.S. Bancorp, its Board of Directors, and its two benefits committees. The recordkeeping-fee and related monitoring claims remain undismissed, while the managed-account-fee and corresponding monitoring claims were dismissed with prejudice and on the merits.
What happened
In Dionicio v. U.S. Bancorp, former U.S. Bank employees Ana L. Dionicio and Alejandro M. Wesaw sued U.S. Bancorp, its Board of Directors, and two benefits committees under the Employee Retirement Income Security Act (ERISA). They alleged that the defendants paid excessive fees for recordkeeping, administrative, and managed-account services in the U.S. Bank 401(k) Savings Plan and failed to properly monitor the committees.
The court allowed the claims about recordkeeping and administrative fees to proceed because the plaintiffs identified large plans that allegedly paid less for similar services and provided a meaningful basis for comparison. The court dismissed the managed-account-fee claim because the complaint lacked enough information about the comparison plans’ sizes, fee schedules, and services. The related claim that U.S. Bancorp and its Board failed to monitor the committees was also dismissed because it depended on the dismissed managed-account claim.
Judge Patrick J. Schiltz granted in part and denied in part the defendants’ motion to dismiss. He dismissed the managed-account-fee and related monitoring claims with prejudice and on the merits, and denied the motion in all other respects.
The detailed version
- Dionicio v. U.S. Bancorp · No. 0:23-cv-00026
- Patrick Schiltz
- Mar. 21, 2024
Background
Ana L. Dionicio and Alejandro M. Wesaw, individually and as representatives of a proposed class of participants and beneficiaries, sued U.S. Bancorp, U.S. Bancorp’s Board of Directors, U.S. Bancorp’s Benefits Administration Committee, and U.S. Bancorp’s Investment Committee. The plaintiffs are former U.S. Bank employees and participants in the U.S. Bank 401(k) Savings Plan. Their claims arise under the Employee Retirement Income Security Act of 1974 (ERISA).
The Plan is a defined-contribution pension plan. The plaintiffs alleged four breaches of fiduciary duty: excessive recordkeeping and administrative fees; excessive managed-account-service fees; and two related failures by U.S. Bancorp and its Board to monitor the committees responsible for overseeing those services. The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing that the amended complaint did not state a legally sufficient claim.
Recordkeeping and Administrative Fees
The plaintiffs alleged that the Plan paid an average of $29 per participant each year for recordkeeping and administrative services, while comparable plans paid an average of $19 per participant. They identified seven comparison plans, each with more than $5 billion in assets and at least 46,000 participants. The plaintiffs also alleged that the Plan had more than 86,000 participants and more than $9.85 billion in assets, making it exceptionally large among defined-contribution plans.
The court held that the comparison plans supplied a meaningful benchmark at the pleading stage. It rejected the defendants’ argument that the plans had to match the U.S. Bank Plan exactly in participant numbers and assets. The court also found that the plaintiffs adequately alleged that the bundled recordkeeping and administrative services were largely interchangeable and sold in a competitive market. The court therefore held that the plaintiffs adequately pleaded a breach of the duty of prudence based on excessive recordkeeping and administrative fees.
Managed-Account-Service Fees
The plaintiffs alleged that the Plan charged participants tiered fees of 0.6 percent, 0.45 percent, or 0.3 percent depending on account size, and that other plans paid less for materially identical services. The court found these allegations insufficient. The complaint did not provide basic information about the comparison plans’ participant numbers or assets, did not adequately identify their fee schedules or the asset ranges corresponding to their fee tiers, and did not sufficiently describe the managed-account services offered by the Plan and the comparison plans.
The court also noted that two comparison plans supplied fee rates from 2015, before the proposed class period began in January 2017. It rejected the plaintiffs’ comparison between managed-account services and lower-cost target-date funds, describing those as different types of investment options. The court dismissed the managed-account-service fee claim.
Failure to Monitor
The plaintiffs separately alleged that U.S. Bancorp and its Board failed to monitor the committees. The court explained that a failure-to-monitor claim is derivative, meaning it depends on an underlying breach of fiduciary duty. Because the court dismissed the underlying managed-account-fee claim, it also dismissed the corresponding failure-to-monitor claim. The court did not dismiss the failure-to-monitor claim connected to the recordkeeping-fee allegations.
Disposition
The court ordered that the defendants’ motion to dismiss was GRANTED IN PART and DENIED IN PART. The motion was granted as to claims II and IV concerning managed-account-service fees and the related failure to monitor. Those claims were DISMISSED WITH PREJUDICE AND ON THE MERITS. The motion was denied in all other respects.
Read the full 17-page opinion on CourtListener, the free public archive maintained by the Free Law Project.