Antoine v. Marsh & McLennan Companies Inc.

Background

Alfretta Antoine, Shannon Cave, Christina Forney, and Judy Gallegos, current and former participants in the Marsh & McLennan Companies Savings and Investment 401(k) Plan, brought a proposed class action under the Employee Retirement Income Security Act of 1974 (ERISA). They sued Marsh & McLennan Companies, Inc., the Marsh & McLennan Board, two plan committees, and unnamed fiduciaries.

The plaintiffs alleged that the defendants breached ERISA fiduciary duties by selecting and retaining the BlackRock LifePath Index Funds, a group of ten target-date funds, despite alleged underperformance. They also alleged that defendants imprudently and disloyally selected and retained the Mercer Emerging Markets Fund because its investment manager was a Marsh & McLennan subsidiary. The plaintiffs further claimed that Marsh & McLennan and the committees failed to monitor the investments and that all defendants knowingly participated in a breach of trust.

Standing and the Mercer Fund

The defendants moved to dismiss under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), arguing both that the plaintiffs lacked standing for some claims and that the complaint failed to state a claim. The court first considered standing because standing is a jurisdictional requirement.

The court found that the plaintiffs adequately alleged personal losses from investing in BlackRock target-date funds. Under the court’s application of class-standing rules, they could also challenge the other BlackRock funds because the claims involved the same investment suite and substantially similar conduct and proof.

The court reached a different conclusion about the Mercer Fund. None of the plaintiffs invested in that fund. The court found that the Mercer claims involved materially different conduct and proof, including the fund’s status as a non-default option and the alleged affiliation between its investment manager and Marsh & McLennan. The plaintiffs therefore lacked class standing to assert claims based on the Mercer Fund, and the court concluded that it lacked jurisdiction over those claims.

Breach of Fiduciary Duties

To plead a breach of ERISA fiduciary duty, the plaintiffs had to allege that the defendants were fiduciaries acting in that capacity and breached a fiduciary duty. The only disputed element was breach. The court explained that the duty of prudence focuses on the fiduciary’s decision-making process at the time of the investment decision, rather than judging the decision only by later results. Fiduciaries also have an ongoing duty to monitor investments and remove imprudent ones.

The court held that the complaint did not provide enough circumstantial facts to plausibly infer that defendants used an imprudent process in retaining the BlackRock funds. The plaintiffs relied mainly on comparisons showing that the funds had underperformed other target-date-fund series. The court concluded that the alleged underperformance was not sufficiently consistent or substantial, particularly because the BlackRock funds’ rankings improved during 2021 and 2022 and the complaint acknowledged that the funds charged low fees. The court did not hold that underperformance can never support a prudence claim; it held that the allegations in this complaint were insufficient without additional indications of imprudent decision-making.

The court therefore granted defendants’ motion to dismiss Count I. The plaintiffs’ failure-to-monitor claim also failed because it required an underlying fiduciary breach. Their knowing-participation-in-a-breach-of-trust theory failed for the same reason. The court did not decide the merits of the duty-of-loyalty claim concerning the Mercer Fund because it had already determined that the plaintiffs lacked standing to bring that claim.

Amendment and Disposition

The court granted the plaintiffs leave to amend if they could plead facts curing the identified standing and pleading deficiencies. The court’s conclusion states that defendants’ motion to dismiss was granted without prejudice. The plaintiffs were required to amend by November 1, 2023. If they failed to do so by that date without showing good cause in advance, the claims concerning the BlackRock LifePath Index Funds would be dismissed with prejudice. The clerk was directed to close the motion at Docket Number 30.