Boyette v. Montefiore Medical Center

Background

Sheila A. Boyette and Tiffany Jiminez, former Montefiore employees and participants in the Montefiore Medical Center 403(b) Plan, brought a proposed class action against Montefiore Medical Center, its Board of Trustees, the TDA Plan Committee, Dr. Michael Stocker, and John Does 1-30. They alleged that the defendants breached fiduciary duties under the Employee Retirement Income Security Act (ERISA) by permitting excessive recordkeeping and administrative fees and by failing to monitor the plan’s fiduciaries.

The plan had more than 22,000 participants and more than $2 billion in assets under management during the relevant period. The plaintiffs alleged that the plan’s asset-based recordkeeping fees were higher than those of comparable plans and that the defendants should have obtained lower fees through periodic negotiations or requests for proposals. They also alleged that the defendants were responsible for losses to the plan caused by inadequate monitoring.

Earlier Proceedings and Proposed Amendment

In an earlier round of this case, the court granted the defendants’ motion to dismiss the second amended complaint. The court found that the plaintiffs had not adequately alleged an injury that gave them constitutional standing concerning excessive recordkeeping fees. It also found that they had not plausibly alleged that the fees were excessive in relation to the services provided. The court dismissed the failure-to-monitor claim because it depended on the unsuccessful fiduciary-duty claim.

The plaintiffs then moved under Federal Rule of Civil Procedure 15(a)(2) for permission to file a third amended complaint. Courts generally allow amendments when justice requires, but may deny permission when the proposed amendment would be futile—that is, when it would still fail to cure the earlier defects or state a legally sufficient claim.

Standing

The court found that Boyette still had not alleged an injury in fact from excessive recordkeeping fees. Boyette alleged that she paid only a minimal fee because her account balance was minimal, but the court concluded that this did not show a concrete and particularized personal injury. Boyette therefore lacked standing for her excessive-fee claim.

The court reached a different conclusion about Jiminez. Jiminez alleged that she paid $31 per year in recordkeeping fees and that this amount was unreasonable. At the pleading stage, the court held, that allegation was sufficient to establish the required personal injury for purposes of standing. The court rejected the plaintiffs’ alternative argument that they could rely on a general injury to plan assets when they had not personally paid the allegedly excessive fees.

Failure to State a Plausible Claim

Despite finding that Jiminez had adequately alleged standing at this stage, the court concluded that the proposed third amended complaint still did not state a plausible ERISA fiduciary-duty claim. The plaintiffs added eight allegedly comparable plans, but did not specifically allege that those plans received the same recordkeeping services as the Montefiore plan. The plaintiffs also did not identify a comparison plan with a similar number of participants or amount of assets under management.

The court held that comparisons must be sufficiently similar to provide a meaningful basis for concluding that the defendants acted imprudently. Alleging that recordkeepers generally provide the same range of services was not enough to show that different plans received identical services. The court also noted that the proposed complaint alleged lower fees than the earlier complaint—approximately $41 to $43 per participant, including Jiminez’s $31 annual fee—while identifying a reasonable range of $25 to $30. Given the services described in the plan documents, including optional services, the court concluded that the allegations did not plausibly show that the fees were unreasonably excessive.

The proposed failure-to-monitor claim remained derivative of the fiduciary-duty claim. Because the underlying fiduciary-duty claim was inadequately pleaded, the court found that amendment of the monitoring claim would also be futile.

Ruling

Judge John G. Koeltl denied the plaintiffs’ motion for leave to amend the complaint. The Clerk was directed to close the docket entry for that motion.