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United States Court of Appeals for the Seventh Circuit
November 29, 2022, Argued; March 23, 2023, Decided
Brennan, Circuit Judge. On remand from Hughes v. Northwestern University, 142 S. Ct. 737, 211 L. Ed. 2d 558 (2022), we reexamine plaintiffs' allegations that plan fiduciary Northwestern breached its duty of prudence under the Employee Retirement Income Security Act, 29 U.S.C. § 1104(a). Following Hughes, we discern three claims of breach that require reconsideration: that Northwestern (1) failed to monitor and incurred excessive recordkeeping fees, (2) failed to swap out retail shares for cheaper but otherwise identical institutional shares, and (3) retained duplicative funds. We conclude that the first two claims survive dismissal and remand them for further proceedings. For all other claims and issues, we reinstate this court's prior judgment in Divane v. Northwestern University, 953 F.3d 980 (7th Cir. 2020).
A. Factual [*3] Background
Plaintiffs are individuals who participate in two defined-contribution plans subject to ERISA: the Northwestern University Retirement Plan and the Northwestern University Voluntary Savings Plan (the "Plans"). Subject to I.R.C. § 403(b), the Plans provide for tax-deferred contributions to retirement accounts by employees of I.R.C. § 501(c)(3) nonprofits like defendant Northwestern University. As defined-contribution plans, the Plans allow participants to direct the investment of their contributions. But the investment options included in the Plans are selected by the Plans' fiduciary. Northwestern University, as the employer, is the administrator and fiduciary of the Plans. The university assigned some of its fiduciary administrative duties to two Northwestern officers, the Northwestern University Retirement Investment Committee, and its members. We refer to these fiduciary defendants collectively as "Northwestern" or "the university."
Northwestern selected various investment options offered by the Teachers Insurance and Annuity Association of America and College Retirement Equities Fund ("TIAA") and the Fidelity Management Trust Company ("Fidelity") to be included in the Plans. Before October 2016, the Retirement [*4] Plan and the Savings Plan offered over 240 and 180 investment options, respectively, from TIAA and Fidelity. For example, the TIAA Traditional Annuity, a fixed annuity contract that returns a contractually specified minimum interest, is a popular investment option in the Plans. This annuity has restrictions and penalties for withdrawal, including a 2.5% surrender charge if a participant withdraws the investment in a lump sum sooner than 120 days after the termination of her employment. TIAA's policy also requires any plan offering the Traditional Annuity to use TIAA as a recordkeeper for its products.
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
2023 U.S. App. LEXIS 7043 *; __ F.4th __
APRIL HUGHES, et al., Plaintiffs-Appellants, v. NORTHWESTERN UNIVERSITY, et al., Defendants-Appellees.
Prior History: [*1] Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:16-cv-08157 — Jorge L. Alonso, Judge.
Divane v. Northwestern Univ., 2018 U.S. Dist. LEXIS 87645, 2018 WL 2388118 (N.D. Ill., May 25, 2018)Divane v. Northwestern Univ., 953 F.3d 980, 2020 U.S. App. LEXIS 9277, 2020 WL 1444966 (7th Cir. Ill., Mar. 25, 2020)
recordkeeping, fiduciary, shares, Plans, pleadings, funds, monitor, expenses, options, share-class, retail, institutional-class, plaintiffs', consolidating, allegations, Counts, fiduciary duty, imprudent, prudent, Annuity, plan participant, mutual fund, explanations, retail-class, duplicative, negotiate, continuing duty, soliciting, providers, survive
Civil Procedure, Appeals, Reviewability of Lower Court Decisions, Preservation for Review, Business & Corporate Compliance, Fiduciaries, Fiduciary Responsibilities, Duty of Prudence, Pensions & Benefits Law, Plan Administration, Adherence to Plan, Governments, Fiduciaries, ERISA, Delegation of Duties, Diversification Rule, Named Fiduciary Appointment & Obligations, Defenses, Demurrers & Objections, Motions to Dismiss, Failure to State Claim, Pleadings, Complaints, Requirements for Complaint, Torts, Intentional Torts, Breach of Fiduciary Duty, Elements, Evidence, Inferences & Presumptions, Inferences, Costs & Attorney Fees, Attorney Fees & Expenses, Reasonable Fees