In a lawsuit alleging that Deutsche Bank and other defendants violated their fiduciary duties by offering in its 401(k) plan proprietary, high-cost investments that profited the bank, U.S. District Judge Lorna G. Schofield, of the U.S. District Court for the Southern District of New York, mostly tossed the defendants’ motion to dismiss.
Schofield first rejected the defendants argument that the lawsuit, filed in December 2015, was time-barred by the Employee Retirement Income Security Act’s (ERISA)’s three-year and six-year statutes of limitation.
Concerning the three-year statute of limitation, the defendants argued that employees had knowledge of the offering of the proprietary funds and their fees by plan disclosures throughout the years. However, the judge noted that the plaintiffs could not have known about poor performance or excessive fees unless they had something to compare it to, and the complaint stated the plaintiffs did not have knowledge of this until shortly before filing the lawsuit in December 2015.
As for the six-year limitation period, the defendants argue that the claims are time barred because the only transaction allegedly prohibited under U.S. Code Section 1106 was the initial decision to include the proprietary funds in the plan, and the proprietary funds were all initially selected “well over six years ago.” Schofield says this argument fails as it does not accurately characterize the allegations in the complaint. The complaint alleges that the relevant prohibited transactions were the “shareholder service fees” paid in exchange for investment management services, and not the selection of the proprietary funds. NEXT: The allegations