Specifically, U.S. District Judge Nanette K. Laughrey of the U.S. District Court for the Western District of Missouri found the ABB defendants violated their fiduciary duties to the plans when they failed to monitor recordkeeping costs, failed to negotiate rebates for the plan from either Fidelity or other investment companies chosen to be on the plans’ platform, selected more expensive share classes for the investment platform when less expensive share classes were available, and removed the Vanguard Wellington Fund from the investment menu and replaced it with Fidelity’s Freedom Funds.
Laughrey ruled that ABB breached its fiduciary duty to the plans because it failed to comply with the plans’ Investment Policy Statement that states: “at all times, [Alliance], rebates will be used to offset or reduce the cost of providing administrative services to plan participants.”
“ABB had good information about how the investing habits of plan participants might affect the availability of revenue sharing, so it had a reasonable basis for conducting such an investigation,” Laughrey wrote in her opinion. She said she was unconvinced that ABB monitored the reasonableness of Fidelity Trust recordkeeping fees by monitoring the reasonableness of the expense ratio of the retail investments chosen for the plans’ platform. The court also found ABB, Inc., and the Employee Benefits Committee violated their fiduciary duties to the plans when they agreed to pay to Fidelity an amount that exceeded market costs for plan services in order to subsidize the corporate services provided to ABB by Fidelity, such as ABB’s payroll and recordkeeping for ABB’s health and welfare plan and its defined benefit plan.