Appellate Court Backs Deere Case Dismissal
February 12, 2009 (PLANSPONSOR.com) - Chock up
another win for a plan sponsor in the litany of
revenue-sharing suits filed in 2006.
class="NoSpacing">
The most recent case - a federal appeals court who
has now upheld a district court's dismissal of a
lawsuit filed against Deere & Co., Fidelity Management
Trust Company, and Fidelity Management and Research Company
alleging breach of fiduciary duties in regards to
retirement plan fee disclosures at two 401(k) plans
sponsored by the company (see "
Deere and Fidelity Fee Lawsuit Thrown Out
").
class="NoSpacing">
The original lawsuit was brought by several employees
against Deere, Fidelity Management Trust Company, the
directed trustee and recordkeeper for the two Deere plans
(which also managed two investments available to plan
participants under the plan), and Fidelity Management &
Research Company, the investment advisor for the mutual
funds offered as investment options under Deere's plans
(see "
Deere Workers Hit Fidelity with Excessive 401(k) Fee
Suit"
).
And, as in that case, Judge Diane P. Wood of the 7th
U.S. Circuit Court of Appeals concluded "that the
district court correctly found that plaintiffs failed to
state a claim against any of the defendants, and we
therefore affirm the district court's
judgment."
class="NoSpacing">
The court also affirmed the district court awards of
$54,396.57 to Deere and $163,814.43 to Fidelity.
class="NoSpacing">
Main Issues
class="NoSpacing">
Two of the main issues addressed by Judge Wood were
whether the district court answered correctly the following
questions:
class="NoSpacing">
1. Were the Fidelity defendants "functional"
fiduciaries of the plans with respect to the selection of
investment options, the structure of the fees, or the
provision of information regarding the fee
structure?
class="NoSpacing">
2. Did Deere breach its fiduciary duty by not informing
the plan participants that Fidelity Trust received money
from the fees collected by Fidelity Research and did it
imprudently limit the investment options to Fidelity
research funds, only then offering investment options with
excessively high fees?