In a rejection of key arguments advanced in many of the
raft of fee lawsuits across the country, U.S. District
Judge John Shabaz of the U.S. District Court for the
Western District of Wisconsin contended that Deere,
Fidelity Management Trust Company, and Fidelity Management
and Research Company had followed current laws and
regulations regarding retirement plan fee disclosures.
Fidelity is trustee and recordkeeper for the farm equipment
maker's 401(k) retirement savings plan.
The four Deere workers, who were seeking class action
status for their suit, charged that not only were their
plan fees excessive, but Deere and Fidelity failed to
disclose to participants information about a revenue
sharing setup between the two (See
Deere Workers Hit Fidelity with Excessive 401(k) Fee
Suit
).
Deere had asked Shabaz to throw out the suit, arguing
that it obeyed the law on fee disclosures and was
protected by the safe harbor provisions in the Employee
Retirement Income Security Act (ERISA). Fidelity Trust
asked for dismissal because the workers' claims were
outside what it said was its limited fiduciary role while
Fidelity Research contended simply that it was not a
fiduciary at all.
"We believe it was the correct ruling,"
Fidelity spokesman Vin Loporchio told Reuters.
Plaintiff lawyer Jerome Schlichter, who has spearheaded
much of the plan fee legal action, told Reuters: "It
is just one event in a process that will be ongoing and
will take considerable time."
Participant Responsibility
In his 18-page ruling, Shabaz asserted that no law or
rule compelled Deere or Fidelity to disclose more fee
information than they were already disclosing , that
participants had to bear some of the responsibility for the
Deere plan fees because of their investment choices, and
that the safe harbor provisions would, in fact, apply in
the case.
"Participants could choose to invest in 20 primary
mutual funds and more than 2,500 others through
BrokerageLink," Shabaz wrote. "…Unquestionably,
participants were in a position to consider and adjust
their investment strategy based in part on the relative
cost of investing in these funds. It is untenable to
suggest that all of the more than 2,500 publicly available
investment options had excessive expense ratios. The only
possible conclusion is that to the extent participants
incurred excessive expenses, those losses were the result
of participants exercising control over their investments
within the meaning of the safe harbor provision."
Shabaz also contended that the plaintiffs were asking
the court to go beyond the applicable laws and rules.
"The allegedly omitted disclosures are not required by
the language of the regulations and would instead require
judicial expansion of the detailed disclosure regime
crafted by Congress and the Department of Labor pursuant to
its statutory authority," Shabaz wrote.
"Furthermore, there is nothing to suggest that
receiving this additional non-prescribed information would
effectively enhance investment decisions. In assessing the
likely return on an investment, the fees netted against the
return are certainly relevant, but knowing the subsequent
distribution of those fees has no impact on the
investment's value."
Shabaz turned aside the workers' argument that Deere
and Fidelity requests for the case to be thrown out were in
part based on the Deere plan Summary Plan Description (SPD)
and prospectuses. Because those documents were not attached
to the plaintiffs' original suit, they should not be
the basis for a motion for dismissal, the plaintiffs had
argued.
Shabaz blasted the argument as well as the
plaintiffs' original legal complaint. "Although
many of the allegations are derived from the documents,
they have not been attached to the complaint in an apparent
effort to evade assessment of the legal merits of the
claims on a motion to dismiss," Shabaz asserted.
"Far from a short and plain statement of claims … ,
the complaint is a rambling 38-page collection long on
legal argument, public policy rhetoric, and repetition, but
vague in its allegations of facts which might be relevant
to the claims alleged."