U.S. District Judge Ruben Castillo of the U.S. District Court for the
Northern District of Illinois rejected Kraft’s argument that the excessive fee
claims were time-barred under the Employee Retirement Income Security Act
(ERISA), saying that since the employees’ complaint did not reference the
plan’s Summary Plan Description and other plan-related communications, the
company cannot prove the employees had knowledge of the fees through these
documents prior to three years before the case was filed. Castillo also found
the claims against Kraft and Altria Corporate Services regarding improper
management of the Kraft Foods and Altria stock funds were not time-barred for the
However, the court did find that some of the employees’
claims against the Altria Investment Committee were time-barred because it
stopped serving the plan in 2001, so its last alleged breach would have
occurred more than six years before the suit was filed.
Castillo rejected the defendants’ argument that the
employees did not satisfy Rule 8 pleading standards, which require that “a
complaint must contain sufficient factual matter, accepted as true, to ‘state a
claim of relief that is plausible on its face.'” He cited the 8th U.S.
Circuit Court of Appeals reversal of a lower court decision in Braden v. Wal-Mart Stores, Inc. in which
it found that employees stated claims of misconduct that could be traced to
defendants’ actions and were likely to receive favorable judgment (see 8th Circuit Says Wal-Mart 401(k) Suit Requires Further Discussion).
More than Excessive Fee Claims
In addition to accusing plan fiduciaries of selecting
investment options that charged excessive or unreasonable fees (see Kraft Fee Suit Plaintiffs Lose Jury Trial Effort), the Kraft employees allege
that the defendants breached their fiduciary duties by allowing the plan and
its participants to pay excessive administrative service fees to service
providers, including Hewitt Associates.
The employees accuse Kraft and Altria with fiduciary
breaches regarding the Kraft and Altria stock funds, alleging that the funds
charged employees investment fees and associated transactional fees, which
resulted in the funds generating significantly less than the returns generated
by Altria and Kraft stock sold on the open market, and that the funds were maintained
as unitized funds instead of allowing employees to make direct investments in
the common stock of Altria and Kraft.
In addition, the employees say Kraft and Altria breached
their fiduciary duties in selecting the plan's Growth Equity Fund and Balanced
Fund options, as both funds were expected to underperform relative to comparable