A U.S. District Court judge in New York dismissed two fiduciary-breach allegations by a participant in a Verizon Communications Inc. 401(k) plan, but refused to dismiss another ERISA-based allegation against corporate and plan executives.
The plan member filed suit in February 2016 accusing multiple Verizon defendants, as well as two units of Fidelity Investments, of violating fiduciary duties under ERISA.
The participant in the Verizon Savings Plan for Management Employees, Basking Ridge, N.J., is seeking class-action status not only for members of her plan but also for participants in three other Verizon 401(k) plans. The Verizon Savings Plan for Management Employees had $21.87 billion in assets as of Dec. 31, according to its latest Form 5500 filing.
However, Judge Paul Gardephe, in a Sept. 28 ruling, removed Fidelity Management Trust Co. and Fidelity Investments Institutional Operations Company Inc. as defendants, when he dismissed one of the claims in the case of Jacobs vs. Verizon Communications Inc. et al.
This claim alleged Fidelity had failed to disclose its compensation from the Verizon plan and that Verizon failed to correct the alleged defective disclosures.
This claim was dismissed "to the extent it is based on plaintiff's argument that defendants breached their fiduciary duties by failing to disclose information, or making misrepresentations in, a Form 5500," Mr. Gardephe wrote. "Plaintiff has not asserted that she relied on the allegedly inaccurate Form 5500 in any way."
The two other claims only cited Verizon and executives as defendants. In one claim, the plaintiff argued that Verizon had created "a multidimensional labyrinth of actively managed 'custom' investment choices, each with multiple layers of investment for which there is little publicly available information," according to court documents. The complaint accused Verizon of creating "undiscoverable layers of fees."
The judge dismissed this complaint, writing that the plaintiff's assertion of complexity, riskiness and inappropriateness for Verizon employees "are not sufficient" to survive a motion to dismiss.
However, Mr. Gardephe refused to accept Verizon's request that a third allegation be dismissed — namely that Verizon plan managers had breached their fiduciary duty to monitor one investment, a global opportunity fund. The plaintiff argued that this fund was a long-time underperformer and had an expense ratio that was higher than other investment options available to Verizon plan participants. The manager of the fund was not named.
The allegations are "sufficient to state a claim," the judge wrote. "The allegations are sufficient to defeat a motion to dismiss."