A federal judge in Detroit ruled that a lawsuit against Magna International Inc. of America may go to trial based on complaints by former 401(k) plan participants about several ERISA violations.
The plaintiffs alleged that the plan charged excessive record-keeping fees, retained unnecessarily expensive investments and acted in a way that placed its record keeper's interests above those of participants.
U.S. District Judge Nancy G. Edmunds on Monday rejected the request by the company and its fiduciaries to grant summary judgment in Davis et al. vs. Magna International Inc. of America et al.
A motion for summary judgment is usually filed after the parties have completed discovery, giving a judge the opportunity to review details of a case. A motion to dismiss, usually requested soon after a complaint is filed, argues the plaintiff has failed to state a claim.
Ms. Edmunds had rejected the defendants' motion to dismiss in March 2021. The plaintiffs sued in April 2020 seeking class-action status.
In her latest ruling, the judge wrote that the plaintiffs "have raised genuine issues of material fact related to whether the defendants prudently monitored the plan's challenged investments," referring to allegations of high costs of stand-alone investments and a target-date series.
The plaintiffs also contended that the defendants failed to monitor record-keeping fees and conducted a flawed RFP process for record keeping. "Plaintiffs provided enough evidence to raise an issue of fact and survive summary judgment on this claim," Ms. Edmunds wrote.
The judge also sided with the plaintiffs who accused defendants of breaching ERISA's standard of loyalty, which says actions must be made "solely" in participants' interests.
"In this case, plaintiffs have pointed out that Principal has interests in both recordkeeping and the proprietary TDF funds," Ms. Edmunds wrote, referring to Principal Financial Group and its proprietary target-date series offered by the plan.
"The court finds that plaintiffs have provided enough evidence to survive summary judgment on the loyalty claim," the judge wrote. Principal isn't a defendant.
Magna International of America Inc. is a subsidiary of Canada's Magna International Inc. The Magna Group of Companies Retirement Savings Plans, Aurora, Ontario, had $2.6 billion in assets as of Dec. 31, 2021, according to the latest Form 5500.
