A federal appeals court in New York affirmed on Feb. 14 a lower court's rejection of a complaint against Goldman Sachs by a 401(k) plan participant who alleged a series of ERISA violations in plan management.
The complaint included allegations that the plan charged excessive record-keeping fees, that fiduciaries failed to adequately monitor plan investments and that fiduciaries acted in their self-interest by including some proprietary Goldman Sachs Asset Management investments in the plan.
The plaintiff sued in October 2019. A U.S. District Court judge granted summary judgment for the defendants in September 2022 in the case of Falberg vs. The Goldman Sachs Group Inc. et al., saying defendants didn't breach any of their fiduciary duties.
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 that the plaintiff has failed to state a claim.
The three-judge panel for the U.S. Court of Appeals for the 2nd Circuit unanimously wrote that the defendants didn't violate ERISA's duty-of-loyalty guidelines, which cover self-dealing.
"Falberg failed to introduce evidence that defendants retained the challenged funds in the plans for advancing their own interests," the judges wrote. "Indeed, the evidence suggests otherwise."
They noted that the fiduciaries engaged in a "robust process" to avoid a conflict of interest, and the committee eventually removed the challenged funds "after a sustained period of underperformance." The investments were dropped in 2017.
Although the plaintiff argued that plan executives didn't establish a formal process for selecting and monitoring investments, the district court disagreed — and so did the appeals court. The investment committee "followed a rigorous and deliberative process when selecting and monitoring investments," the appeals court judges wrote.
The Goldman Sachs 401(k) Plan, New York, had assets of $9.7 billion as of Dec. 31, 2022 according to the latest Form 5500.
