Booz Allen, Capital One fight ERISA target-date lawsuits again

Booz Allen Hamilton Inc. and Capital One Financial Corp. have entered the second round of a legal fight defending claims by the participants in their respective 401(k) plans that retaining a BlackRock target-date series violated their fiduciary duties under ERISA.

The companies are defendants in 11 virtually identical ERISA lawsuits against sponsors — including Microsoft and Citigroup — accusing them of keeping the BlackRock LifePath Index Fund, whose performance lagged four other target-date series over certain time periods.

U.S. District Court Judge Michael S. Nachmanoff, Alexandria, Va., dismissed the lawsuits against Booz Hamilton and Capital One on Dec. 1, but he gave plaintiffs 14 days to file amended complaints. They did file on Dec. 15, and both defendants submitted their responses to the judge on Jan. 11.

BlackRock isn't a defendant in any of the lawsuits, whose attorneys, Miller Shah LLP, are the lead plaintiffs' attorneys or co-counsel in all of the BlackRock target-date series complaints.

The cases are Tullgren vs. Booz Allen Hamilton Inc. et al. and Hall et al. vs. Capital One Financial Group et al.

The amended complaints are similar to each other and to the original lawsuits arguing, for example, in the Capital One complaint that "defendants selected, retained, and/or otherwise ratified poorly-performing investments instead of offering more prudent alternative investments that were readily available at the time."

The amended complaints reprised the comparisons of the BlackRock target-date series vs. passively managed target-date funds from Vanguard Group and Fidelity Investments and actively managed target-date funds from Capital Group's American Funds and T. Rowe Price.

The amended complaints also introduced the S&P Target Date indices as a benchmark to bolster their argument of the BlackRock target-date series' poor performance.

Capital One and Booz Hamilton — both represented by Morgan, Lewis & Bockius LLP and both making the same argument — told the court the amended complaints were basically a rehash of the original lawsuits.

In the Booz Hamilton case, for example, the plaintiff "has essentially doubled down on the same implausible allegations as before, while adding a handful of new superficial allegations that do not change the salient analysis," the defendants wrote.

"Plaintiff is rearranging deck chairs on a sinking ship, and his latest allegations do not and cannot salvage his unsupported and unsupportable claims," they wrote

Citing the judge's dismissal of the original complaint, the Booz Hamilton lawyers wrote that the plaintiff "still does not compare the BlackRock TDFs to any meaningful benchmarks. Instead, he relies on the same four comparator TDFs the Court already rejected."

Using the S&P index as a comparison fails because it is a "mashup" of many target-date funds, they wrote. The index "does not share the same investment strategy, style, risk profile, or asset allocation as the BlackRock TDFs" — the primary reason why the judge dismissed the original complaint when plaintiffs compared the BlackRock target-date series to the four other series, they wrote.

The Booz Allen Hamilton Inc. Employees' Capital Accumulation Plan, McLean, Va., had assets of $7.85 billion as of Dec. 31, 2021, according to the latest Form 5500.

The Capital One Financial Corp. Associate Savings Plan, McLean, Va., had $7.9 billion in assets as of Dec. 31, 2021.