A federal appeals court has ruled in favor of Northwestern University, Evanston, Ill., supporting a district court's decision to dismiss ERISA complaints against the university and fiduciaries in managing two 403(b) plans.
The 3-0 opinion by a panel of the 7th U.S. Circuit Court of Appeals, Chicago, endorsed the district court's rejection of allegations by participants that the two plans' fiduciaries violated their ERISA duties by, among other things, offering too many investment options, having too many record keepers, charging too high fees,and using revenue sharing instead of a flat-fee payment system.
U.S. District Judge Jorge Alonso dismissed the complaint in May 2018.
"We find no error" in the district court's dismissal in the case of Divane et al. vs. Northwestern University et al., the appeals court judges wrote.
Occasionally using blunt language, the appeals court judges also criticized some of the legal tactics used by the plaintiffs.
For example, they agreed with the District Court's denying the plaintiffs' request to file a second amended complaint following an initial lawsuit in August 2016 and an amended complaint in December 2016.
"Although plaintiffs dress up their claims with different language in the second amended complaint, they rely on the same allegations and facts, revealing these claims as essentially the same claims separated into different counts," the judges wrote. This approach represents "a lack of proper pleading."
The appeals court judges referenced Mr. Alonso's comments about denying the second amended complaint because the request was "untimely" and "futile."
The appeals court judges had some strong words for the participants' arguments that the two plans had too many choices that were "too numerous, too expensive or underperforming" and that some choices were retail-share fees, which cost more than institutional-share fees, according to the decision.
"Plaintiffs also spill much ink ... describing their clear preference for low-cost index funds," the judges wrote. "Plaintiffs failed to allege, though, that Northwestern did not make their preferred offerings available to them. In fact, Northwestern did."
The appeals court also rejected plaintiffs' arguments that the university should use a single record keeper, writing that "Northwestern's decision to maintain two record keepers (was) prudent."
The Northwestern University Retirement Plan had assets of $2.83 billion, as of Dec. 31, 2018, and the Northwestern University Voluntary Savings Plan had assets of $703.53 million, as of Dec. 31, 2018,, both according to the latest Form 5500 filings.