A federal judge in Denver has allowed an ERISA lawsuit against DISH Network Corp. to proceed to trial, reversing her ruling in March that dismissed all allegations by former employees against the company and its fiduciaries.
Senior U.S. District Court Judge Christine M. Arguello on Nov. 24 accepted the recommendation by a U.S. magistrate judge in Denver rejecting one request for dismissal by DISH Network while approving another.
The plaintiffs sued in January 2022, seeking class-action status for their complaint, which contained allegations of excessive record-keeping fees, poor investment choices, failing to monitor fiduciaries' actions and putting their own interests ahead of participants' interests.
When Arguello dismissed all allegations, she said plaintiffs could amend their complaint, which subsequently led to the decision in the case of Jones et al. vs. DISH Network Corp. et al.
Magistrate Judge Scott T. Varholak recommended denying DISH's request to dismiss the complaint that plan fiduciaries failed to monitor and should have replaced the Fidelity Freedom target date funds due to poor performance and heightened risk. Fidelity Investments isn't a defendant.
"The operative complaint's underperformance allegations are part and parcel of direct allegations that defendants ignored their own selected criteria for evaluating and monitoring the prudence of plan investments," the magistrate judge wrote. "Plaintiffs plausibly allege that consistent underperformance occurred, as well as other signs of unsuitability based on the plan's own selected criteria, but contemporaneous minutes reflect that the requisite careful scrutiny did not occur."
He concluded by writing that the plaintiffs have sufficiently alleged a procedural failure by defendants to review the plan's investment decisions."
The magistrate judge also recommended – and Arguello agreed – dismissing the allegation that defendants had violated ERISA's duty of loyalty, which focuses on self-dealing and putting a sponsor's interests ahead of participants' benefits.
"The amended complaint includes no factual allegations that defendants' actions were for the purpose of benefitting themselves or anyone else," the magistrate judge wrote. "The Court finds that dismissal is appropriate."
DISH Network Corp. 401(k) Plan, Englewood, Colo., had $730 million in assets as of Dec. 31, 2022, according to the latest Form 5500.
