A federal court judge in Allentown, Pa., issued a split opinion on an ERISA lawsuit filed by former employees of B. Braun Medical Inc., refusing to dismiss all allegations against the company and fiduciaries of its 401(k) plan.
U.S. District Court Judge Edward G. Smith on June 4 denied the company's request to dismiss the plaintiffs' argument that plan fiduciaries violated ERISA's duty of prudence in managing the plan, in the case of Nunez et al. vs. B. Braun Medical Inc. et al.
However, Mr. Smith granted the defendants' motion to dismiss complaints regarding fiduciaries' duty of loyalty and duty to monitor plan management under ERISA.
"The court finds that the plaintiffs have plausibly alleged that the defendants failed to manage and select investments with the level of care, prudence and diligence required under ERISA," Mr. Smith wrote.
The judge rejected the plaintiffs' argument that the Braun fiduciaries violated ERISA's duty of loyalty — a provision that covers fiduciaries acting in their own interest, or a third party's interest, at the expense of participants.
"The complaint is devoid of any factual allegations explaining why the defendants would have an interest in benefitting T. Rowe Price," Mr. Smith wrote. T. Rowe Price is the plan's record keeper. It was not cited as a defendant.
The judge also rejected the plaintiffs' claim that the defendants violated ERISA's duty to monitor, noting that the complaint lacked "additional supporting allegations regarding the monitoring process or how defendants were deficient in carrying out their duties."
The former employees sued in August 2020, contending that the Braun 401(k) plan "had substantial bargaining power regarding the fees and expenses that were charged against participants' investments," said the original complaint, which seeks class-action status.
"Defendants, however, did not try to reduce the plan's expenses or exercise appropriate judgment to scrutinize each investment option that was offered in the plan to ensure it was prudent," it added.
The B. Braun Medical Inc. Savings Plan, Bethlehem, Pa., had assets of $674 million as of Dec. 31, 2019, according to the latest Form 5500.