A federal appeals court in Boston has upheld a District Court's dismissal of a complaint by several plaintiffs that FMR LLC, the parent of Fidelity Investments, and several FMR affiliates violated their ERISA duties.
They contended that Fidelity breached its fiduciary duties by charging certain fees for investments offered in the Fidelity FundsNetwork, an open architecture investment platform. Fidelity responded that it isn't a fiduciary.
"We see nothing here that calls for treating Fidelity's charging of fees to some funds as an exercise of authority or control over any plan assets, management, or administration," said the March 5 ruling by a three-judge panel for the 1st U.S. Circuit Court of Appeals in Boston.
"Nothing in this arrangement suggests that Fidelity must automatically be treated as if it were also a fiduciary advising which options to select," the judges wrote in the case of In Re: Fidelity ERISA Fee Litigation, a consolidation of several similar lawsuits by participants in several plans.
They accused Fidelity of charging "secret fees" and offering a "kickback" to managers of competing firms whose investments are available through the Fidelity FundsNetwork.
However, the appeals court ruled that "case law almost directly on point flatly rejects plaintiffs' notion that Fidelity acts as a fiduciary in selecting funds for its FundsNetwork."
In February 2020, U.S. District Judge Leo T. Sorokin, Boston, dismissed the complaint "because this court requires at least one of the defendants be deemed a fiduciary, and because the court has held that plaintiffs have not plausibly alleged defendants' fiduciary status as to which they complain."
