A federal court judge in Seattle has dismissed a lawsuit against Microsoft Corp. and fiduciaries by former employees who alleged ERISA violations in the company 401(k) plan's offering a BlackRock target-date series.
"Plaintiffs have not plausibly alleged that defendants breached their fiduciary duty of prudence by selecting the BlackRock TDFs, failing to monitor them, and retaining them in the plan," U.S District Judge James L. Robart wrote in a Feb.7 opinion in Beldock et al. vs. Microsoft Corp. et al.
"Plaintiffs ask the court to infer, based on the quarterly charts of three- and five-year annualized returns they present in their complaint, that defendants must have breached their fiduciary duty of prudence when they did not divest from the BlackRock TDFs," he wrote.
"They allege no facts, however, that would 'tend to exclude the possibility' that defendants had reasons to retain the BlackRock TDFs that were consistent with their fiduciary duties," he added. "Absent such allegations, Plaintiffs fail to raise their claim above a speculative level."
Mr. Robart is the third federal court judge to dismiss a complaint against a sponsor for allegedly violating ERISA by offering the BlackRock LifePath Index funds.
In December, U.S. District Court Judge Michael S. Nachmanoff in Alexandria, Va., dismissed similar complaints against Booz Allen Hamilton Inc. and Capital One Financial Corp.
These three cases are among the 11 lawsuits filed by Miller Shah LLP either as lead counsel or co-counsel, making the same allegations of ERISA violations by different sponsors who offered the BlackRock target-date series.
The lawsuits allege the BlackRock target-date series had a weaker overall performance when compared to four other target-date series, some of which were actively managed and others, like the BlackRock product, were passively managed. Plaintiffs in all lawsuits are seeking class-action status.
Defendants in all cases have asked courts to dismiss the lawsuits, arguing that plaintiffs selectively chose comparative data and made their allegations based on hindsight.
In the Microsoft case, Mr. Robart also dismissed the plaintiffs' assertion that the sponsor violated ERISA's duty of loyalty standard, which covers self-dealing and actions that would benefit defendants rather than participants.
"Plaintiffs conceded at oral argument that they do not allege that defendants engaged in self-dealing and that their claim for breach of the duty of loyalty is based solely on the BlackRock TDFs' alleged underperformance," the judge wrote. "Plaintiffs have not plausibly alleged a claim for breach of the fiduciary duty of loyalty under ERISA."
The judge gave the plaintiffs until Feb. 17 to file an amended complaint.
The Microsoft Corporation Savings Plus 401(k) Plan, Redmond, Wash., had assets of $48 billion as of Dec. 31, 2021, according to the latest Form 5500.