A U.S. District Court judge in Charlotte, N.C., refused to dismiss a complaint against Duke Energy Corp. and 401(k) plan fiduciaries filed by current and former plan participants who allege a series of ERISA violations.
The plaintiffs sued in September 2020 contending that record-keeping fees were much higher than "competitive marketplace rates."
They said fiduciaries failed to either negotiate lower fees with the record keeper, Fidelity Investments, or to conduct an RFP, said the complaint in Turpin and Johnson vs. Duke Energy Corp. et al. Fidelity isn't a defendant in the case.
The plaintiffs also alleged the 401(k) plan paid "excessive" managed account fees to Edelman Financial Engines. Edelman isn't a defendant.
The plaintiffs are seeking class-action status.
"Plaintiffs have sufficiently stated a claim for breach of fiduciary duty under ERISA," U.S. District Court Judge Kenneth D. Bell wrote on Jan. 31. "Plaintiffs are entitled at this earliest stage of the case to an opportunity to pursue their claims."
Mr. Bell cited the Jan. 24 decision by the U.S. Supreme Court in the ERISA case Hughes et al. vs. Northwestern University et al. to support his ruling.
"Defendants' objections cannot be accepted as consistent with the governing law," Mr. Bell wrote, noting that the Supreme Court reversed a dismissal of "a similar claim" to the one made in the Duke Energy case.
The 8-0 Supreme Court ruling vacated and remanded a pro-sponsor decision by the 7th U.S. Circuit Court of Appeals in Chicago. The Supreme Court said lower courts must make sure sponsors abide by the "duty to monitor" all investment options in defined contribution plans subject to ERISA and to remove imprudent investments.
Mr. Bell's decision is the fourth action by federal court judges denying a motion to dismiss since the Supreme Court's ruling. A U.S. District Court judge in Columbus, Ga., denied a motion to dismiss on Jan. 25, and a U.S. District Court judge in Milwaukee, Wis., rejected motions to dismiss in two cases on Jan. 26.
Duke Energy Retirement Savings Plan, Charlotte, N.C., had $10 billion in assets as of Dec. 31, 2020, according to the latest Form 5500.
