A federal court judge in Las Vegas has rejected requests by Caesars Holdings Inc. and Russell Investments Trust Co. to dismiss all allegations of ERISA violations filed by participants in the Caesars 401(k) plan.
The plaintiffs accused the defendants of transferring all plan investments to Russell Investments Trust Co. (RITC) so that RITC could install its own products in the plan lineup.
After Caesars outsourced its 401(k) plan management to RITC in 2017, plaintiffs alleged that plan assets lost value over a five-year period based on a comparison of RITC investments and "comparable prior options," according to court documents in the case of Thomson et al. vs Caesars Holdings Inc. et al.
Caesars Holdings was formerly known as Casears Entertainment Corp. prior to a corporate reorganization. RITC, based in Seattle, is a non-depository trust company that offers fiduciary investment services, including retirement plans, to institutional investors, the lawsuit explained.
"Because plaintiffs sufficiently allege that RITC took actions which both had the effect of enlarging the assets under its own management and may have been inconsistent with the interests of plan participants, I find that plaintiffs have adequately stated a claim for RITC breaching its duty of loyalty," wrote U.S. District Judge Cristina D. Silva on March 13.
Duty of loyalty is an ERISA standard that covers self-dealing and actions that are not solely in the interest of participants.
The judge also agreed that the participants "plausibly state a claim" that RITC breached its fiduciary duties of prudence by adding and keeping poor-performing Russell funds to the plan lineup.
The judge referred to plaintiffs' allegation that RITC removed some of the challenged funds from Russell's own retirement plan, noting that such action "may be indicative of internal concern over the funds' performance in 2016."
Withdrawing funds from its own employees plan but keeping the funds in the Caesars plan, "is puzzling in light of RITC's status as a fiduciary to the Caesars plan," the judge wrote.
The judge also agreed with the plaintiffs' allegation that Caesars executives violated their ERISA duty of prudence. "I find that the plaintiffs state a claim against the Caesars defendants for the imprudent selection and monitoring of RITC," the judge wrote.
The plaintiffs' argument was based on their documents showing previous plan investments "performed adequately" before being replaced by RITC investments and that the RTIC investments were "allegedly objectively worse," the judge wrote.
As of Dec. 31, 2021, the Caesars Entertainment Inc. 401(K) Plan, Reno, Nev., had assets of $2 billion according to the latest Form 5500.