A federal judge in San Diego delivered a split decision in a lawsuit involving SeaWorld San Diego and its fiduciaries, refusing to dismiss most allegations of ERISA violations but agreeing to dismiss some.
The plaintiffs are former SeaWorld employees. They sued in August 2021, criticizing the company and its 401(k) plan fiduciaries for high record-keeping costs, poor-performing investments and an unwillingness to issue RFPs to assess whether better choices were available in the marketplace.
The plaintiffs are seeking class-action status in Coppel et al. vs. SeaWorld Parks & Entertainment et al. The original complaint — later amended — said Sea World Parks & Entertainment is the former sponsor and that SWBG LLC, also a defendant, is the current sponsor. SWBG LLC is a subsidiary of SeaWorld Entertainment Inc., a theme park and entertainment company based in Orlando, Fla. The parent company is not a defendant.
The lawsuit also named Alliant Insurance Services Inc. as a defendant. Alliant provides financial advice and assists in fiduciary oversight, according to court documents. Alliant filed a separate request for dismissal.
In issuing his March 22 ruling on all defendants, U.S. District Court Judge Robert S. Huie dismissed ERISA claims against Alliant. He noted that plaintiffs "chose not to address any of Alliant's arguments" for dismissing the ERISA claims, adding that such inaction "fails to state a claim against Alliant."
As to the SeaWorld defendants, Mr. Huie rejected their petition to dismiss the claim that plan executives should have pursued lower-cost mutual fund shares.
"Plaintiffs support their allegations with examples of lower cost share classes that outperformed the plan's more expensive share classes," the judge wrote. "According to plaintiffs, the SeaWorld defendants recognized their imprudence and shifted a limited number of funds into lower share classes in 2016 and again in 2020."
Mr. Huie also rejected the defendants' motion to dismiss the plaintiffs' claim of excessive record-keeping fees. "District courts in the Ninth Circuit have repeatedly found allegations like these sufficient to state a claim of imprudence based on excessive recordkeeping fees," the judge wrote. The 9th U.S. Circuit Court of Appeals covers California and eight other states.
Mr. Huie also rejected the defendants' request to dismiss an allegation that they violated ERISA by failing to monitor investments and service providers.
The judge wrote that the plaintiffs "plausibly plead" an allegation of imprudence under ERISA relating to a stable value fund offered by MassMutual because the SeaWorld defendants "failed to competitively bid and replace MassMutual as the stable value fund provider, even though other providers offered lower fees for identical products." MassMutual isn't a defendant.
Plaintiffs also alleged ERISA violations for several investments. Mr. Huie dismissed claims involving American Century target-date funds and for actively managed funds cited by plaintiffs, who said fiduciaries should have chosen passively managed funds.
The judge rejected a motion to dismiss an ERISA claim involving the ClearBridge Appreciation Fund.
SWBG LLC 401(k) Plan, Orlando, Fla., formerly known as the SeaWorld Parks & Entertainment 401(k) Plan, had $301 million in assets as of Dec. 31, 2021, according to the latest Form 5500.