A federal judge in Richmond, Va., has approved for trial, a rarity for ERISA lawsuits, a case filed against Genworth Financial by former employees who alleged a BlackRock target-date series in Genworth’s 401(k) plan should have been removed for poor performance.
“The court cannot say, as a matter of law, that a hypothetical prudent fiduciary in Genworth's position would have made the same decision to retain the BlackRock TDFs under the circumstances,” Senior U.S. District Judge Robert E. Payne, wrote on Aug. 29.
“Drawing all reasonable inferences in favor of plaintiffs, the court finds that a reasonable juror could find in favor of plaintiffs,” he wrote.
Genworth Financial is one of approximately a dozen companies that have been sued over their retirement plans’ offering the BlackRock LifePath Index Retirement Funds. BlackRock isn’t a defendant in any of the lawsuits that were all filed by the same law firm, Miller Shah, as lead counsel or co-counsel.
The allegations among these lawsuits are similar, contending that the BlackRock target-date series underperformed several other target-date series and that fiduciaries violated ERISA by failing to monitor and replace the series.
Most of the lawsuits have been dismissed — sometimes more than once — against sponsors including Microsoft, Capital One Financial, Cisco Systems and Booz Allen Hamilton.
Aside from Genworth, the only sponsor not to have their case thrown out by a court is Stanley Black & Decker Inc.
U.S. District Court Judge Stefan R. Underhill, Bridgeport, Conn., ruled in July that Stanley the Black & Decker plaintiffs had provided sufficient information for their complaint to go to trial.
“Considering their allegations in totality, the plaintiffs have plausibly alleged the adequacy of their comparators sufficient for this stage of the litigation,” he wrote.
The other target-date series cited by the Stanley Black & Decker plaintiffs “are sufficient at the pleading stage to support their underperformance claim,” Underhill added.
Although the Genworth plaintiffs’ allegations are much like those in similar cases and although Genworth used a similar defense here, Payne wrote that this lawsuit contained different facts.
The Genworth 401(k) plan’s investment policy statement “explicitly stated that the performance of the BlackRock TDFs is expected to ‘compare favorably’ to the S&P TDF Index and its peer group of target date funds,” Payne wrote.
“So, plaintiffs are ‘not simply pointing to a fund with better performance’ as in (other cases), they are alleging that the BlackRock TDFs violated the stated criteria in the plan's own IPS,” he wrote.
Payne rejected Genworth’s claim that plaintiffs waited too long to sue, and he based much of his ruling on addressing loss causation.
For loss causation, the question is whether plaintiffs must prove losses caused by Genworth’s offering the target-date series or Genworth must disprove losses were caused by its offering the target-date series.
“The court finds that a genuine dispute of material fact exists on the issue of loss causation,” Payne wrote in denying Genworth’s motion for summary judgment. “Compliance with a plan’s IPS is ‘highly relevant’ to loss causation.”
A motion for summary judgment is usually filed after the parties have completed discovery, giving a judge the opportunity to review details of a case. A motion to dismiss, usually requested soon after a complaint is filed, argues that the plaintiff has failed to state a claim.
The plaintiffs originally sued in August 2022, later amending their complaint twice. The judge denied Genworth’s motion to dismiss in September 2023.
A Genworth spokeswoman wrote in an email that the company doesn’t comment on pending litigation.
The Genworth Financial Inc. Retirement and Savings Plan, Richmond, Va., had assets of $741.5 million as of Dec. 31, 2022, according to the latest Form 5500.
