A district court judge has denied a motion from Lowe's Cos., Wilkesboro, N.C., to dismiss a class-action lawsuit alleging fiduciary breaches in its 401(k) plan.
The Sept. 6 decision from U.S. District Judge Kenneth D. Bell, of the Western District of North Carolina, upheld a magistrate judge's decision to dismiss the motion in February. However, Mr. Bell granted a part of the Lowe's motion to dismiss on the grounds that it failed to monitor its investment consultant Aon Hewitt Investment Consulting.
The ERISA lawsuit, filed April 2018 in U.S. District Court in Charlotte, N.C., says the company breached its fiduciary duty in offering an underperforming investment option in the 401(k)plan beginning in 2015.
The lawsuit alleges that the option, the Hewitt Growth Fund, was a risky investment option to include in the plan because there were very few other plans that offered the collective investment trust. According to the original court filing, it "was included in only two other retirement plans in the entire country."
Lowe's transferred over $1 billion of plan assets into the Hewitt Growth Fund in 2015, which amounted to nearly half of the plan's assets other than Lowe's stock, court documents show.
As of December 2016, the most recent year information was publicly available at the time of the complaint in April 2018, the plan had more than 250,000 participants and held about $5.3 billion in retirement assets, consisting of some $2.65 billion in Lowe's stock and about $2.61 billion in investment funds, according to court documents.
The original filing alleges that the Hewitt Growth Fund "performed so poorly that the plan already has suffered over $100 million in investment losses based on a comparison of the returns of the (fund) to the eight funds it replaced."
The lawsuit seeks to recover the $100 million in losses it alleges and "disgorge the profits that Hewitt received on account of its disloyal conduct, prevent further mismanagement of the plan and obtain other appropriate relief."
In his decision last week, Mr. Bell wrote, "The scale of the decision made results in a plausible inference that plaintiff has plausibly stated a claim that Lowe's failed to monitor the administrative committee 'in such a manner as may be reasonably expected to ensure that [its] performance has been in compliance with the terms of the plan and statutory standards, and satisfies the needs of the plan.' "
Kai Richter, partner at Nichols Kaster, attorney for the plaintiffs, said in an email that the firm is “pleased with the decision and look(s) forward to exploring discovery and litigating the case.”
A Lowe's spokesperson could not be immediately reached to provide comment.