Supreme Court to Hear Case Involving Investment and Record Keeping Costs | Jackson Lewis PC

The Supreme Court recently granted the writ of certiorari requested by Northwestern University pension plan members, following the solicitor general’s plea for the court to hear the case. Hughes v. Northwestern Univ., n ° 19-1401, 2021 US LEXIS 3583 (July 2, 2021). The certiorari motion states the question presented as follows: “[w]Allegations that a defined contribution pension plan paid or charged its members a fee that significantly exceeded the fee for available alternative investment products or services are sufficient to raise a claim against the plan trustees for breach of contract. duty of care under ERISA. “

In Hugues, the plan members-claimants alleged that Northwestern breached the duty of care by (1) paying excessive record keeping fees (using multiple record keepers and allowing payment of the record keeping fee by the income sharing) and (2) offering mutual funds with excessive investment management fees.

The district court allowed the defendants’ motion to dismiss, and the Seventh Circuit upheld. Finding no violation of ERISA with respect to Northwestern’s record-keeping arrangement, the Seventh Circuit noted that ERISA does not require a single registrar and that there is “nothing struggling – for the purposes of ERISA – with plan participants paying the costs of record keeping through expense ratios “as part of a revenue-sharing agreement.” .

Regarding the claim for excessive investment management fees, the Seventh Circuit concluded that the types of funds sought by the applicants (low cost index funds) were and are available to them, “thus eliminating any allegation that the Plan members would have been forced to endure an unappetizing menu. The Seventh Circuit noted that Northwestern had provided the plans with “a wide range of investment options” and offered “cautious explanations for the contested fiduciary rulings.”

The Solicitor General argued that the Seventh Circuit decision is incorrect and that his decision conflicts with the Third and Eighth Circuit decisions. Northwestern argued that no circuit conflict exists; instead, the circuits “just achieved different results on different complaints.”

The Supreme Court order granting the writ of certiorari noted that Judge Barrett had no part in considering this motion. Judge Barrett did not participate because she was a judge on the Seventh Circuit when the Seventh Circuit rendered its decision. Whatever the Supreme Court’s final decision in this case, it is certain that it will have a significant impact on the more than 127 class action lawsuits relating to pension plan expenses that have been filed since January 2020.


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