Case 2:20-cv-02644-MAK Document 1 Filed 06/05/20 Page 1 of 41
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`UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF PENNSYLVANIA
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`CIVIL ACTION NO.:
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`CLASS ACTION COMPLAINT
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`COMPLAINT
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`MARY K. BOLEY, KANDIE SUTTER and
`PHYLLIS JOHNSON, individually and on
`behalf of all others similarly situated,
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`UNIVERSAL HEALTH SERVICES, INC.,
`THE BOARD OF DIRECTORS OF
`UNIVERSAL HEALTH SERVICES, INC.,
`THE PLAN COMMITTEE OF
`UNIVERSAL HEALTH SERVICES, INC.,
`and JOHN DOES 1-30.
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`Plaintiffs,
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`Defendants.
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`v.
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`Plaintiffs Mary K. Boley, Kandie Sutter and Phyllis Johnson (“Plaintiffs”), by and through
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`their attorneys, on behalf of the Universal Health Services, Inc., Retirement Savings Plan (the
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`“Plan”),1 themselves and all others similarly situated, state and allege as follows:
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`I.
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`INTRODUCTION
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`1.
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`This is a class action brought pursuant to §§ 409 and 502 of the Employee
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`Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1109 and 1132, against the
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`Plan’s fiduciaries, which include Universal Health Services, Inc., (“UHS,” “Universal” or the
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`“Company”), the Board of Directors of Universal Health Services, Inc., (“Board”), and its
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`members during the Class Period and the Plan Committee of Universal Health Services, Inc.,
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`1 The Plan is a legal entity that can sue and be sued. ERISA § 502(d)(1), 29 U.S.C. § 1132(d)(1).
`However, in a breach of fiduciary duty action such as this, the Plan is not a party. Rather, pursuant
`to ERISA § 409, and the law interpreting it, the relief requested in this action is for the benefit of
`the Plan and its participants.
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`Case 2:20-cv-02644-MAK Document 1 Filed 06/05/20 Page 2 of 41
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`(“Administrative Committee” or “Committee”) and its members during the Class Period for
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`breaches of their fiduciary duties.
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`2.
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`Defined contribution retirement plans, like the Plan, confer tax benefits on
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`participating employees to incentivize saving for retirement. As of the end of 2015, Americans
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`had approximately $6.7 trillion in assets invested in defined contribution plans. See INVESTMENT
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`COMPANY INSTITUTE, Retirement Assets Total $24.0 Trillion in Fourth Quarter 2015 (Mar. 24,
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`2016), available at https://www.ici.org/research/stats/retirement/ret_15_q4; PLAN SPONSOR, 2015
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`Recordkeeping Survey
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`(June 2015),
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`available
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`at http://www.plansponsor.com/2015-
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`Recordkeeping-Survey/.
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`3.
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`In a defined contribution plan, participants’ benefits “are limited to the value of
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`their own investment accounts, which is determined by the market performance of employee and
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`employer contributions, less expenses.” Tibble v. Edison Int’l, 135 S. Ct. 1823, 1826 (2015)
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`(“Tibble I”). Thus, the employer has no incentive to keep costs low or to closely monitor the Plan
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`to ensure every investment remains prudent, because all risks related to high fees and poorly-
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`performing investments are borne by the participants.
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`4.
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`To safeguard Plan participants and beneficiaries, ERISA imposes strict fiduciary
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`duties of loyalty and prudence upon employers and other plan fiduciaries. 29 U.S.C. § 1104(a)(1).
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`These twin fiduciary duties are “the highest known to the law.” Sweda v. Univ. of Pennsylvania,
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`923 F.3d 320, 333 (3d Cir. 2019). Fiduciaries must act “solely in the interest of the participants
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`and beneficiaries,” 29 U.S.C. § 1104(a)(1)(A), with the “care, skill, prudence, and diligence” that
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`would be expected in managing a plan of similar scope. 29 U.S.C. § 1104(a)(1)(B).
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`5.
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`The Plan has at all times, during the Class Period maintained over 1.3 billion dollars
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`in assets (including having 1.9 billion dollars in assets in 2018), qualifying it as a large plan in the
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`defined contribution plan marketplace, and among the largest plans in the United States. These
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`2
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`Case 2:20-cv-02644-MAK Document 1 Filed 06/05/20 Page 3 of 41
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`assets are entrusted to the care of the Plan’s fiduciaries. As a large plan, the Plan had substantial
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`bargaining power regarding the fees and expenses that were charged against participants’
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`investments. Defendants, however, did not try to reduce the Plan’s expenses or exercise
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`appropriate judgment to scrutinize each investment option that was offered in the Plan to ensure it
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`was prudent.
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`6.
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`Plaintiffs allege that during the putative Class Period (June 5, 2014 through the date
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`of judgment) Defendants, as “fiduciaries” of the Plan as that term is defined under ERISA Section
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`3(21)(A), 29 U.S.C. § 1002(21)(A), breached the duties they owed to the Plan, to Plaintiffs, and to
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`the other participants of the Plan by, inter alia, (1) failing to objectively and adequately review the
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`Plan’s investment portfolio with due care to ensure that each investment option was prudent, in
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`terms of cost; and (2) maintaining certain funds in the Plan despite the availability of identical or
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`materially similar investment options with lower costs and/or better performance histories.
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`7.
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`To make matters worse, Defendants failed to consider lower cost collective trusts
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`that were available to the Plan as alternatives to certain mutual funds in the Plan.
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`8.
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`Defendants’ mismanagement of the Plan, to the detriment of participants and
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`beneficiaries, constitutes a breach of the fiduciary duties of prudence and loyalty, in violation of
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`29 U.S.C. § 1104. Their actions were contrary to the actions of a reasonable fiduciary and cost the
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`Plan and its participants millions of dollars.
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`9.
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`Based on this conduct, Plaintiffs assert claims against Defendants for breach of the
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`fiduciary duties of loyalty and prudence (Count One) and failure to monitor fiduciaries (Count
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`Two).
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`II.
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`JURISDICTION AND VENUE
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`10.
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`This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C.
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`§ 1331 because it is a civil action arising under the laws of the United States, and pursuant to 29
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`3
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`U.S.C. § 1332(e)(1), which provides for federal jurisdiction over actions brought under Title I of
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`ERISA, 29 U.S.C. § 1001, et seq.
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`11.
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`This Court has personal jurisdiction over Defendants because they are
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`headquartered and transact business in this District, reside in this District, and/or have significant
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`contacts with this District, and because ERISA provides for nationwide service of process.
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`12.
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`Venue is proper in this District pursuant to ERISA Section 502(e)(2), 29 U.S.C.
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`§ 1132(e)(2), because some or all of the violations of ERISA occurred in this District and
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`Defendants reside and may be found in this District. Venue is also proper in this District pursuant
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`to 28 U.S.C. § 1391 because Defendants do business in this District and a substantial part of the
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`events or omissions giving rise to the claims asserted herein occurred within this District.
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`III.
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`PARTIES
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`Plaintiffs
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`13.
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`Plaintiff Mary K. Boley (“Boley”) resides in Anna, Texas. During her employment,
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`Plaintiff Boley participated in the Plan, investing in the options offered by the Plan and which are
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`the subject of this lawsuit.
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`14.
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`Plaintiff Kandie Sutter (“Sutter”) resides in Corona, California. During her
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`employment, Plaintiff Sutter participated in the Plan, investing in the options offered by the Plan
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`and which are the subject of this lawsuit.
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`15.
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`Plaintiff Phyllis Johnson (“Johnson”) resides in Las Vegas, Nevada. During her
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`employment, Plaintiff Johnson participated in the Plan, investing in the options offered by the Plan
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`and which are the subject of this lawsuit.
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`16.
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`Each Plaintiff has standing to bring this action on behalf of the Plan because each
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`of them participated in the Plan and were injured by Defendants’ unlawful conduct. Plaintiffs are
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`entitled to receive benefits in the amount of the difference between the value of their accounts
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`4
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`currently, or as of the time their accounts were distributed, and what their accounts are or would
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`have been worth, but for Defendants’ breaches of fiduciary duty as described herein.
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`17.
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`Plaintiffs did not have knowledge of all material facts (including, among other
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`things, the investment alternatives that are comparable to the investments offered within the Plan,
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`comparisons of the costs and investment performance of Plan investments versus available
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`alternatives within similarly-sized plans, total cost comparisons to similarly-sized plans,
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`information regarding other available share classes, and information regarding the availability and
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`pricing of collective trusts) necessary to understand that Defendants breached their fiduciary duties
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`and engaged in other unlawful conduct in violation of ERISA until shortly before this suit was
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`filed. Further, Plaintiffs did not have and do not have actual knowledge of the specifics of
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`Defendants’ decision-making process with respect to the Plan, including Defendants’ processes
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`(and execution of such) for selecting, monitoring, and removing Plan investments, because this
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`information is solely within the possession of Defendants prior to discovery.2 Moreover, having
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`never managed a large 401(k) plan such as the Plan, Plaintiffs lacked actual knowledge of
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`reasonable fee levels and prudent alternatives available to such plans. For purposes of this
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`Complaint, Plaintiffs have drawn reasonable inferences regarding these processes based upon
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`(among other things) the facts set forth herein.
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`Defendants
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`Company Defendant
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`18.
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`Universal Health Services, Inc., is the Plan sponsor. See 2018 Form 5500 at 1. Its
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`corporate headquarters is located at 367 S. Gulph Road, King of Prussia, Pennsylvania. UHS
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`2 See Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 598 (8th Cir. 2009) (“If Plaintiffs cannot state
`a claim without pleading facts which tend systematically to be in the sole possession of defendants,
`the remedial scheme of [ERISA] will fail, and the crucial rights secured by ERISA will suffer.”).
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`5
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`describes itself as “one of the nation’s largest and most respected providers of hospital and
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`healthcare services.”3 It “has 400 acute care hospitals, behavioral health facilities and ambulatory
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`centers across the U.S., Puerto Rico and the U.K….and employs 90,000 employees.”4 In 2019,
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`“UHS generated net revenues of approximately $11.4 billion, an increase of 5.6% over 2018.” See,
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`the December 31, 2019 Annual Report of Universal Health Services, Inc., at 6.
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`19.
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`“The Company and its authorized representatives appointed by the Board of
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`Directors are the Plan fiduciaries and the Plan Administrator.” Summary Plan Description
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`Handbook of Universal Health Services, Inc., Effective January 1, 2020 (“UHS 2020 SPD”), at
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`81. In executing their powers, the “Plan Administrator and Plan Sponsor have the authority to
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`control and manage the operation and administration of the plan….” Id. at 92.
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`20.
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`In addition, UHS is responsible for “selecting and removing Plan trustees,
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`investment media, record-keepers and/or insurance companies.” UHS 2020 SPD at 81. Under
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`ERISA, fiduciaries with the power to appoint have the concomitant fiduciary duty to monitor and
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`supervise their appointees.
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`21.
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`Additionally, at all times, UHS acted through its officers, including the Committee,
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`to perform Plan-related fiduciary functions.
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`22.
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` Lastly, UHS made discretionary decisions to make matching and discretionary
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`contributions (explained below) to Plan participants. As described in the 2018 Audited Statement,
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`UHS “contributes a discretionary amount of each participant’s contribution to the Plan in
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`accordance with Plan provisions…” See, the December 31, 2018 Audited Financial Statements of
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`Universal Health Services, Inc., (“2018 Audited Statement”) at 4.
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`3 https://www.uhsinc.com/about-uhs/
`4 Id.
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`6
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`23.
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`For all the foregoing reasons, the Company is a fiduciary of the Plan, within the
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`meaning of ERISA Section 3(21)(A), 29 U.S.C. § 1002(21)(A).
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`Board Defendants
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`24.
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`The Board appointed “authorized representatives” of the Company, including the
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`Committee, as Plan fiduciaries. UHS 2020 SPD at 81.
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`25.
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`Accordingly, the Board had the fiduciary duty to monitor and supervise the
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`Committee while it performed its role as the fiduciary responsible for selection and monitoring of
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`the Plan’s investments.
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`26.
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`Each member of the Board during the putative Class Period (referred to herein as
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`John Does 1-10) is/was a fiduciary of the Plan, within the meaning of ERISA Section 3(21)(A),
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`29 U.S.C. § 1002(21)(A), during the Class Period, because each exercised discretionary authority
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`to appoint and/or monitor the Committee, which had control over Plan management and/or
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`authority or control over management or disposition of Plan assets.
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`27.
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`The Board and it members during the Class Period are collectively referred to
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`herein as the “Board Defendants.”
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`Committee Defendants
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`28.
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`As noted in the 2018 Audited Financial Statement: “[t]he Company’s Plan
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`Committee … is the plan administrator.” 2018 Audited Statement at 4. “Participants direct the
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`investment of their contributions … into various investment options selected by the Plan
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`Committee.” Id.
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`29.
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`Further, the Administrative Committee and its members, as “authorized
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`representatives of the Company,” appointed the trustee of the Plan. UHS 2020 SPD at 81. The
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`Committee selected “Fidelity Trust Company” to act as the Plan trustee. Id. The Plan trustee,
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`Fidelity Trust Company “shall be the named fiduciary with respect to management and control of
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`7
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`Plan assets held by it…” The Universal Health Services, Inc., Retirement Saving Plan Document
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`as amended and restated effective January 1, 2017 (“2017 Plan Doc.”) at 54.
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`30.
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`The Committee and each of its members were fiduciaries of the Plan during the
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`Class Period, within the meaning of ERISA Section 3(21)(A), 29 U.S.C. § 1002(21)(A), because
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`each exercised discretionary authority over management or disposition of Plan assets.
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`31.
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`The Committee and members of the Committee during the Class Period (referred
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`to herein as John Does 11-20), are collectively referred to herein as the “Committee Defendants.”
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`Additional John Doe Defendants
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`32.
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`To the extent that there are additional officers and employees of UHS who are/were
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`fiduciaries of the Plan during the Class Period, or other individuals who were hired as investment
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`managers for the Plan during the Class Period, the identities of whom are currently unknown to
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`Plaintiffs, Plaintiffs reserve the right, once their identities are ascertained, to seek leave to join
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`them to the instant action. Thus, without limitation, unknown “John Doe” Defendants 21-30
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`include, but are not limited to, UHS officers and employees who are/were fiduciaries of the Plan
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`within the meaning of ERISA Section 3(21)(A), 29 U.S.C. § 1002(21)(A), during the Class Period.
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`IV.
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`THE PLAN
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`33.
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`The Plan “which became effective January 1, 1985, is a defined contribution plan
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`available to qualifying employees of Universal Health Services, Inc.” 2018 Audited Statement at
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`4. The plan was amended and restated effective January 1, 1997. See, 2017 Plan Doc. at 1.
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`34.
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`The Plan is a “defined contribution” or “individual account” plan within the
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`meaning of ERISA Section 3(34), 29 U.S.C. § 1002(34), in that the Plan provides for individual
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`accounts for each participant and for benefits based solely upon the amount contributed to those
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`accounts, and any income, expense, gains and losses, and any forfeitures of accounts of the
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`participants which may be allocated to such participant’s account. See, 2017 Plan Doc at 9.
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`8
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`Further, the 2020 SPD provides: “[t]he Plan is a defined contribution plan…” UHS 2020 SPD at
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`82. Consequently, retirement benefits provided by the Plan are based solely on the amounts
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`allocated to each individual’s account.
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`Eligibility
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`35.
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`As detailed in the 2018 Auditor Report: “[t]o be eligible to participate in the Plan,
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`an employee must generally have completed at least one month of credited service and be 21 years
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`of age.” 2018 Auditor Report at 4.
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`Contributions and Vesting
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`36.
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`There are several types of contributions that can be added to a participant’s account:
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`an employee salary deferral contribution, an employer matching contribution, and an employer
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`profit sharing contribution. UHS 2020 SPD at 72 and 73. Participants can also roll over amounts
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`from other qualified benefit or defined contribution plans. Id.
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`37.
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`As described in the UHS 2020 SPD, a participant “can save from 1% to 75% of
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`your eligible compensation on a pre-tax basis….” Id. In addition, “the Company will match a
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`portion of your pre-tax and/or Roth after-tax contributions (your “Company Matching
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`Contribution”) each pay period.
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`38.
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`UHS made discretionary decisions about the matching and discretionary
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`contributions to Plan participants. 2015 Plan Doc. at 25. As described in the 2018 Audited
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`Statement, UHS “contributes a discretionary amount of each participant’s contribution to the Plan
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`in accordance with Plan provisions…” 2018 Audited Statement at 4. As long as an employee is
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`eligible to participate in the Plan, UHS will make contributions to each participants’ accounts on
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`the first day of eligibility. See, UHS 2020 SPD at 71.
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`39.
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`Generally, “[p]articipants are immediately vested in their contributions plus actual
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`earnings thereon. Vesting in the Company’s contribution portion is based on years of continuous
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`service. Generally, participants vest 25% each year and are fully vested after four years of
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`service.” 2018 Auditor Report at 4.
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`40.
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`Like other companies that sponsor 401(k) plans for their employees, UHS enjoys
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`both direct and indirect benefits by providing matching contributions to Plan participants.
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`Employers are generally permitted to take tax deductions for their contributions to 401(k) plans at
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`the time when the contributions are made. See generally https:/www.irs.gov/retirement-
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`plans/plan-sponsor/401k-plan-overview.
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`41.
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`UHS also benefits in other ways from the Plan’s matching program. It is well-
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`known that “[m]any employers match their employees’ contributions to the 401(k) plan in order
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`to help attract and retain talent at their company. By hiring and retaining employees with a high-
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`caliber of talent, [a company] may save money on training and attrition costs associated with
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`unhappy or lower-performing workers.” See, https://www.paychex.com/articles/employee-
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`benefits/employer-matching-401k-benefits.
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`42.
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`Given the size of the Plan, UHS likely enjoyed a significant tax and cost savings
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`from offering a match.
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`The Plan’s Investments
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`43.
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`Several investments were available to Plan participants for investment each year
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`during the putative Class Period, including several Fidelity target date funds. As noted above, the
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`Committee determines the appropriateness of the Plan’s investment offerings and monitors
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`investment performance. For 2018, the Plan offered 31 investment options, which included 29
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`mutual funds, 1 collective trust and 1 money market fund.
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`44.
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`The Plan’s assets under management for all funds as of the end of 2018 was
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`$1,914,043,716. 2018 Auditor Report at 2. From 2014 to 2017 the Plan’s assets under
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`management ranged from $1.3 billion to $1.9 billion.
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`10
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`Plan Expenses
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`45.
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` “Certain expenses of maintaining the Plan are paid directly by the Plan …” 2018
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`Auditor Report at 6.
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`V.
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`CLASS ACTION ALLEGATIONS
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`46.
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`Plaintiffs bring this action as a class action pursuant to Rule 23 of the Federal Rules
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`of Civil Procedure on behalf of themselves and the following proposed class (“Class”):5
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`All persons, except Defendants and their immediate family
`members, who were participants in or beneficiaries of the Plan, at
`any time between June 5, 2014 through the date of judgment (the
`“Class Period”).
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`The members of the Class are so numerous that joinder of all members is
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`47.
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`impractical. The 2018 Form 5500 filed with the Dept. of Labor lists 41,872 Plan “participants
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`with account balances as of the end of the plan year.” 2018 Form 5500 at 2.
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`48.
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`Plaintiffs’ claims are typical of the claims of the members of the Class. Like other
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`Class members, Plaintiffs participated in the Plan and have suffered injuries as a result of
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`Defendants’ mismanagement of the Plan. Defendants treated Plaintiffs consistently with other
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`Class members and managed the Plan as a single entity. Plaintiffs’ claims and the claims of all
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`Class members arise out of the same conduct, policies, and practices of Defendants as alleged
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`herein, and all members of the Class have been similarly affected by Defendants’ wrongful
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`conduct.
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`49.
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`There are questions of law and fact common to the Class, and these questions
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`predominate over questions affecting only individual Class members. Common legal and factual
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`questions include, but are not limited to:
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`5 Plaintiffs reserve the right to propose other or additional classes or subclasses in their motion for
`class certification or subsequent pleadings in this action.
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`11
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`A. Whether Defendants are/were fiduciaries of the Plan;
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`B. Whether Defendants breached their fiduciary duties of loyalty and prudence
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`by engaging in the conduct described herein;
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`C. Whether the Company and Board Defendants failed to adequately monitor
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`the Committee and other fiduciaries to ensure the Plan was being managed
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`in compliance with ERISA;
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`D.
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`E.
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`The proper form of equitable and injunctive relief; and
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`The proper measure of monetary relief.
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`50.
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`Plaintiffs will fairly and adequately represent the Class and have retained counsel
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`experienced and competent in the prosecution of ERISA class action litigation. Plaintiffs have no
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`interests antagonistic to those of other members of the Class. Plaintiffs are committed to the
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`vigorous prosecution of this action and anticipate no difficulty in the management of this litigation
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`as a class action.
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`51.
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`This action may be properly certified under Rule 23(b)(1). Class action status in
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`this action is warranted under Rule 23(b)(1)(A) because prosecution of separate actions by the
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`members of the Class would create a risk of establishing incompatible standards of conduct for
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`Defendants. Class action status is also warranted under Rule 23(b)(1)(B) because prosecution of
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`separate actions by the members of the Class would create a risk of adjudications with respect to
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`individual members of the Class that, as a practical matter, would be dispositive of the interests of
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`other members not parties to this action, or that would substantially impair or impede their ability
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`to protect their interests.
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`52.
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`In the alternative, certification under Rule 23(b)(2) is warranted because the
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`Defendants have acted or refused to act on grounds generally applicable to the Class, thereby
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`Case 2:20-cv-02644-MAK Document 1 Filed 06/05/20 Page 13 of 41
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`making appropriate final injunctive, declaratory, or other appropriate equitable relief with respect
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`to the Class as a whole.
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`VI. DEFENDANTS’ FIDUCIARY STATUS
`AND OVERVIEW OF FIDUCIARY DUTIES
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`ERISA requires every plan to provide for one or more named fiduciaries who will
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`53.
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`have “authority to control and manage the operation and administration of the plan.” ERISA §
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`402(a)(1), 29 U.S.C. § 1102(a)(1).
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`54.
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`ERISA treats as fiduciaries not only persons explicitly named as fiduciaries under
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`Section 402(a)(1), 29 U.S.C. § 1102(a)(1), but also any other persons who in fact perform fiduciary
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`functions. Thus, a person is a fiduciary to the extent “(i) he exercises any discretionary authority
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`or discretionary control respecting management of such plan or exercises any authority or control
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`respecting management or disposition of its assets, (ii) he renders investment advice for a fee or
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`other compensation, direct or indirect, with respect to any moneys or other property of such plan,
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`or has any authority or responsibility to do so, or (iii) he has any discretionary authority or
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`discretionary responsibility in the administration of such plan.” ERISA § 3(21)(A)(i), 29 U.S.C.
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`§ 1002(21)(A)(i).
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`55.
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`As described in the “Parties” section above, Defendants were fiduciaries of the Plan
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`because:
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`(a)
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`they were so named; and/or
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`(b)
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`they exercised authority or control respecting management or disposition of
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`the Plan’s assets; and/or
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`(c)
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`they exercised discretionary authority or discretionary control respecting
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`management of the Plan; and/or
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`13
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`Case 2:20-cv-02644-MAK Document 1 Filed 06/05/20 Page 14 of 41
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`(d)
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`they had discretionary authority or discretionary responsibility in the
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`administration of the Plan.
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`56.
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`As fiduciaries, Defendants are/were required by ERISA Section 404(a)(1), 29
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`U.S.C. § 1104(a)(1), to manage and administer the Plan, and the Plan’s investments, solely in the
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`interest of the Plan’s participants and beneficiaries and with the care, skill, prudence, and diligence
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`under the circumstances then prevailing that a prudent person acting in a like capacity and familiar
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`with such matters would use in the conduct of an enterprise of a like character and with like aims.
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`These twin duties are referred to as the duties of loyalty and prudence and are “the highest known
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`to the law.” Sweda, 923 F.3d at 333.
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`57.
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`The duty of loyalty requires fiduciaries to act with an “eye single” to the interests
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`of plan participants. Pegram v. Herdrich, 530 U.S. 211, 235 (2000). “Perhaps the most
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`fundamental duty of a [fiduciary] is that he [or she] must display . . . complete loyalty to the
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`interests of the beneficiary and must exclude all selfish interest and all consideration of the interests
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`of third persons.” Id., at 224 (quotation marks and citations omitted). Thus, “in deciding whether
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`and to what extent to invest in a particular investment, a fiduciary must ordinarily consider only
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`factors relating to the interests of plan participants and beneficiaries . . . . A decision to make an
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`investment may not be influenced by [other] factors unless the investment, when judged solely on
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`the basis of its economic value to the plan, would be equal or superior to alternative investments
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`available to the plan.” Dep’t of Labor ERISA Adv. Op. 88-16A, 1988 WL 222716, at *3 (Dec.
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`19, 1988) (emphasis added).
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`58.
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`In effect, the duty of loyalty includes a mandate that the fiduciary display complete
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`loyalty to the beneficiaries and set aside the consideration of himself or third persons.
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`59.
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`ERISA also “imposes a ‘prudent person’ standard by which to measure fiduciaries’
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`investment decisions and disposition of assets.” Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct.
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`Case 2:20-cv-02644-MAK Document 1 Filed 06/05/20 Page 15 of 41
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`2459, 2467 (2014) (quotation omitted). In addition to a duty to select prudent investments, under
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`ERISA a fiduciary “has a continuing duty to monitor [plan] investments and remove imprudent
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`ones” that exists “separate and apart from the [fiduciary’s] duty to exercise prudence in selecting
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`investments.” Tibble I, 135 S. Ct. at 1828.
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`60.
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`In addition, ERISA Section 405(a), 29 U.S.C. § 1105(a) (entitled “Liability for
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`breach by co-fiduciary”), further provides that:
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`[I]n addition to any liability which he may have under any other
`provision of this part, a fiduciary with respect to a plan shall be liable
`for a breach of fiduciary responsibility of another fiduciary with
`respect to the same plan in the following circumstances: (A) if he
`participates knowingly in, or knowingly undertakes to conceal, an
`act or omission of such other fiduciary, knowing such an act or
`omission is a breach; (B) if, by his failure to comply with section
`404(a)(1), 29 U.S.C. §1104(a)(1), in the administration of his
`specific responsibilities which give rise to his status as a fiduciary,
`he has enabled such other fiduciary to commit a breach; or (C) if he
`has knowledge of a breach by such other fiduciary, unless he makes
`reasonable efforts under the circumstances to remedy the breach.
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`61.
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`During the Class Period, Defendants did not act in the best interests of the Plan
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`participants. Investments chosen for a plan are not to favor the fund provider over the plan’s
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`participants. Yet here, to the detriment of the Plan and its participants and beneficiaries, the Plan’s
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`fiduciaries included and retained in the Plan many mutual fund investments that were more
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`expensive than necessary and otherwise not justified on the basis of their economic value to the
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`Plan or Plan participants.
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`62.
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`Based on reasonable inferences from the facts set forth in this Complaint, during
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`the Class Period Defendants failed to have a proper system of review in place to ensure that
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`participants in the Plan were being charged appropriate and reasonable fees for the Plan’s
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`investment options. Additionally, Defendants failed to leverage the size of the Plan to negotiate
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`for: (1) lower expense ratios for certain investment options maintained and/or added to the Plan
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`Case 2:20-cv-02644-MAK Document 1 Filed 06/05/20 Page 16 of 41
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`during the Class Period; and (2) a prudent payment arrangement with regard to the Plan’s
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`recordkeeping and administrative fees.
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`63.
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` As discussed below, Defendants breached fiduciary duties to the Plan and its
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`participants and beneficiaries and are liable for their breaches and the breaches of their co-
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`fiduciaries under 29 U.S.C. §§ 1104(a)(1) and 1105(a).
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`VII. SPECIFIC ALLEGATIONS
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`A.
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`Improper Management of an Employee Retirement Plan Can Cost the Plan’s
`Participants Millions in Savings
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`64.
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`Under 29 U.S.C. § 1104(a)(1), a plan fiduciary must provide diversified investment
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`options for a defined-contribution plan while also giving substantial consideration to the cost of
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`those options. “Wasting beneficiaries’ money is imprudent. In devising and implementing
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`strategies for the investment and management of trust assets, trustees are obligated to minimize
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`costs.” Uniform Prudent Investor Act (the “UPIA”), § 7.
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`65.
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`“The Restatement … instructs that ‘cost-conscious management is fundamental to
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`prudence in the investment function,’ and should be applied ‘not only in making investments but
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`also in monitoring and reviewing investments.’” Tibble v. Edison Int’l, 843 F.3d 1187, 1197-98
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`(9th Cir. 2016) (en banc) (quoting Restatement (Third) of Trusts, § 90, cmt. b) (“Tibble II”). See
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`also U.S. Dep’t of Labor, A Look at 401(k) Plan Fees, (Aug. 2013), at 2, available at
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`https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-
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`center/publications/a-look-at-401k-plan-fees.pdf (last visited February 21, 2020) (“You should be
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`aware that your employer also has a specific obligation to consider the fees and expenses paid by
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`your plan.”). As the Ninth Circuit described, additional fees of only 0.18% or 0.4% can have a
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`large effect on a participant’s investment results over time because “[b]eneficiaries subject to
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`higher fees … lose not only money spent on higher fees, but also lost investment opportunity; that
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`Case 2:20-cv-02644-MAK Document 1 Filed 06/05/20 Page 17 of 41
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`is, the money that the portion of their investment spent on unnecessary fees would have earned
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`over time.” Tibble II, 843 F.3d at 1198 (“It is beyond dispute that the higher the fees charged to a
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`beneficiary, the more the beneficiary’s investment shrinks.”).
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`66. Most participants in 401(k) plans expect that their 401(k) accounts will be their
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`principal source of income after retiremen