Falberg v. The Goldman Sachs Group, Inc. et al
***SELECTED PARTIES*** OPINION AND ORDER re: 170 MOTION to Strike Certain Opinions of Dr. Brian C. Becker. filed by The Goldman Sachs Group, Inc., The Goldman Sachs 401(k) Plan Retirement Committee, 213 MOTION to Compel Ar bitration of Certain Class Members. filed by The Goldman Sachs Group, Inc., The Goldman Sachs 401(k) Plan Retirement Committee, 188 MOTION for Partial Summary Judgment . filed by Leonid Falberg, 195 CROSS MOTION for Pa rtial Summary Judgment . filed by Leonid Falberg, 131 MOTION to Compel Defendants to Produce Documents Designated as Privileged. filed by Leonid Falberg, 174 MOTION for Summary Judgment . filed by The Goldman Sachs Group, Inc., The Goldman Sachs 401(k) Plan Retirement Committee. For the reasons set forth above, Defendants motion for summary judgment is GRANTED and Falberg's motion for partial summary judgment is DENIED. In addition, Falberg' s motion to compel documents designated as privileged and Defendants' motions to strike expert opinions and to compel arbitration of certain class members are DENIED as moot. The Clerk of Court is respectfully directed to terminate the motions , Docs. 131, 170, 174, 188, 195, and 213, and to close the case. The Clerk of Court is further directed to restrict access to this Opinion to the "selected party" viewing level. It is SO ORDERED. (Signed by Judge Edgardo Ramos on 9/14/2022) (jca) Transmission to Orders and Judgments Clerk for processing.
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 1 of 34
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
Leonid Falberg, as representative of a class of
similarly situated persons, and on behalf of the
Goldman Sachs 401(k) Plan,
OPINION AND ORDER
19 Civ. 9910 (ER)
The Goldman Sachs Group, Inc., The Goldman Sachs
401(k) Plan Retirement Committee, and John Does 120,
Leonid Falberg, a participant in the Goldman Sachs 401(k) Plan (the “Plan”), brings this
putative class action on behalf of the Plan and those similarly situated. Falberg alleges violations
of the Employment Retirement Income Security Act of 1974 (“ERISA”) by the Plan’s sponsor,
Retirement Committee and its members John Does 1-20 (collectively “Defendants”).
Defendants move for summary judgment on all claims. Falberg separately moves for
partial summary judgment only on the issues of loss and loss causation. Also before the Court
are Falberg’s motion to compel certain documents designated as privileged; Defendants’ motion
to strike certain opinions of Dr. Brian C. Becker, Falberg’s expert; and Defendants’ motion to
compel arbitration of certain class members.
For the reasons set forth below, Defendants’ motion for summary judgment is
GRANTED; Falberg’s motions for partial summary judgment and to compel documents are
DENIED; and Defendants’ motions to strike and to compel arbitration are DENIED.
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 2 of 34
*ROGPDQ6DFKVVSRQVRUVDGH¿QHG-contribution 401(k) plan for eligible employees. Doc.
227 ¶ 1. Participants in the Plan are responsible for directing the investments in their accounts.
Id. ¶ 3. During the class period, October 25, 2013, to June 6, 2017, Plan participants could set up
their accounts either through a “target date fund,” based on a target retirement date, or by
selecting funds from a menu of 35 single-strategy investment options. 2 Id. ¶ 4. Falberg worked
for Goldman Sachs from 1999 until 2008 and has participated in the Plan since 1999. Doc. 228 ¶
1. During the class period, less than one third of the Plan’s investment options were managed by
Goldman Sachs Asset Management (“GSAM”), an investment manager with over $1.5 trillion of
assets under supervision (as of 2018). Doc. 227 ¶¶ 5–6.
Falberg challHQJHVWKHDYDLODELOLW\RI¿YHproprietary mutual funds managed by
GSAM—the Mid Cap Value Fund, Large Cap Value Fund, High Yield Fund, Core Fixed Income
Fund, and Short Duration Government Fund—as investment options in the Plan. 3 Id. ¶ 2. HVH
Defendants’ Statement of Additional MaWHULDO)DFWVDVWR:KLFKHUHLVQR*HQXLQH'LVSXWH´—and 228—
As of July 31, 2013, the Plan held 12 mutual funds, seven collective investment trusts (“CITs”), and 15 separate
accounts on the single-strategy menu. Doc. 228 ¶ 76. Of the 12 mutual funds, seven were managed by Goldman
Sachs. Id. All the challenged GSAM funds were retained as mutual funds. Id.
On this point, while Falberg admits that his complaint does not “explicitly challenge” two other GSAM funds—the
Emerging Markets Equity Fund and the Strategic Income Fund—he denies that Defendants had a prudent process
IRUVHOHFWLQJWKHVHIXQGVRUIRUHYDOXDWLQJLQYHVWPHQWYHKLFOHVIRUWKRVHIXQGVHVHdenials are beside the point, as
Fund, the Mid Cap Value Fund, the High Yield Fund, the core Fixed Income Fund, and/or the Short-Duration
Government Fund. Doc. 163 at 25. As such, the Emerging Market Equity and Strategic Income Funds are not at
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 3 of 34
¿YHIXQds were included in the Plan’s investment menu from before 2013 until their removal in
2017. Doc. 228 ¶ 4.
and monitoring Plan investment options. Doc. 227 ¶ 9. During the class period, the Committee
consisted of 10 to 12 sophisticated ¿QDQFLDOSURIHVVLRQDOVZKRKHOGVHQLRUSRVLWLRQVDW*ROGPDQ
Sachs. 4 Id. ¶ 10. According to Falberg’s expert Marcia Wagner, the Retirement Committee
¶ 11. She also stated that the Committee members’ experience “compares favorably” to those of
other large plan FRPPLWWHHVWKH³YDVWPDMRULW\´RI³ZKRVHPHPEHUV>@SRVVHVV>@DOLPLWHG
investment knowledge” and/or expertise. Id. 5 H5HWLUHPHQW&RPPLWWHHZDVDVVLVWHGE\DIXOOtime, highly-TXDOL¿Hd secretary, Cheryl Mintzer, who received an MBA from Columbia Business
School and is a Chartered Financial Analyst with extensive industry experience. Id. H
Falberg FODLPVWRGLVSXWHWKH³QDWXUHRIHDFK>@&RPPLWWHHPHPEHU¶VµVRSKLVWLFDWLRQ¶´see Doc. 227 ¶ 10, but does
not point to any evidence suggesting the Committee members were unsophisticated or lacked expertise. Instead,
Falberg quotes from his expert Marcia Wagner, who opined that 'HIHQGDQWV¶H[SHUW(LOHHQ.DPHULFN³IDLO>HG@WR
KLJKOLJKWDQ\VSHFL¿FH[DPSOHVRIWKH&RPPLWWHHDSSO\LQJ>LWVNQRZOHGJH@´ZLth respect to managing the
challenged funds. Id. And, Falberg adds WKDWKLVH[SHUW:LOOLDP)HQGHUWHVWL¿HGWKDW³WKHUHLVQRFRUUHODWLRQ
that they actually know what’s involved in the prudent management of an investment portfolio.” Fender further
DQGEDFNJURXQGWRDFWDVDSUXGHQW(5,6$¿GXFLDU\´1RQHRIWKHVHchallenges amount to a dispute over the
Committee’s sophistication: ¿UVW:DJQHUGRHVQRWGLVSXWHWKDWWKH&RPPLWWHHhad knowledge and expertise but
instead objects that it did not properly apply WKRVHLQDQ\HYHQW:DJQHUWHVWL¿HGWKDWWKHPHPEHUVRIWKH&RPPLWWHH
were “sophisticated ¿QDQFLDOSURIHVVLRQDOV´Id. Second, Felder’s testimony is at most general speculation about a
disconnect that may exist between the Committee members’ qXDOL¿FDWLRQVDQGWKHDELOLW\WRSUXGHQWO\PDQDJH
investment portfolios, and does not speak to—or controvert—the experience or sophistication of the Committee
Falberg points to Wagner’s testimony as evidence of a dispute over the Committee’s expertise, but, again, Wagner
does not contest that the Committee members were “consummate professionals.” Id. ¶ 11. Instead, she notes she
observed a “disconnect” between their “¿QDQFLDO SURIHVVLRQDOLVP´DQG³KRZ>@WKH\XVH>G@WKDW¿QDQFLDO
professionalism.” Id. In other words, there is no dispute that the Committee members had “deep expertise;” Wagner
objects only to their exercise of that expertise.
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 4 of 34
Committee also was assisted by Alan Wilmit, an experienced, highly-TXDOL¿HG(5,6$FRXQVHODW
Goldman Sachs. Id. ¶ 16. Wilmit attended each of the Committee’s meetings during the class
period. Id. ¶ 17. 6
Upon joining the Committee, each new member participated in a one-on-one training
session with Goldman Sachs’ senior ERISA counsel covering a range of topics, including
disclosure obligations. 7 Id. ¶¶ 20–21. Committee members also received periodic training about
developments. Id. ¶ 24. Retirement Committee member 'HDQ%DFNHUWHVWL¿HGWKDW&RPPLWWHH
options.” Id. ¶ 26.
³5RFDWRQ´DVD¿GXFiary to provide the Committee with investment advice. Id. ¶ 27. Rocaton
provided the Committee with, among other things, (1) information about each of the Plan’s
investment options, including monthly and quarterly performance reports, (2) written reports
summarizing Rocaton’s meetings with investment managers, (3) Rocaton’s commentary on
GL൵HUHQW investment options and industry trends, and (4) other information periodically requested
by the Committee. Id. ¶¶ 44–47.
Wagner opines that the Committee should have considered appointing independent members who were not
HPSOR\HHVRI*ROGPDQ6DFKVRULWVD൶OLDWHVId. ¶ 18. However, when asked if she was aware of a single 401(k)
know. I can’t answer either way.” Id.
Falberg objects that Defendants did not produce any documents detailing these training sessions, but this is
controverted by the record, which, as Defendants point out, includes emails and an expert report relating to the
training sessions. See Doc. 227 ¶ 21. Falberg’s further objection that there is no indication the trainings included
ERISA’s prohibited transaction rules also is controverted by the record. See id.
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 5 of 34
During the class period, Rocaton assLJQHGRQHRI¿YHUDWLQJVWRWKHPXWXDOIXQGVWKDWLW
covered: “buy,” “hold,” “not broadly recommended,” “sell,” and “under construction.” Doc.
227 ¶ 31; Doc. 228 ¶ 62. HVHZHUHUDWLQJVWKDW5RFDWRQPDGHDYDLODEOHWRDOOLWVFOLHQWVId. ¶
32. According to Falberg’s expert William Fender, Rocaton’s “not broadly recommended” rating
means that “a fund is average (or worse) within its peer group.” ¶ 33. Fender also stated that a
³QRWEURDGO\UHFRPPHQGHG´UDWLQJ³LVIDUIURPDVWURQJYRWHRIFRQ¿GHQFH.” Id. Still, according
to Rocaton, a fund with “not broadly recommended” rating nonetheless “may be suitable for
VRPHFOLHQWVEDVHGRQWKHLUVSHFL¿Fobjectives.” Id. ¶ 34.
As Anne Buehl, one of Rocaton’s co-founders and advisor to the Plan since 1998,
explained, Rocaton’s “not broadly recommended” rating was “not a recommendation by Rocaton
to remove a fund as an investment option.” Instead, Rocaton mentioned a “sell” rating for that
purpose. Id. ¶ 35. %XHKODOVRWHVWL¿HGWKDWPDQ\RI5Rcaton’s clients held investments that
Rocaton had rated “not broadly recommended,” and that “Rocaton believed it was appropriate
IRUFOLHQWVWRLQYHVWLQIXQGVWKDWKDGUHFHLYHGDµQRWEURDGO\UHFRPPHQGHG¶UDWLQJ>@´ 8 Id. ¶¶
According to Buehl, Rocaton’s ratings were only a small part of the information that
Rocaton provided to the Committee about the Plan’s investment options. 9 Id. ¶ 43. During the
Falberg notes Buehl did not name any particular clients that retained “not broadly recommended” investments, but
does not point to any evidence controverting her testimony that many of Rocaton’s clients held such investments.
Falberg also argues, here, that Buehl’s “credibility is in serious doubt,” but, as Defendants note, does not provide a
proper evidentiary basis for such a claim. See Doc. 227 ¶ 37.
Falberg does not dispute that Rocaton provided the Committee a range of other information—beyond the ratings—
on the Plan’s investment options, but instead contends that this additional information should be considered part and
parcel of the ratings. In other words, Falberg argues Rocaton considered other information so as to arrive at its
ratings and that, as such, WKHUDWLQJVDUHUHÀHFWLYHRI—not apart from—the additional information Rocaton
considered. But Falberg¶VH[SHUW:DJQHUWHVWL¿HGthat she did not say, imply, or intend to imply that “manager
UDWLQJVZ>HUH@WKHHQG-all and sole output or product of Rocaton,” Doc. 227 at ¶ 43. In any event, Falberg’s
objection does not change the fact that Rocaton considered and produced to the Committee a range of information
on investment options, including its ratings.
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 6 of 34
class period, Rocaton provided the Committee with quantitative and qualitative reviews of each
of the Plans’ investment options, including monthly and quarterly performance reports that
showed quarterly, year-to-date, 1-year, 3-year, 5-year, 7-year, and 10-year performance compared
to index benchmarks and mutual funds peers. 10 Id. ¶ 44. Also during the class period, Rocaton
provided the Committee with a “one-page snap shot” for each option that included a product
description, total product and Plan assets, fees, a quarterly performance update, portfolio
characteristics, and commentary, as well as analyses of the management fees charged by each of
the Plan’s investment options, including comparisons of those fees to peer-group averages across
GL൵HUHQWLQYHVWPHQWYHKLFOHW\SHV. Id. ¶¶ 45–46. Rocaton also provided other information
requested by the Committee, including monthly reports on the performance of each Plan
investment option. Id. ¶ 47.
H5HWLUHPHQW&RPPLWWHHPHWTXDUWHUO\DQGalso held ad hoc meetings, including eight
ad hoc meetings during the class period. Id. ¶ 49. Rocaton attended each of the Committee’s
quarterly meetings during the class period. Id. ¶ 50. Rocaton generally began each quarterly
meeting of the Retirement Committee by presenting information about Plan performance and
¿HOGLQJTXHVWLRQVIURP&RPPLWWHHPHPEHUV 11 After Rocaton’s presentation at the beginning of
Falberg generally takes issue with the level of detail in these reports but does not dispute that Rocaton produced
them. Doc. 227 ¶ 44.
Falberg does not dispute that Rocaton began each meeting by presenting information about Plan performance, but
broadly objects to the depth and detail of these presentations. 6SHFL¿FDOO\)DOEHUJVSHFXODWHVWKDWWKH&RPPLWWHH
may have spent “less than a minute” discussing each investment option at its meetings, and objects that during much
of the class period, meeting minutes contained little to no detail on the challenged funds and instead are made up of
more generic language. See Doc. 228 ¶¶ 50–52, 140–41, 145–59. Falberg further notes this general language is
repeated in numerous minutes. Id. ¶ 52.
In any event, Falberg’s expert Wagner previously has acknowledged that meeting “minutes do not need to be
OHQJWK\´DQGWHVWL¿HGWKDW³WKHGRFXPHQWDU\¿OHGRHVQ¶WKave to be verbatim” and “more robust” minutes “are not an
D൶UPDWLYHGXW\SHUVH´'RF Falberg also disputes whether the Committee asked questions, but does not
point to any evidence showing they did not. See id.
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 7 of 34
its quarterly meetings, the Committee often heard presentations from investment managers of
current or prospective Plan investment options. Id. ¶ 53.
With respect to Rocaton’s presentations, Committee Co-&KDLU3DXOD0DGR൵WHVWL¿HGWKDW
5RFDWRQ³ZRXOGJRWKURXJKWKHLUERRN´VKHDOVRWHVWL¿HGVKH³GLGQ¶Wknow how much time was
spent VSHFL¿FDOO\ on . . . the particular reporting,” and that Rocaton “would be more likely to talk
about what was happening in the markets and trends and things like that . . . .” Doc. 228 ¶ 49.
And as to the review of the quarterly reports, Committee Co-Chair Joseph *OHEHUPDQWHVWL¿HG
that at each meeting “Rocaton would go through the report and point out whatever highlights
they felt were particularly relevant;” in all, Gleberman estimated the discussion was “15 to 30
minutes.” Id. ¶ 50. *OHEHUPDQDOVRWHVWL¿HGthat Committee members “were expected to have
read the material before they got to the meeting.” Id. :DJQHUWHVWL¿HGWKDWWKHDPRXQWRIWLPH
that the Committee devoted to reviewing the Plan’s investments and Rocaton’s ratings at
Committee meetings “would not have been enough to have meaningful conversations about the
Plan’s investments.” Id. ¶ 51.
F 7UHDWPHQW DQG5HPRYDO RI WKH *6$0)XQGV
>*6$0@IXQGVWKDQIRUDQ\RWKHUIXQGLQWKHSODQ´Doc. 227 ¶¶ 59–63. In particular,
Committee Co-&KDLU-H൵UH\*ROGHQEHUJWHVWL¿HGWhat the Retirement Committee employed
³WUHDW>@SURSULHWDU\IXQGVDQ\GL൵HUHQWO\´Id. ¶ 60. And, Committee Co-&KDLU3DXOD0DGR൵
GSAM funds “no preferential treatment at all.” Id. ¶ 61. Goldman Sachs’s senior ERISA
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 8 of 34
DVWKH\WUHDWWKLUGSDUWLHV>@´Id. ¶ 62. At the same time, Falberg’s expert Fender opined that
in the Plan,” and that the “real issue here is whether the >@&RPPLWWHHSURSHUO\PDQDJHGWKH
In the years before the start of the class period, three of the challenged funds, the Large
Cap Value Fund, Mid Cap Value Fund, and High Yield Fund, repeatedly underperformed
benchmark indices. In particular, the Mid Cap Value and High Yield Funds underperformed their
benchmarks in 2009, and the Large Cap Value and High Yield Funds underperformed their
benchmarks in 2010. Id. ¶¶ 97–98. And, in 2011, each of the three funds underperformed its
benchmark index. Id. ¶ 99.
As a result of these, in November 2010, the Committee asked Rocaton to conduct an
Mid Cap Value Fund, High Yield Fund, and Short Duration Government Fund—DQGVSHFL¿FDOO\
to compare their performance to those of the funds included on a “Buy” list Rocaton maintained
for its clients. Id. ¶¶ 69–70. With respect to the three challenged funds, the 2010 review showed
that over 3- and 5-year periods, those funds performed above median or at median. 12 Id. ¶ 71.
Following Rocaton’s review, the Committee retained those three funds, but removed a GSAMmanaged real estate fund—not at issue here—in favor of a non-GSAM alternative. Id. ¶ 72.
In December 2011, the Retirement Committee directed Rocaton to expand the prior
year’s report and evaluate all of the GSAM funds compared to their peer groups. Id. ¶ 73.
Falberg does not dispute WKDWZLWKUHVSHFWWRWKHUHYLHZ'HIHQGDQWV¶UHIHUHQFHGH[KLELWVWDWHVWKDW³>L@W
seems that over 3- and 5-\HDUSHULRGVWKH*6$0IXQGVKDYHSHUIRUPHGDERYHPHGLDQRU>DW@PHGLDQ´EXWRQO\
disagrees that the High Yield Fund’s 63rd percentile rank should be deemed at or above median. See Doc. 227 at ¶
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 9 of 34
Following this review, the Committee voted in January to remove two additional GSAM funds
and replaced them with funds not managed by GSAM. Id. ¶ 74. While the Committee removed
certain *6$0IXQGVIURPWKH3ODQLWFKRVHWRUHWDLQWKH¿YHFKDOOHQJHd funds based on their
long-term performance. Id. ¶¶ 72, 74. $QGLQDOO¿YHFKDOOHQJHG*6$0IXQGV
outperformed their benchmarks. Id. ¶ 100.
According to Defendants’ expert, the “long-run (ten-year) historical returns” of the Mid
Cap Value Fund, Large Cap Value Fund, and High Yield Fund, as of January 1, 2014, “were
generally consistent with, or better than, those of their mutual fund peers (both on an absolute
and a risk adjusted basis).” Id. ¶ 102. Over that same ten-year period, before January 1, 2014,
the Mid Cap Value Fund, High Yield Fund, and Large Cap Value Fund ranked in the top 28th,
47th, and 57th percentile, respectively, of their mutual fund peers. Id. ¶ 103. $QGGXULQJWKH¿UVW
three years of the class period, both Morningstar and Lipper 13 also rated these three GSAM funds
as average or above average. Id. ¶ 111. At the same time, Falberg’s expert Fender argues that
the three challenged funds “consistently and substantially underperformed benchmark indices
and peer universe medians, both in terms of investment returns and risk adjusted returns,” and
overlooked it to permit the funds to continue as an investment” in the Plan. Doc. 228 ¶¶ 134,
On this point, Defendants maintain Fender’s opinion is basHGRQD³ÀDZHG´FRQVLVWHQF\DQDO\VLVDQGLQDQ\
event, they note he gives no deference to the Committee’s decision-making process with respect to the three
underperforming funds: indeed, the Committee did evaluate these three funds shortly before the start of the class
period, and evaluated their historical performance in comparison to other investment options in their peer groups as
well as non-proprietary alternatives. Doc. 228 ¶ 127.
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 10 of 34
HVHthree funds began to exhibit underperformance over multiple quarters in 2016. At
its quarterly meeting on September 29, 2016, the Committee discussed the Mid Cap and Large
Cap Value Funds5RFDWRQSUHVHQWHGLQIRUPDWLRQDERXWERWKDQG¿HOGHGTXHVWLRQVIURPWKH
Committee; that same meeting also included a presentation by the GSAM managers who
managed those funds. Id. ¶¶ 118–H&RPPLWWHHDVNHGWKH*6$0PDQDJHUV questions
about the funds’ investment performance and the team’s current outlook. Id. ¶ 121. After the
GSAM managers left the meeting, the Committee and Rocaton discussed the value funds, and
the Committee asked Rocaton to analyze alternatives that may be available. Id. ¶ 122.
H5HWLUHPHQW&RPPLWWHHWKHQVcheduled an ad hoc meeting to further address the value
funds; at this meeting, on October 25, 2016, Rocaton presented its view of the value funds and
discussed potential alternatives. 15 Id. ¶¶ 123–H2FWREHUPHHWLQJPLQXWHVUHÀHFW
that the Committee and Rocaton reviewed the investment lineup in the Plan, including the hedge
fund asset class, the availability of passively managed investment options, and the GSAMmanaged investment options. Id. ¶ 125.
investment lineup as a whole and decided to further review the status of the two value funds at its
next quarterly meeting on December 5, 2016. Id. ¶ 126. At the December 5, 2016, meeting,
Rocaton made a presentation to the Committee regarding the Plan’s investment fund lineup and
Falberg disagrees about the purpose of the meeting and argues it was set up to “address the litigation risk
associated with all proprietary funds.” Id. ¶ 123. But the September 29, 2016, minutes state that the “Committee
asked Ms. Mintzer to set up an ad hoc meeting for the Committee to further address the value funds.” Id. (emphasis
added). And the October 25, 2016, minutes state that “the primary purpose of this ad hoc meeting was to continue
the discussion of the GSAM large cap and mid cap value funds . . . .” Id. In support of his contention that the
meeting was arranged to address litigation risk, Falberg quotes from an email from Buehl to Mintzer stating that “it
wasn’t clear to me either whether the committee wanted an ad hoc meeting to discuss the GSAM value team or the
broader GSAM strategies.” Id. is email does not mention litigation risk and in any event does not rebut the fact
that the Committee intended to—and did—discuss the value funds and alternatives at the October meeting.
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 11 of 34
discussed the GSAM actively managed investment options in the Plan. Id. ¶ 127. Rocaton’s
accompanying 119-page presentation, which was provided to Committee members in advance of
funds to potential replacements. Id. ¶ 128. Also at that meeting, the Committee listened to a
presentation from the managers of a potential new investment. Id. ¶ 129.
Following these presentations, the Committee unanimously voted to remove ¿YH*6$0
funds, including four of the funds challenged here: the Short Duration Government, Core Fixed
Income, Mid Cap Value, and Large Cap Value Funds from the Plan, as well as the Strategic
Income Fund. Id. LVYRWHZDVIROORZHGE\GLVFXVVLRQRIWKH*6$0High Yield Fund
and the Emerging Markets Equity Fund, and a request that the managers of possible alternatives
to those funds present at the next Committee meeting. Id. ¶ 131.
HQH[W&RPPLWWHHPHHWLQJ, on April 3, 2017, contained similarly detailed presentations
concerning the High Yield Fund and the Emerging Markets Equity Fund. Id. ¶ 132. Rocaton
provided an overview of potential non-GSAM alternatives and compared both GSAM funds to
those alternatives. Id. ¶ 133. Also at that meeting, the Committee listened to presentations by
investment managers of alternative funds under consideration. Id. ¶ 134. Following those
presentations, the Committee voted unanimously to remove the High Yield Fund and Emerging
Markets Equity Fund from the Plan and to add non-GSAM funds as replacements. Id. ¶ 135.
HHigh Yield Fund—the last of the ¿ve challenged GSAM mutual funds—was removed from
the Plan on June 6, 2017. 16 Id. ¶ 136.
Falberg argues the challenged funds ultimately were removed to avoid litigation risk. In support, he points to
Mintzer’s statement that she anticipated discussions at the October 2016 meeting regarding “legal’s review of the
recent wave of ERISA litigation,” Doc. 228 ¶ 199, as well as her testimony that the Committee was “becoming
concerned that there would be more scrutiny and false accusations regarding keeping Goldman funds on the
platform,” and that “it would be easier to just remove the proprietary funds from the menu to avoid any potential
litigation like this.” Doc. 228 ¶ 229.
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 12 of 34
Defendants explain there are transaction costs associated with making frequent changes
WRWKHPHQXRILQYHVWPHQWRSWLRQVLQDGH¿QHG-contribution plan. Id. ¶ 137. In particular,
according to Defendants’ expert Eileen Kamerick, “changes to a plan’s investment lineup”
should “be approached with care” because they are “disruptive to participants and may cause
disengagement and confusion.” Id. ¶ 138. In explaining why it chose to remove all seven
GSAM funds from the Plan’s investment lineup in 2017, LQFOXGLQJWKH¿YHDWLVVXHKHUH,
Committee members indicated that the costs of frequent changes to the Plan’s investment menu
was one reason to remove all the GSAM mutual funds together, rather than only removing some
of them. Id. 6SHFL¿FDOO\Committee member Dean %DFNHUWHVWL¿HGWKDWWKH&RPPLWWHH
would “rather do more at once than less at once, as it would be less disruptive, less confusing,
PRUHH൶Fient to our participants, as opposed to removing two funds here and maybe one fund
there and maybe two funds there, whatever they may be.” Id. ¶ 142.
Before and during the class period, three of the challenged funds, the Mid Cap Value
Fund, Large Cap Value Fund, and High Yield Fund, were rated “not broadly recommended” by
Rocaton. Id. ¶ 75. MoreoverQRQHRIWKH¿YHFKDOOHQJHGIXQGVZDVUDWHG³VHOO´E\5RFDWRQ
during the relevant time period. Id. ¶ 79. Also during the class period, at least four non-GSAM
funds included in the Plan’s investment lineup were rated “not broadly recommended” by
Rocaton, and on September 26, 2014, Rocaton downgraded its ratings of two non-GSAM
investment options in the Plan to “sell.” Id. ¶¶ 83–84. After receiving input from Rocaton and
hearing a presentation from the investment managers of the “sell”-rated funds, the Committee
voted on October 16, 2014 to retain and continue to monitor these investment options
notwithstanding Rocaton’s “sell” rating. Id. ¶ 85.
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 13 of 34
As set out above, &RPPLWWHHPHPEHUVWHVWL¿HGWKDWLQHYDOXDWLQJ3ODQLQYHVWPHQW
options, they considered Rocaton’s ratings alongside all the other information Rocaton provided.
Id. ¶ 80. And %DFNHUWHVWL¿HGWKDWRocaton’s ratings were considered as one of a number of
factors. 17 Id. In particular, the Committee considered performance data, commentary from
managers and from Rocaton, and the Committee members’ own knowledge of capital markets
and market indicators in evaluating Plan investment options. Id. ¶ 81. H Committee also
considered the fees charged by GSAM as part of its review of Plan investment options. Id. ¶¶
45–46. Rocaton provided the Committee with comparisons of the fees charged by each fund
available to the Plan with those charged in its peer group. 18
Falberg objects that the Committee did not move the Plan assets invested in the GSAM
mutual funds to lower-cost separately managed accounts. But this option was unavailable to the
Committee, as the Plan could not pay GSAM management fees for separately managed accounts
under ERISA’s prohibited transaction rules. According to Mintzer, although the Committee
generally preferred to choose investment vehicles that could “get the lowest fee for the
participants,” Doc. 228 ¶ 77, the Plan could make the challenged funds’ strategies available to
Plan participants through separately managed accounts only if GSAM was willing to forgo any
relevant in evaluating a fund,” but does not dispute that Committee members also considered the additional
Falberg also notes the addition of two other GSAM funds—not at issue here—during the class period: the
Emerging Markets Equity Fund and the Strategic Income Fund. Falberg argues the addition of these funds
“demonstrates the preferential treatment afforded to proprietary funds,” Doc. 198 at 12, and on in support of this
claim, notes the Rocaton ratings for each: first, the Committee chose the Emerging Market Equities Fund over two
“buy” rated non-proprietary options, despite the fact that Rocaton had not yet completed due diligence on it, and,
second the Committee chose the Strategic Income fund over other, non-proprietary “buy” rated funds despite the
fact that it was rated “not broadly recommended.” Doc. 228 ¶¶ 111–18; 120–22.
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 14 of 34
management fees paid by the plan. Doc. 227 ¶ 88. GSAM was not willing to do so and as a
result, that option was unavailable to the Committee. Id. ¶ 89.
Falberg also objects that while other retirement plans received fee rebates, in the form of
revenue sharing, from GSAM mutual funds, the Plan did not. For example, GSAM made
revenue-sharing payments to Hewitt Associates, which provided recordkeeping services to the
Plan and many other retirement plans, pursuant to a shareholder services agreement between
GSAM and Hewitt Associates. Id. ¶ 93. DWDJUHHPHQWH[FOXGHGWKHDVVHWVRIDOOUHWLUHPHQW
plans that opened accounts with the GSAM Fund prior to April 1, 2009. Id. Because the Plan
invested in GSAM mutual funds before April 1, 2009, Hewitt Associates, as the Plan’s
recordkeeper, was ineligible to receive any revenue-sharing payments from GSAM related to the
Plan. Id. ¶ 94. And, any other retirement plan for which Hewitt acted as recordkeeper that
invested in GSAM mutual funds before April 1, 2009, likewise was ineligible for revenuesharing payments from GSAM. Id. ¶ 95.
On these points, Falberg does not dispute that as a result of the agreement between
GSAM and Hewitt, the Plan and other plans invested in GSAM mutual funds before April 1,
2009, were ineligible for revenue-sharing payments from GSAM. Falberg only objects that the
&RPPLWWHH³PDGHQRH൵RUWWRUHQHJRWLDWHWKLVSURYLVLRQZLWK+HZLWWRURWKHUZise secure the
revenue sharing that other plans received from the >F@hallenged GSAM Funds.” Id. ¶¶ 94–95.
Falberg objects that the Committee did not maintain a written Investment Policy
Statement (“IPS”). An IPS is a document outlining the process for a plan’s investment-related
decision making, and can include a plan’s goals and strategic vision for investment. According
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 15 of 34
to Falberg’s expert Wagner, having an IPS is a “best practice” for large retirement plans, and a
³VLJQL¿FDQWPDMRULW\RIODUJHUHWLUHPHQWSODQVKDYHDGRSWHGDQ,36.” Id. ¶¶ 147–48. At the same
time, Wagner acknowledged that an “IPS is not strictly required under ERISA,” and that
“ERISA’s duty of prudence doesn’t mandate a best practice.” Id. ¶ 147. And when asked what
done the survey.” Id. 6KHDOVRWHVWL¿HGWKDWVKHFRXOGQ¶WJLYHDSHUFHQWDJHRWKHUWKDQ
saying a “vast majority or a siJQL¿FDQWPDMRULW\´Id.
establish an IPS for the plan, and has stated that the maintenance of an IPS is consistent with a
SODQVSRQVRU¶V¿GXFLDU\REOLJDWLRQV´EXWZKHQDsked whether the Department of Labor had ever
taken the position that an IPS is a required document, she answered that it had not. Id. ¶ 144.
Wagner also noted that an IPS would have helped the Committee identify problems with
process” and “contributed to the lack of attention paid to the GSAM Funds and the lax
performance standards applied to them.” Id. ¶¶ 41–:DJQHUDGGHGWKDWLW³LVGL൶FXOWWRVHH
. . without having a set of procedures or criteria to provide a framework for uniform decisionmaking, such as an IPS would have provided.” Id. ¶ 41.
But, as Defendants point out, that the Committee lacked an IPS does not mean it did not
have in place robust policies for selecting and monitoring investment options. See Supra Section
When asked whether the use of an IPS is a “best practice” for 401(k) plans, Defendants’
expert Kamerick WHVWL¿HGWKDWan IPS is “one of the indicia” of a well-run plan but noted that plan
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 16 of 34
adopting an IPS,” and that the Committee’s selection and monitoring processes in this case were
“robust, supported by objective quantitative and qualitative analysis, and consistent with
SUDFWLFHVRIRWKHUGH¿QHGFRQWULEXWLRQSODQcommittees.” Id. ¶ 38. Kamerick also noted that all
VHYHQ¿GXFLDU\committees on which she has served have maintained an IPS. Doc. 228 ¶ 32.
Falberg’s expert Fender also WHVWL¿HGWKDW³LWLVQRWFRQVLVWHQWZLWKWKHVWDQGDUGVRIFDUH
maintain an IPS. Id. ¶ 33. Fender also opined that “because the Plan lacked an IPS, the
WRDFKLHYH>WKH3ODQ¶V@JRDOVDQGREMHFWLYHV´Id. ¶ 37.
Fender further noted that “if the Plan had an IPS that contained reasonable criteria for
evaluating GSAM funds, WKHQWKH>@+LJKG@HYHORSDQGIROORZDQ,36´DVRQHRILWV
best practices, Callan Associates Inc. included a “detailed” IPS as one of its “best in class”
characteristics, and Mercer ranked “develop an Investment Strategy” as its “Step 1.” Doc. 228
¶¶ 12, 27–30.
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 17 of 34
In its response to the RFP, Rocaton did not explicitly note the importance of an IPS. Id. ¶
31. Still, Falberg notes that Rocaton has published literature advising clients to maintain and
regularly revisit an IPS. Id.
one of Rocaton’s co-founders, WHVWL¿HGthat ³>R@WKHUclients have IPS documents and update
them;” she could not recall whether there was a Rocaton client, other than the Plan, that did not
have an IPS. Id. ¶ 31.
While the Committee did not have a written IPS, Committee secretary 0LQW]HUWHVWL¿HG
investment managers representing GLYHUVL¿HGstrategies in both passively and actively managed
IRUPVIRUWKHEHQH¿Wof 401(k) participants.” Id. ¶ 72.
reluctantly and belatedly” removing underperforming GSAM funds as Plan investment options,
(2) failing to consider lower-cost institutional investment vehicles, and (3) failing to claim “fee
rebates” on behalf of the Plan that allegedly were available to other similarly situated retirement
plans that invested in the GSAM funds. Doc. 1 ¶¶ 47, 65–71, 72–77. With respect to the
retention and “belated” removal of the funds, Falberg’s expert Fender noted that the Committee
should have carefully scrutinized and removed the Mid Cap Value Fund, Large Cap Value Fund,
and High Yield Fund from the Plan by January 1, 2014, if not earlier. Id. ¶ 104. In particular,
Fender opined these three funds should have been removed because they consistently and
substantially underperformed benchmark indices and peer universe medians, because they were
not recommended by Rocaton, and because they were retained as higher-cost mutual funds
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 18 of 34
instead of lower-cost investment vehicles. Doc. 227 ¶ 104. Fender also maintained the
&RPPLWWHHVKRXOGQRW³KDYHEHHQVDWLV¿HGZLWKDQDYHUDJHinvestment product.” Id. ¶ 105.
In all, Falberg claims Defendants breached their duties of loyalty and prudence by
“retaining high-cost, poorly performing mutual funds in the Plan” based on their “own selfinterest” and in “disregard for participants.” Doc. 1 ¶ 47. Falberg also alleges that the
Committee’s purported failure to claim fee rebates that supposedly were avail to other plans
violated ERISA’s prohibited transaction restrictions, and that Goldman Sachs breached its duty to
monitor the Retirement Committee.
Summary judgment is appropriate where “the movant shows that there is no genuine
dispute as to any material fact.” Fed. R. Civ. 3D³$QLVVXHRIIDFWLVµJHQXLQH¶LIWKH
evidence is such that a reasonable jury could return a verdict for the non-moving party.” Senno
v. Elmsford Union Free Sch. Dist., 812 F. Supp. 2d 454, 467 (S.D.N.Y. 2011) (citing SCR Joint
Venture L.P. v. Warshawsky, 559 F.3d 133, 137 (2d Cir. 2009)). A fact is “material” if it might
affect the outcome of the litigation under the governing law. Id.
The party moving for summary judgment is first responsible for demonstrating the
absence of any genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986). If the burden of proof at trial would fall on the movant, that party's “own submissions in
support of the motion must entitle it to judgment as a matter of law.” Albee Tomato, Inc. v. A.B.
Shalom Produce Corp., 155 F.3d 612, 618 (2d Cir. 1998). &RQYHUVHO\³>Z@KHQWKHEXUGHQRI
proof at trial would fall on the nonmoving party, it ordinarily is sufficient for the movant to point
to a lack of evidence to go to the trier of fact on an essential element of the nonmovant’s
claim.” Cordiano v. Metacon Gun Club, Inc., 575 F.3d 199, 204 (2d Cir. 2009) (citing Celotex
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 19 of 34
Corp., 477 U.S. at 322–23). If the moving party meets its burden, “the nonmoving party must
come forward with admissible evidence sufficient to raise a genuine issue of fact for trial in order
to avoid summary judgment.” Jaramillo v. Weyerhaeuser Co., 536 F.3d 140, 145 (2d Cir. 2008)
(citing Celotex Corp., 477 U.S. at 322–23).
In deciding a motion for summary judgment, the Court must “construe the facts in the
light most favorable to the non-moving party and must resolve all ambiguities and draw all
reasonable inferences against the movant.” Brod v. Omya, Inc., 653 F.3d 156, 164 (2d Cir. 2011)
(quoting Williams v. R.H. Donnelley, Corp., 368 F.3d 123, 126 (2d Cir. 2004)) (internal
quotation marks omitted). However, in opposing a motion for summary judgment, the
nonmoving party may not rely on unsupported assertions, conjecture or surmise. Goenaga v.
March of Dimes Birth Defects Found., 51 F.3d 14, 18 (2d Cir. 1995). The non-moving party
must do more than show that there is “some metaphysical doubt as to the material
facts.” McClellan v. Smith, 439 F.3d 137, 144 (2d Cir. 2006) (quoting Matsushita Elec. Indus.
Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)) (internal quotation mark omitted). To
defeat a motion for summary judgment, “the non-moving party must set forth significant,
probative evidence on which a reasonable fact-finder could decide in its favor.” Senno, 812 F.
Supp. 2d at 467–68 (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256–57 (1986)).
The same legal standard applies when analyzing cross-motions for summary judgment.
See Schultz v. Stoner, 308 F. Supp. 2d 289, 298 (S.D.N.Y. 2004) (quoting Aviall, Inc. v. Ryder
Sys., Inc., 913 F. Supp. 826, 828 (S.D.N.Y. ³>(@DFKSDUW\’s motion must be examined on
its own merits, and in each case all reasonable inferences must be drawn against the party whose
motion is under consideration.” Morales v. Quintel Entm’t, Inc., 249 F.3d 115, 121 (2d Cir.
2001) (citing Schwabenbauer v. Bd. of Educ., 667 F.2d 305, 314 (2d Cir. 1981)). The Court is
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 20 of 34
not required to grant summary judgment in favor of either moving party. See id. (citing
Heublein, Inc. v. United States, 996 F.2d 1455, 1461 (2d Cir. 1993)).
The central purpose of ERISA is “to protect beneficiaries of employee benefit plans.”
Slupinski v. First Unum Life Ins. Co., 554 F.3d 38, 47 (2d Cir. 2009). To further this purpose,
prevailing.’” Pension Benefit Guar. Corp. ex rel. St Vincent Catholic Med. Ctrs. Ret. Plan v.
Morgan Stanley Inv. Mgmt., Inc., 712 F.3d 705, 716 (2d Cir. 2013) (quoting 29 U.S.C. §
1104(a)(1)(B)). This duty is measured “according to the objective prudent person standard
developed in the common law of trusts” one that requires the fiduciary to act with “prudence, not
prescience.” Rinehart v. Lehman Bros. Holdings Inc., 817 F.3d 56, 63–64 (2d Cir. 2016)
(quotation marks omitted).
Under that standard, courts judge a fiduciary’s actions “based upon information available
to the fiduciary at the time of each investment decision and not from the vantage point of
hindsight.” Pension Ben. Guar., 712 F.3d at 715–16. This inquiry “focus>es@ on a fiduciary’s
conduct arriving at an investment decision, not on its results, and ask>V@ whether a fiduciary
employed the appropriate methods to investigate and determine the merits of a particular
investment.” Id. (internal quotation marks and citations omitted). Put simply, the central
question is whether a “prudent fiduciary in like circumstances would have acted differently.” Id.
at 720. So long as the “prudent person” standard is met, ERISA does not impose a “duty to take
any particular course of action if another approach seems preferable.” Chao v. Merino, 452 F.3d
174, 182 (2d Cir. 2006) (internal citation omitted).
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 21 of 34
Here, Falberg’s claim that Defendants breached their duty of prudence rests on a single
factor: the Committee did not adopt an IPS. 19 Falberg argues that a prudent fiduciary in
Defendants’ shoes would have “acted differently” by maintaining an IPS, and that, because the
Committee did not have an IPS, it had no criteria by which to evaluate and monitor Plan
investments, and therefore its decisions relating to the GSAM funds were not the result of a
Without such a process, Falberg argues, the Committee could not properly scrutinize the
GSAM funds, and had it adopted an IPS, Falberg further argues, the Committee would not have
retained the GSAM funds in more expensive investment vehicles, rather than cheaper,
nonproprietary options; would not have failed to secure fee rebates from the funds; and would
have removed the underperforming, poorly rated funds far earlier than it did.
But it is undisputed that an IPS is not required under ERISA. See Taylor v. United
Technologies Corp., 2009 WL 535779 (D. Conn. Mar. 3, 2009), aff’d, 354 App’x 525 (2d Cir.
2009), (plaintiff’s expert faulted the plan sponsor “for failing to create a written Investment
Policy Statement,” but the court held that “ERISA does not require a fiduciary . . . to create such
a document.”) While Falberg argues an IPS is a “best practice,” his expert Wagner conceded
that the duty of prudence does not mandate a “best practice.” Doc. 227 ¶ 147. And, despite
Falberg’s suggestions to the contrary, the Department of Labor has never taken the position that
an IPS is required to satisfy a fiduciary’s duties. See id ¶ 144.
Falberg makes much of the fact that a “significant majority” of large retirement plans
have adopted an IPS and that investment advisors as well as the parties’ experts have
Falberg’s complaint that Defendants lacked an IPS. See Doc. 198 at 16–25.
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 22 of 34
recommended its use. But this is beside the point: that the adoption of an IPS is a common
practice among retirement plans does not suggest that the choice to forgo one is a breach of any
fiduciary duty under ERISA, and Falberg does not point to any authority showing otherwise.
Falberg does cite to Liss v. Smith, 991 F. Supp. 278 (S.D.N.Y. 1998) for the proposition
that an “IPS was essential here in light of the conflicts of interest.” Doc. 198 at 17 n.22. The
court in Liss recognized that “ERISA does not contain a specific requirement that a written
investment policy be maintained by the trustees,” id. at 296, and while it did find that the trustees
breached their fiduciary duty, Defendants are right that the absence of a written policy alone was
not dispositive and that it was just one factor “coupled with the other acts and omissions . . .
>WKDW@FRQVWLWXWHGDEUHDFKRIILGXFLDU\GXW\´Id. In Liss, the officers of a union whose
“financial condition” was “deteriorating” had “engaged in financial malpractice including
embezzlement of Local Union Funds.” Id. at 286. The Liss court criticized the “trustees’
complete and total failure to take even the most minimal and basic steps to ensure that Fund
for breached fiduciary duty.” Id. at 288. Here, there is no evidence of such total
Without an IPS guiding its review, Falberg argues, the Committee failed to undertake
more fulsome, in-depth discussion of the challenged funds. Falberg speculates—based on the
number of investment options and the typical timetable for Committee meetings—that the
Committee may have spent “less than a minute” discussing each investment option at its
meetings. Doc. 198 at 18. Falberg further notes that none of the challenged funds is mentioned
in the meeting minutes for much of the class period, and objects that the minutes “contain no
details” about Rocaton’s ratings of the challenged funds: what concerns led to those ratings, why
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 23 of 34
the funds were retained despite the ratings, whether the Committee or Rocaton would more
closely monitor the funds going forward. Id. at 24.
Falberg then suggests that because the Committee had “no set criteria” to guide its
review, the GSAM funds “were allowed to avoid scrutiny,” even when some unperformed their
benchmarks; when “cheaper, nonproprietary options” were available; and in spite of Rocaton’s
“poor” ratings. Id. at 19–23. At bottom, Falberg argues it “is unlikely the Committee could have
justified retaining these funds,” and that an IPS containing “any reasonable criteria for
evaluating” the funds would have compelled it to remove them “by the beginning of 2014 at the
latest.” Id. at 25 (alterations omitted).
As support for his claim that the Committee lacked a “deliberative process” with respect
to the challenged funds—a process he maintains an IPS would have ensured—Falberg focuses
almost entirely on the minutes from Committee meetings. In particular, Falberg argues that the
sparse, “boilerplate” meeting minutes reveal that the Committee at most engaged in a cursory
review of the challenged funds, in effect ignoring them. Doc. 198 at 3, 18–25. At the outset, as
Defendants correctly note, there is no requirement that meeting minutes need to be a verbatim
transcript of all the issues considered by fiduciaries. Indeed, Falberg’s expert Wagner previously
has acknowledged that meeting “minutes do not need to be lengthy” and testified that “the
documentary file doesn’t have to be verbatim.” Doc. 227 ¶ 51. Wagner further testified “more
robust” minutes “are not an affirmative duty, per se.” Id. Beyond this, as Defendants point out,
Falberg fails to cite a single case that sustained a claim for breach of the duty of prudence on the
ground that a committee’s minutes were insufficiently descriptive.
In any event, Falberg does not point to any evidence that an IPS would have caused the
Committee to act differently. Falberg does not dispute that in advance of Committee meetings,
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 24 of 34
Committee members received a packet of information from Rocaton—including information
about each of the Plan’s investment options, monthly and quarterly performance reports, written
reports summarizing Rocaton’s meetings with investment managers, and Rocaton’s commentary
on different investment options and industry trends—and reviewed those materials in preparation
for the meetings. Doc. 227 ¶¶ 43–47. Falberg also does not dispute that Rocaton began each
quarterly meeting by presenting information about Plan performance and that Committee
members often heard presentations from investment managers of current or prospective Plan
investment options. Id. ¶¶ 50–53. That the meeting minutes do not reflect a particular level of
detail with respect to these discussions—of the funds and their performance, as well as
alternatives—does not mean the discussions did not happen, nor is it enough to suggest that the
Committee’s consideration of its investment options, both during and outside its regular
meetings, was not sufficiently “deliberative” or was otherwise imprudent.
Falberg’s claim that the Committee did not engage in a prudent process because it did not
set out in writing an IPS is at best speculation and as such is unavailing. Indeed, as Falberg’s
expert Fender recognized, an opinion on whether an IPS might have improved Plan performance
would be “hindsight or hypothetical.” Doc. 227 ¶ 149. Because Falberg cannot show that a
prudence claim fails.
ERISA’s duty of loyalty UHTXLUHVILGXFLDULHVWR³GLVFKDUJH>WKHLU@GXWLHVZLWKUHVSHFWWRD
plan solely in the interest of the participants.” 29 U.S.C. § 1104(a)(1)(A). “The Second Circuit
KDVGHVFULEHG>WKLV@GXW\DVRQHUHTXLULQJDILGXFLDU\WRDFWZLWKDQµH\HVLQJOHto the interests
of the participants.’” In re SunEdison, Inc. ERISA Litig., 331 F. Supp. 3d 101, 114 (S.D.N.Y.
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 25 of 34
2018) (quoting State St. Bank & Trust Co. v. Salovaara, 326 F.3d 130, 136 (2d Cir. 2003)), aff’d
sub nom. O’Day v. Chatila, 774 F. App’x 708 (2d Cir. 2019).
Falberg raises four arguments in support of his claim that Defendants breached their duty
of loyalty: (1) they failed to acknowledge their conflicts of interest, (2) they retained the
challenged funds even though they were “outliers”, (3) they gave preferential treatment to the
challenged funds, and (4) they removed the funds only to protect themselves from litigation risk.
In all, Falberg argues Defendants violated the duty of loyalty by “succumbing to their conflicts
and maintaining a different standard for proprietary funds than for nonproprietary funds.” None
of these arguments is supported by evidence sufficient to defeat summary judgment.
First, Falberg claims that Committee members faced an “inherent conflict of interest” as
Goldman Sachs employees because GSAM received management fees from the Plan’s
investment in GSAM funds. Doc. 198 at 8. On this point, Falberg points to testimony from his
expert Fender, who opined that “there is no serious question that it was a conflict of interest for
the GSAM funds to be included in the Plan,” and that “the real issue here is whether the
Retirement Committee properly managed the confliFW>@´'RF Falberg then argues
that Defendants at once ³GLVDYRZ>HG@WKHLUFRQIOLFW” and “greeted the conflict with open arms”
but points to no evidence in support of either claim.
Falberg suggests only that Rocaton’s presentation—and the Committee’s selection—of
“not broadly recommended” GSAM funds—when “buy” rated funds also were available—is
evidence of a “more-lenient” standard for proprietary funds, and “exemplifies the Committee’s . .
. favoritism toward GSAM funds.” Doc. 198 at 9. As the best summary of Defendants’
conflict, Falberg quotes from Committee Co-Chair Gleberman who, when asked why Rocaton
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 26 of 34
presented funds it had rated “not broadly recommended” as options for inclusion in the plan,
testified that “Rocaton would generally have to comment on whether GSAM had a fund that was
available,” and that it would be “sort of human nature” for Rocaton to “comment.” Doc. 198 at
9. But Falberg does not explain how Rocaton’s general inclination to “comment” on whether
GSAM funds were available in any way demonstrates that Defendants greeted a conflict of
interest with open arms or gave special treatment to the GSAM funds.
In any event, “in the ERISA context, µa conflict of interest alone is not a per se breach’”
of the duty of loyalty. In re State St. Bank & Trust Co. Fixed Income Funds Inv. Litig., 842 F.
Supp. 2d 614, 649 (S.D.N.Y. 2012) (citation omitted). As this Court previously recognized, to
state a claim for a breach of the duty of loyalty, a plaintiff must show that the defendant acted for
the purpose of providing benefits to itself or someone else. Falberg v. Goldman Sachs Group,
Inc., 19 Civ. 9910 (ER), 2002 WL 3893285, at *13 (S.D.N.Y. Jul. 9 2020).
Here, Falberg does not dispute that Committee members received training on their
fiduciary responsibilities, including the need to treat GSAM funds the same as non-GSAM
funds. See Doc. 227 ¶¶ 20–21, 24, 26. Nor does he dispute that no Committee member had a
personal financial incentive to prefer GSAM funds over nonproprietary options: indeed, his
expert Wagner, when asked whether she was aware that any Committee member had a personal
financial incentive in having the Plan offer investment options managed by GSAM, answered
“No,” and further testified that she had no reason to question the “honesty” or “integrity” of any
Committee member. Doc. 227 ¶¶ 12, 13. Beyond this, as set out above, Committee members
uniformly testified that they applied no different standard for GSAM funds than for any other
fund, and that the evaluated each investment option on its merits. See id. ¶¶ 59–63.
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 27 of 34
At bottom, as Defendants note, the mere possibility that Committee members may have
been influenced by a desire to benefit Goldman Sachs is not enough to show a breach of the duty
of loyalty; Falberg has not pointed to any evidence demonstrating the Committee “acted for the
purpose” of advancing Goldman Sachs’ interests. As a result, his conflict of interest argument
cannot support a claim of the breach of the duty of loyalty.
Second, Falberg argues the challenged funds were inferior to alternative investments
available to the Plan in three ways: first, three of the GSAM funds were rated “not broadly
recommended” by Rocaton; second, the majority of the mutual funds retained by the Plan were
proprietary funds and were “higher-cost” than other investment options; and third, the challenged
funds consistently underperformed their benchmarks, in “stark contrast” to the Plan’s
nonproprietary funds. Doc. 198 at 10–11. Defendants’ retention of these funds, despite their
purported inferiorities, Falberg argues, amounts to a breach of the duty of loyalty.
As to Rocaton’s ratings, Falberg does not dispute that the Committee was presented
with—and considered—a range of information beyond the ratings, and that these ratings were
only a small part of the information Rocaton provided to the Committee. Doc. 227 ¶¶ 43, 44.
Indeed, Falberg’s expert Wagner testified that she did not imply or intend to imply that the
ratings were the “end-all and sole output or product of Rocaton.” Id. ¶ 43.
Falberg also does not dispute that a “not broadly recommended” rating is not an
instruction to “sell.” Doc. 198 at 10 n.8; see also Doc. 227 ¶¶ 35, 79. And, according to
Rocaton’s Buehl, many of Rocaton’s clients held investments with “not broadly recommended”
ratings in their retirement plans, and Rocaton believed it was entirely appropriate for retirement
committees to make such funds available as investment options. Doc. 227 ¶¶ 36–37.
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 28 of 34
As Defendants note, there is no support for Falberg’s suggestion that the Committee
ignored the ratings—the Committee discussed and asked questions about the ratings at
Committee meetings. Doc. 227 ¶ 25. Nor is there support for Falberg’s contention that the
Committee’s retention of GSAM funds rated “not broadly recommended” is evidence of more
favorable treatment of those funds: Falberg does not dispute that during the class period, at least
four non-GSAM funds included in the Plan’s investment lineup also were rated “not broadly
recommended” by Rocaton, and he also does not dispute that the Committee maintained two-non
GSAM options in the Plan after Rocaton downgraded its rating of them to “sell.” Doc. 227 ¶¶
82–84. In other words, there is no basis for the suggestion that the Committee, in considering
Rocaton’s ratings, held GSAM funds to a different standard. 20
In any event, Falberg does not argue that the Committee was obligated to consider only
Rocaton’s ratings in making decisions on its investment options, nor does he point to any law
showing that the retention of poorly rated funds evinces a breach of the duty of loyalty.
As to higher costs, Falberg argues that the majority of the mutual funds retained by the
Plan were proprietary funds and that these mutual funds cost substantially more than collective
investment trusts (“CITs”) and separate accounts in the same asset class. Falberg contends that
Defendants’ choice to retain higher-cost GSAM mutual funds constitutes a breach of the duty of
loyalty and cites to Span v. The Boeing Co., 125 F. Supp. 3d 848, 867 (S.D. Ill. 2014) for the
proposition that summary judgment is inappropriate where Defendants “admitted that these
separate accounts were superior investment vehicles.” Spano, however, is factually inapposite:
Here, Falberg notes that while Defendants did not document their reasoning for retaining “not broadly
recommended” GSAM funds, they did do so for nonproprietary funds that also were rated “not broadly recommend;
aFFRUGLQJWR)DOEHUJWKLVGL൵HUHQFHLQWUHDWPHQWLV³PRUHWKDQVXVSLFLRXV´See Doc. 198 at 10 n.8. But on this
point, Defendants make clear they had other reasons for documenting those nonproprietary funds, namely that one
had been downgraded to a “sell” rating and the others LQYROYHG¿UPVWKDWZHUHVXEMHFWWRDQ6(&VHWWOHPHQWRU
complaint. See Doc. 226 at 11–12.
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 29 of 34
Mintzer’s testimony that the Committee generally preferred to choose investment vehicles that
could “get the lowest fee for the participants,” Doc. 228 ¶ 77, does not amount to an admission
that separate accounts were “superior” to the funds Defendants retained. 21
And, last, as to performance, Falberg contends that three of the challenged funds—the
Large Cap Fund, Mid Cap Fund, and High Yield Fund—trailed their benchmarks on three-year,
five-year, and ten-years bases. Here, Falberg points to testimony from his expert, Fender, who
argued this underperformance was “so obvious that a fiduciary would have to have consciously
Defendants in turn argue Fender’s opinion rests on flawed analysis, but, in any event, whether
Fender is right is beside the point with respect to Defendants’ duty of loyalty: Falberg does not
point to any law showing that Defendants’ consideration—and eventual removal—of the
underperforming funds, including their analysis of the funds’ long-run performance, amounts to
a breach of the duty of loyalty. Instead, Falberg suggests that Defendants’ delay in removing the
underperforming funds was part of their larger project of affording different and more favorable
treatment to GSAM funds, and that when the funds’ underperformance is “viewed together” with
their higher costs and with Defendants’ purported conflicts of interests, there exist “too many
coincidences.” Doc. 198 at 12 (quoting Tussey v. ABB, Inc., 850 F.3d 951, 957–58 (8th Cir.
2017)). Beyond this broad contention that Defendants’ treatment of the GSAM funds overall
For their part, Defendants argue that lower-cost separately managed accounts were unavailable to them, as the
Plan could not pay GSAM management fees for separately managed accounts under ERISA’s prohibited transactions
restrictions. See Doc. 175 at 26–27. In other words, Defendants maintain that even if they had wanted to retain
lower-cost separately managed accounts, they were prohibited from doing so. See id. (noting the funds’ strategies
only could be available to Plan participants through separately managed accounts if GSAM had been willing to
forgo any management fees paid by the Plan, and GSAM was unwilling to do so).
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 30 of 34
creates an inference of favoritism, Falberg does not point to any authority showing a failure to
expeditiously remove underperforming funds amounts to a breach of the duty of loyalty.
Third, Falberg argues the addition of two other GSAM funds during the class period—the
Emerging Markets Equity Fund (“EME Fund”) and the Strategic Income Fund, neither of which
is a basis for Falberg’s claims here—“demonstrates the preferential treatment afforded to
proprietary funds.” Doc. 198 at 12. With respect to these two funds, Falberg again zeroes in on
the Rocaton ratings, noting that (1) the Committee chose the EME Fund over two “buy” rated
non-proprietary options, despite the fact that Rocaton had not yet completed due diligence on the
EME Fund and cautioned WKDWLW³VHHP>HG@OLNHDIDLUO\DJJUHVVLYHVWUDWHJ\´'RF8 ¶¶ 120–
22, and that (2) the Committee chose the Strategic Income fund over other, non-proprietary
“buy” rated funds despite the fact that it was rated “not broadly recommended.” Id. ¶¶ 111–18.
Falberg then argues that these “self-interested selections,” when “taken together and viewed in
for their conflicts of interest, the Committee would not have chosen to include either fund. Doc.
198 at 14.
But, that the Committee’s selection of these two proprietary funds may “shed light” on its
“motivations” for retaining the five challenged funds does not show that the Committee was
disloyal in violation of ERISA. And, in any event, Falberg again cannot overcome the fact that
in considering these funds, as it did when it considered the challenged funds, the Committee
looked to and weighed a range of information beyond the Rocaton ratings and was not obligated
simply to defer to Rocaton’s ratings or its suggestions.
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 31 of 34
Last, Falberg argues that the Committee breached its duty of loyalty when it ultimately
chose to remove the challenged funds to avoid litigation risk. In support, Falberg points to
Mintzer’s testimony that the Committee was “becoming concerned that there would be more
scrutiny and false accusations regarding keeping Goldman funds on the platform,” and that “it
would be easier to just remove the proprietary funds from the menu to avoid any potential
litigation like this.” Doc. 228 ¶ 229.
But Falberg does not and cannot show that the Committee’s consideration of the
litigation environment in choosing to remove the challenged funds in any way amounts to a
breach of its duty of loyalty.
Because Falberg cannot point to any evidence showing a breach of the duty of loyalty, he
cannot defeat summary judgment on those claims.
Falberg argues the Committee’s failure to collect fee rebates, in the form of revenue
sharing, on behalf of the Plan that supposedly were available to other plans invested in GSAM
mutual funds resulted in a “prohibited transaction” under ERISA. Specifically, Falberg argues
that the lack of rebates for the Plan “placed Plan participants in a less favorable position than
other investors.” Doc. 198 at 27.
Section 406 of ERISA, 29 U.S.C. § 1106, identifies several types of transactions that
constitute per se violations. These prohibited-transactions rules supplement a fiduciary’s duty of
loyalty by “categorically barring certain transactions deemed likely to injury the pension plan.”
Harris Trust & Sav. Bank v. Salomon Smith Barney Inc., 530 U.S. 238, 241–42.
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 32 of 34
Defendants argue that they are exempt from any violations of § 1106 under the
Department of Labor’s Prohibited Transaction Exemption 77-3 (“PTE 77-3”). Under PTE 77-3,
DQH[HPSWLRQDSSOLHVZKHUH³>D@OORWKHUGHDOLQJV´EHWZHHQthe Plan and Goldman Sachs were
Fed. Reg. 18,734 (Apr. 8, 1977).
Here, Falberg argues the Plan was treated less favorably than other plans because the
fiduciaries of other plans collected fee rebates on behalf of those plans while the Plan’s
fiduciaries did not. On this point, Defendants maintain that Falberg’s claim is premised on
GSAM’s shareholders services agreement with Hewitt Associates, which provided
recordkeeping services to retirement plans, including the Plan, and that this agreement excluded
the assets of all retirement plans that opened accounts with the GSAM fund prior to April 1,
Falberg does not dispute that the Plan invested in GSAM mutual funds before April 1,
2009, and that as a result, Hewitt, as the Plan’s recordkeeper, was ineligible to receive any
revenue-sharing payments from GSAM related to the Plan. 22 Falberg also does not dispute that
any other retirement plan for which Hewitt acted as recordkeeper and that invested in GSAM
mutual funds before April 1, 2009, likewise was ineligible for revenue-sharing payments from
GSAM. This, Defendants argue, makes plain that the Plan was treated no less favorably than
similarly situated plans: it was treated the same as other plans that (1) had the same
6SHFL¿FDOO\)DOEHUJGRHVQRWGLVSXte the factual statements that “GSAM made revenue-sharing payments to
Hewitt Associates, which provided recordkeeping services to the Plan and many other retirement plans, pursuant to a
shareholder-services agreement,” and (2) the agreement between GSAM anG+HZLWW³µH[FOXGH>G@WKHDVVHWV¶RIDOO
UHWLUHPHQWSODQVWKDWµRSHQHGDFFRXQWVZLWKWKH>*6$0@)XQGSULRUWR$SULO´See Doc. 227 ¶ 93. Falberg
only WDNHVLVVXHZLWKWKHIDFWWKDWWKH&RPPLWWHH³PDGHQRH൵RUWWRUHQHJRWLDWHWKLVSURYLVLRQZLWKHewitt or
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 33 of 34
recordkeeper and (2) invested in GSAM funds before April 1, 2009. In all those cases, the
recordkeeper—Hewitt—was contractually ineligible for any revenue sharing.
On this point, Falberg argues that this is too narrow a reading of the exemption, and that
it matters that other investors, namely those plans than did not use Hewitt as their recordkeeper
and those plans that opened their accounts after April 1, 2009, received fee rebates that the Plan
did not. But here Falberg cannot show that any difference in treatment is traceable to some less
favorable basis and not, instead, to the fact that these plans simply did not use the same
recordkeeper or, if they did, did not open their accounts until after April 1, 2009. In other
words, Defendants are right that the Plan was treated no less favorably “than other comparably
situated plans.” Doc. 226 (citing Brotherston v. Putnam Invs., LLC, 907 F.3d 17 (1st Cir. 2018)).
Accordingly, Defendants are exempt, and Falberg’s prohibited transactions claim fails.
Falberg’s claim that Goldman Sachs breached its duty to monitor Plan fiduciaries is
predicated on his allegation that the Committee breached its fiduciary duties. See In re Citigroup
ERISA Litig., 2009 WL 2762708, at *26 (S.D.N.Y. Aug. 31, 2009). Because this claim is
derivative of Falberg’s other claims, it fails for the same reasons. See Rinehart v. Akers, 722
F.3d 137, 154 (2d Cir. 2013) (“>Falberg@ cannot maintain a claim for breach of the duty to
monitor . . . absent an underlying breach of the duties imposed under ERISA>.@”). In any event,
as Defendants argue, there is no evidence to support this claim: Falberg does not suggest that the
Committee members were unqualified or failed to perform their duties.
H /RVV DQG/RVV&DXVDWLRQ
Falberg separately brings a partial motion for summary judgment on the issues of loss
and loss causation. See Doc. 190. Specifically, Falberg argues that there is no dispute that (1)
Case 1:19-cv-09910-ER Document 256 Filed 09/14/22 Page 34 of 34
the Plan suffered losses as a result of Defendants’ use of the challenged GSAM funds and (2)
those losses were caused by Defendants’ decision to maintain the funds in the Plan and the
manner in which they were maintained. Id. at 1.
As the Second Circuit has held, questions of loss and loss causation arise only after “a
breach of fiduciary duty has been established.” Donovan v. Bierwirth, 754 F.2d 1049, 1055 (2d
Cir. 1985). Because the Court finds that Defendants did not breach any of their fiduciary duties
under ERISA, the Court does not reach questions of loss and loss causation. As such, Falberg’s
motion for partial summary judgment on these issues is DENIED.
For the reasons set forth above, Defendants’ motion for summary judgment is
GRANTED and Falberg’s motion for partial summary judgment is DENIED. In addition,
Falberg’s motion to compel documents designated as privileged and Defendants’ motions to
strike expert opinions and to compel arbitration of certain class members are DENIED as moot.
The Clerk of Court is respectfully directed to terminate the motions, Docs. 131, 170, 174, 188,
195, and 213, and to close the case. The Clerk of Court is further directed to restrict access to
this Opinion to the “selected party” viewing level.
It is SO ORDERED.
September 14, 2022
New York, New York
Edgardo Ramos, U.S.D.J.
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