Kohari et al v. MetLife Group, Inc. et al

Filing 44

OPINION AND ORDER re: #34 MOTION to Dismiss (Notice of Motion to Dismiss the Complaint). filed by Benefit Plans Investment Advisory Committee, MetLife, Inc., Metropolitan Life Insurance Company. For the foregoing reasons, Defendants' motion to dismiss is denied. Within two weeks of the date of this Opinion and Order, the parties shall file on ECF a proposed case management plan and scheduling order for the Court's consideration. The Clerk of Court is respectfully directed to close the motion pending at Docket Number 34. SO ORDERED. (Signed by Judge John P. Cronan on 8/1/2022) (jca)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
RITA KOHARI et al.,
:
:
Plaintiffs,
:
:
-v:
:
METLIFE GROUP, INC. et al.,
:
:
Defendants.
:
:
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21 Civ. 6146 (JPC)
OPINION AND ORDER

JOHN P. CRONAN, United States District Judge:
Plaintiffs Rita Kohari, John Radolec, and Mohani Jaikaran, who are current and former
participants in the MetLife 401(k) Plan, bring this putative class action pursuant to the Employee
Retirement Income Security Act of 1974, as amended, 29 U.S.C. §§ 1001, et seq. (“ERISA”),
against Defendants MetLife Group, Inc., Metropolitan Life Insurance Company, the Benefit Plans
Investment Advisory Committee, and John and Jane Does 1-20. Plaintiffs allege that Defendants
breached their fiduciary duties to the plan and its participants and beneficiaries in violation of
ERISA by applying an imprudent and disloyal preference for selecting and retaining MetLife
proprietary index fund products to offer to plan participants despite their poor performance and
high costs in comparison to similar investment products in the marketplace. Plaintiffs allege that
Defendants’ imprudence and disloyalty have cost plan participants millions of dollars in excessive
fees and lost investment returns. Plaintiffs also allege that MetLife Group, Inc. and Metropolitan
Life Insurance Company breached their fiduciary duties by failing to monitor the investments.
Defendants have moved to dismiss the Complaint pursuant to Federal Rule of Civil Procedure
12(b)(6). For the reasons discussed below, Defendants’ motion to dismiss is denied.

I.

Background

A. Facts
The following facts, which are assumed true for purposes of this Opinion and Order, are
taken from the Complaint, Dkt. 1 (“Compl.”), and the documents incorporated therein by
reference, see Chambers v. Time Warner, Inc., 282 F.3d 147, 152-53 (2d Cir. 2002) (noting that at
the motion to dismiss stage, a court may consider “any written instrument attached to [the
complaint] as an exhibit or any statements or documents incorporated in it by reference” as well
as any documents “integral” to the complaint, i.e., “where the complaint ‘relies heavily upon [the
document’s] terms and effects’” (quoting Int’l Audiotext Network, Inc. v. Am. Tel. & Tel. Co., 62
F.3d 69, 72 (2d Cir. 1995))).
Plaintiffs are former and current participants in the MetLife 401(k) Plan (the “Plan”). 1
Compl. ¶¶ 14-16, 18. Defendant MetLife Group, Inc. (“MetLife Group”) is the current Plan
sponsor. Id. ¶¶ 17, 23. Defendant Metropolitan Life Insurance Company (“Metropolitan Life”)
previously served as the Plan sponsor. 2 Id. ¶¶ 17, 27. As the Plan sponsor, MetLife Group and
Metropolitan Life have or previously had “ultimate decision-making authority with respect to the
Plan and the management and administration of the Plan and the Plan’s investments.” Id. ¶¶ 23,
1

Plaintiff Kohari participated in the Plan from approximately 2010 to 2020 and was
invested in the MetLife Bond Index Fund, Balanced Index Fund, and Large Cap Growth Index
Fund during the statutory period. Compl. ¶ 14. Plaintiff Radolec is a current participant who has
participated in the Plan since 1977 and has been invested in the MetLife Balanced Index Fund,
Large Cap Equity Index Fund, and Large Cap Value Index Fund during the statutory period. Id.
¶ 15. Plaintiff Jaikaran participated in the Plan from 1986 to 2018 and was invested in the MetLife
Bond Index Fund, Balanced Index Fund, Large Cap Equity Index Fund, Large Cap Value Index
Fund, Large Cap Growth Index Fund, Mid Cap Equity Index Fund, and Small Cap Equity Index
Fund during the statutory period. Id. ¶ 16.
2

The Complaint alleges that “[t]he Plan was sponsored by Metropolitan Life Insurance
Company until September 2018, when MetLife Group became the plan sponsor.” Compl. ¶ 17.
However, the Complaint also alleges that “Metropolitan Life was the Plan sponsor from at least
2014 until 2017.” Id. ¶ 27.
2

27. They are also identified as “the Administrator of the Plan in the Plan’s Form 5500s filed with
the United States Department of Labor,” 3 which renders them “a fiduciary of the Plan for purposes
of ERISA.” Id. ¶¶ 24, 28. Because MetLife Group and Metropolitan Life currently exercise or
previously exercised “discretionary authority or discretionary control with respect to management
and administration of the Plan and disposition of Plan assets,” each likewise qualifies as a
“functional fiduciary under 29 U.S.C. § 10002(21)(A).” Id. ¶ 23. “[T]he responsibility for
appointing and removing other fiduciaries carries with it an accompanying duty to monitor the
appointed fiduciaries, and to ensure that they are complying with the terms of the Plan and
ERISA’s statutory standards.” Id. ¶ 25.
Defendant Benefit Plans Investment Advisory Committee (the “Committee”) assists
MetLife Group with the administration of the Plan, including by “select[ing] the funds for the
Plan’s investment menu.” Id. ¶ 30. The Complaint alleges that “[t]o the extent that MetLife Group
has delegated any of its fiduciary functions to others, such as the Committee, it maintained
fiduciary responsibilities with respect to the Plan.” Id. ¶ 25. The Complaint also names as
Defendants “John and Jane Does 1-20,” who “are or were members of the Committee during the
statutory period.” Id. ¶ 31. Plaintiffs allege that “[t]he identities of the Doe Defendants are not
currently known to Plaintiffs.” Id.

3

According to the United States Department of Labor, “[t]he Form 5500 Series is part of
ERISA’s overall reporting and disclosure framework, which is intended to assure that employee
benefit plans are operated and managed in accordance with certain prescribed standards and that
participants and beneficiaries, as well as regulators, are provided or have access to sufficient
information to protect the rights and benefits of participants and beneficiaries under employee
benefit plans.” Form 5500 Series, U.S. Dep’t of Labor, https://www.dol.gov/agencies/ebsa/
employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500
(last visited on July 29, 2022).
3

1. The Plan
The Plan covers eligible employees of Metropolitan Life, MetLife Group, Metropolitan
Property and Casualty Insurance Company, MetLife Funding, Inc., MetLife Credit Corp., and
SafeGuard Health Plans, Inc. Id. ¶ 19. The Plan is a “defined contribution plan,” 4 which permits
eligible employees saving for retirement to “contribute a percentage of their earnings on a pre-tax
basis to the Plan.” Id. ¶¶ 18-19. In a defined contribution plan, a participant’s benefits “are limited
to the value of their own investment accounts, which is determined by the market performance of
employee and employer contributions, less expenses.” Id. ¶ 3 (quoting Tibble v. Edison Int’l, 575
U.S. 523, 525 (2015)).
In contrast, in a defined benefit plan, “the participant is entitled to a fixed monthly pension
payment, while the employer is responsible for making sure the plan is sufficiently capitalized,
and thus the employer bears all risks related to excessive fees and investment underperformance.”
Id. Consequently, as alleged, “[i]n a defined benefit plan, the employer and the plan’s fiduciaries
have every incentive to keep costs low and to remove imprudent investments,” whereas an
employer in a defined contribution plan “has no incentive to closely monitor the plan to ensure
that every investment remains prudent, because all risks related to high fees and poorly performing
investments are borne by the employee.” Id.
2. Alleged Breaches of Fiduciary Duties
As a “mega” or “jumbo” plan, the Plan had “between 36,000 and 42,000 participants and
approximately $6.4 billion to $7.3 billion in assets” throughout the statutory period. Id. ¶ 20. “As

4

Title 29, United States Code, Section 1002 defines a “defined contribution plan” or
“individual account plan” as “a pension plan which provides for an individual account for each
participant and for benefits based solely upon the amount contributed to the participant’s account,
and any income, expenses, gains and losses, and any forfeitures of accounts of other participants
which may be allocated to such participant’s account.” 29 U.S.C. § 1002(34).
4

of 2019, the Plan was the 111th largest defined contribution plan in the country out of a total of
718,632 defined contribution plans.” Id. The Plan’s investment menu, which has remained the
same throughout the statutory period, consists of nine investment options and a self-directed
brokerage account “selected and retained” by Defendants. Id. ¶¶ 5, 21. Eight of those investment
options are MetLife proprietary investments, and seven of those are proprietary index funds that
are at issue here: the MetLife Bond Index Fund, Balanced Index Fund, Large Cap Equity Index
Fund, Large Cap Value Index Fund, Large Cap Growth Index Fund, Mid Cap Equity Index Fund,
and Small Cap Equity Index Fund (collectively, the “MetLife Index Funds”). 5 Id.
As with other index funds, each MetLife Index Fund is “a passively managed, pooledinvestment product designed to mirror the performance of a particular benchmark index.” Id.
¶ 37. The marketplace for index funds is “highly competitive,” and for any given benchmark
index, there typically are “dozens of different products” offered by different companies that track
benchmark indices with varying degrees of precision and charge varying amounts of fees. Id.
¶¶ 38-39. Higher fees, however, do not “in any way correspond to a higher quality product or
higher level of services” and, in fact, “the least expensive offerings often have the lowest level of
tracking error.” Id. ¶ 40. Indeed, as alleged, companies such as BlackRock, Northern Trust, State
Street, Vanguard, and Fidelity “have captured a very large percentage of market share” of index
funds “based on several competitive advantages: lower investment management fees than
competing firms, a high degree of institutional expertise, sophisticated trading platforms that
minimize trading costs, and a large asset base that provides economies of scale.” Id. ¶ 39.

5

Plaintiffs do not assert any claims against Defendants as to the remaining two investment
options: International Equity Fund and Fixed Income Fund. Compl. ¶ 21 n.8.
5

Plaintiffs allege that Defendants breached their fiduciary duties by “us[ing] the Plan to
promote MetLife’s proprietary financial products and earn profits for MetLife,” id. ¶ 5, and by
failing “to prudently and objectively evaluate index fund options for the Plan,” id. ¶ 6. Specifically,
the Complaint alleges that Defendants failed to adequately investigate identical marketplace
alternatives “in selecting and retaining index funds for the Plan, choosing instead to further
MetLife’s interests by using the MetLife Index Funds,” even though the MetLife Index Funds
“charged fees that were significantly higher than the fees charged by more competitive options
that were identical (other than their lower cost).” Id. ¶ 46. Plaintiffs contend that “[h]ad
Defendants been monitoring the expenses of these index funds and performed a reasonable
investigation of marketplace alternatives consistent with the practice of other fiduciaries of 401(k)
plans, they would have replaced the MetLife Index Funds with one of the more competitive
alternatives in the marketplace.” Id.
The Complaint also alleges that the MetLife Index Funds were “of lower quality than other
options when it came to their sole function—tracking the underlying index.” Id. ¶ 48. For
example, “[f]or the 5-year period ending in 2019, two of the [MetLife Index Funds] performed as
expected, meaning equal to the benchmark minus expenses, five index funds performed worse than
expected, and no index fund[] performed better than expected.” Id. The MetLife Index Funds also
“underperformed the alternatives . . . by roughly the difference in costs.” Id. ¶ 47. The Complaint
further alleges that Defendants failed to account for “[i]nstitutional factors, such as assets under
management,” which demonstrate the superiority of index funds managed by companies such as
Vanguard, State Street, Northern Trust, Fidelity, and BlackRock, each of which “manages over
$300 billion in indexed assets (with BlackRock, State Street, and Vanguard managing over $1

6

trillion in passive investments).” Id. ¶ 49. By comparison, MetLife manages “under $35 billion
in indexed assets.” Id.
Plaintiffs further allege that Defendants’ processes for selecting and retaining the more
costly and less superior MetLife Index Funds were not only imprudent but also disloyal. Id. ¶ 42.
According to Plaintiffs, Defendants chose the MetLife Index Funds because “[e]ach of the MetLife
Index Funds charge an annual operating expense that is paid to MetLife and deducted from the
rate of return of the fund.” Id. ¶ 43. In addition to investment management fees, “MetLife also
claims a tax deduction called the Dividend Received Deduction (‘DRD’) on dividends received on
the assets owned by MetLife on behalf of the Plan,” which are worth millions of dollars, because
“the MetLife Index Funds are structured as separate accounts.” Id. In other words, Plaintiffs allege
that had Defendants not invested the Plan’s assets in the MetLife Index Funds, MetLife would
have received significantly less money from investment management fees and the DRD tax
benefits. Id.
According to Plaintiffs, they “did not have actual knowledge of the specifics of
Defendants’ decision-making processes with respect to the Plan (including Defendants’ processes
for selecting, monitoring, evaluating and removing Plan investments), because this information is
solely within the possession of Defendants prior to discovery.” Id. ¶ 51. Plaintiffs also allege that
they “did not have knowledge of all material facts . . . necessary to understand that Defendants
breached their fiduciary duties and engaged in other unlawful conduct in violation of ERISA, until
shortly before this suit was filed.” Id.
B. Procedural History
Plaintiffs filed the Complaint on July 19, 2021, alleging claims for breach of duties of
loyalty and prudence in violation of 29 U.S.C. § 1104(a)(1)(A)-(B) against all Defendants, and for

7

failure to monitor fiduciaries in violation of 29 U.S.C. § 1002(21)(A) against MetLife Group and
Metropolitan Life. See Compl. ¶¶ 61-73. On October 6, 2021, Defendants filed a motion to
dismiss the Complaint, arguing that Plaintiffs fail to state a claim for breach of fiduciary duty, both
as to the duty of prudence and the duty of loyalty, and that Plaintiffs fail to state a claim for failure
to monitor. Dkts. 34, 35 (“Motion”) at 4-15. Defendants also argue that the Court should dismiss
Plaintiffs’ claims as time-barred under ERISA’s three-year limitations period. Id. at 15-16.
Plaintiffs filed an opposition to Defendants’ motion on November 3, 2021, Dkt. 36 (“Opposition”),
and Defendants filed a reply on November 24, 2021, Dkt. 39. The parties also filed supplemental
briefing on January 26 and 28, 2022, addressing the impact of the Supreme Court’s recent decision
in Hughes v. Northwestern University, 142 S. Ct. 737 (2022), on Plaintiffs’ claims. See Dkts. 4041.
II.

Legal Standard

The Federal Rules of Civil Procedure require that a complaint contain “a short and plain
statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Thus,
to survive a motion to dismiss, “a complaint must contain sufficient factual matter, accepted as
true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is plausible “when
the plaintiff pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. A complaint’s “[f]actual allegations must be
enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. Although
the Court must “accept[] as true the factual allegations in the complaint and draw[] all inferences
in the plaintiff’s favor,” Biro v. Conde Nast, 807 F.3d 541, 544 (2d Cir. 2015), it need not “accept
as true legal conclusions couched as factual allegations,” LaFaro v. N.Y. Cardiothoracic Grp.

8

PLLC, 570 F.3d 471, 475-76 (2d Cir. 2009). The Supreme Court has recognized that a motion to
dismiss for failure to state a claim serves an “important mechanism for weeding out meritless
claims” in the ERISA context.” Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. 409, 425 (2014).
At the same time, however, “ERISA plaintiffs generally lack the inside information necessary to
make out their claims in detail unless and until discovery commences.” Pension Ben. Guar. Corp.
ex rel. St. Vincent Cath. Med. Ctrs. Ret. Plan v. Morgan Stanley Inv. Mgmt. Inc., 712 F.3d 705,
718 (2d Cir. 2013) (“Morgan Stanley”) (citation omitted).
“The lapse of a limitations period is an affirmative defense that a defendant must plead and
prove” under Federal Rule of Civil Procedure 8(c)(1). Staehr v. Hartford Fin. Servs. Grp., Inc.,
547 F.3d 406, 425 (2d Cir. 2008); accord Demopoulos v. Anchor Tank Lines, LLC, 117 F. Supp.
3d 499, 507 (S.D.N.Y. 2015) (“Because the statute of limitations is an affirmative defense,
Defendants carry the burden of showing that Plaintiff failed to plead timely claims.”). “Although
the statute of limitations is ordinarily an affirmative defense that must be raised in the answer, a
statute of limitations defense may be decided on a Rule 12(b)(6) motion if the defense appears on
the face of the complaint.” Thea v. Kleinhandler, 807 F.3d 492, 501 (2d Cir. 2015) (citation
omitted). However, because the Court must accept all of the factual allegations in the complaint
as true and draw all reasonable inferences in the plaintiff’s favor on a motion to dismiss, Biro, 807
F.3d at 544, dismissal on statute of limitations grounds at the motion to dismiss stage is not
appropriate “unless it appears beyond doubt that the plaintiff can prove no set of facts in support
of his claim that would entitle him to relief.” Clement v. United Homes, LLC, 914 F. Supp. 2d
362, 369 (E.D.N.Y. 2012) (quoting Ortiz v. Cornetta, 867 F.2d 146, 148 (2d Cir. 1989)). In other
words, “the Court can only grant a motion to dismiss based on statute of limitations grounds if
there is no factual question as to whether the alleged violations occurred within the statutory

9

period.” Id.; see Staehr, 547 F.3d at 425 (holding that dismissal based on an affirmative defense
at the pleadings stage is warranted only if “it is clear from the face of the complaint . . . that the
plaintiff’s claims are barred as a matter of law” (quoting Conopco, Inc. v. Roll Int’l, 231 F.3d 82,
86 (2d Cir. 2000))).
III.

Discussion

ERISA is a “comprehensive and reticulated statute,” Mertens v. Hewitt Assocs., 508 U.S.
248, 251 (1993) (citation omitted), that was enacted for the “central purpose” of “protect[ing]
beneficiaries of employee benefit plans,” Rinehart v. Lehman Bros. Holdings Inc., 817 F.3d 56,
65 (2d Cir. 2016) (internal quotation marks omitted). To carry out this purpose, ERISA imposes
upon fiduciaries “a number of detailed duties and responsibilities, which include the proper
management, administration, and investment of [plan] assets, the maintenance of proper records,
the disclosure of specified information, and the avoidance of conflicts of interest.” Mertens, 508
U.S. at 251-52 (internal quotation marks omitted) (alteration in original).
A. Statute of Limitations
The Court begins by addressing Defendants’ argument that Plaintiffs’ claims are timebarred under ERISA’s three-year limitations period. Motion at 15-16. Breach of fiduciary duty
suits under ERISA ordinarily must be filed within six years of “(A) the date of the last action which
constituted a part of the breach or violation, or (B) in the case of an omission the latest date on
which the fiduciary could have cured the breach or violation.” 29 U.S.C. § 1113(1). However,
the six-year limitations period “is accelerated when the plaintiff has actual knowledge of the breach
[of fiduciary duty].” Walsh v. Ruane, Cunniff & Goldfarb, No. 19 Civ. 9302 (ALC), 2022 WL
902285, at *3 (S.D.N.Y. Mar. 28, 2022). In such circumstance, a breach of fiduciary duty suit
under ERISA must be brought within “three years after the earliest date on which the plaintiff had

10

actual knowledge of the breach or violation.” 29 U.S.C. § 1113(2). 6 “Although ERISA does not
define the phrase ‘actual knowledge,’ its meaning is plain”: “knowledge that is actual, not merely
a possible inference from ambiguous circumstances.” Intel Corp. Inv. Pol’y Comm. v. Sulyma,
140 S. Ct. 768, 775-76 (2020) (internal quotation marks omitted); see also Browe v. CTC Corp.,
15 F.4th 175, 191 (2d Cir. 2021) (“The term actual knowledge is strictly construed and constructive
knowledge will not suffice.” (quoting L.I. Head Start Child Dev. Servs. v. Econ. Opportunity
Comm’n of Nassau Cnty., 710 F.3d 57, 67 (2d Cir. 2013))).
“A plaintiff has ‘actual knowledge’ of a breach or violation ‘when he has knowledge of all
material facts necessary to understand that an ERISA fiduciary has breached his or her duty or
otherwise violated the Act.’” Muehlgay v. Citigroup Inc., 649 F. App’x 110, 111 (2d Cir. 2016)
(quoting Caputo v. Pfizer, Inc., 267 F.3d 181, 193 (2d Cir. 2001)). As the Supreme Court recently
made clear, “§ 1113(2) requires more than evidence of disclosure alone.” Sulyma, 140 S. Ct. at
777. While the fact that “all relevant information was disclosed to the plaintiff is no doubt relevant
in judging whether he gained knowledge of that information,” “if a plaintiff is not aware of a fact,
he does not have ‘actual knowledge’ of that fact however close at hand the fact might be.” Id.; see
also Falberg v. Goldman Sachs Grp., Inc., No. 19 Civ. 9910 (ER), 2022 WL 538146, at *9
(S.D.N.Y. Feb. 14, 2022) (“[T]he fact that plaintiffs may have received notices or disclosures about
a breach is not sufficient to establish actual knowledge.”).
In Sulyma, the Supreme Court addressed whether a retirement plan participant who
receives disclosures regarding the plan necessarily has “actual knowledge” of the information
contained in the disclosures that he receives but does not read or cannot recall reading, such that

6

Section 1113 further provides that “in the case of fraud or concealment,” the statute of
limitations period begins when the plaintiff discovers the alleged breach. 29 U.S.C. § 1113. In
such cases, the suit must be filed within six years of “the date of discovery.” Id.
11

the three-year limitations period under section 1113(2) applies. On appeal, the petitioners argued,
among other things, that once a plaintiff receives a disclosure, he “ha[s] actual knowledge” of the
defendant’s breach or violation under section 1113(2) because “he could acquire it with reasonable
effort.” Sulyma, 140 S. Ct. at 777. The Supreme Court disagreed, noting that the petitioners’
proposed construction would turn section 1113(2) “into what it is plainly not: a constructiveknowledge requirement.” Id. Indeed, the Supreme Court observed that under the plain meaning
of “actual knowledge,” “the plaintiff’s knowledge must be more than ‘potential, possible, virtual,
conceivable, theoretical, hypothetical, or nominal.’” Id. at 776 (quoting Black’s Law Dictionary
53 (4th ed. 1951)); see also Caputo, 267 F.3d at 193 (holding that “it is not enough that plaintiffs
had notice that something was awry; plaintiffs must have had specific knowledge of the actual
breach of duty upon which they sued” (cleaned up)).
Defendants argue that Plaintiffs’ claims are time-barred under the three-year limitations
period because “ERISA requires plan administrators to deliver to plan participants annual
disclosures that reveal the fees charged for investment options, and to provide ongoing information
about fund performance.” Motion at 15. And because Plaintiffs “began participating in the Plan
in, respectively, the 1970s, 1980s, and 2010s,” Defendants contend that Plaintiffs “undoubtedly
had actual knowledge of the alleged facts for their fiduciary breach claim more than three years
prior to filing this action” as the disclosures contained “the fee and performance data that are the
root of their claim.” Id. But disclosure, alone, is insufficient to establish “actual knowledge” under
section 1113(2). See Sulyma, 140 S. Ct. at 777. And in fact, the Complaint alleges that “Plaintiffs
did not have knowledge of all material facts . . . necessary to understand that Defendants breached
their fiduciary duties and engaged in other unlawful conduct in violation of ERISA, until shortly
before this suit was filed.” Compl. ¶ 51. Likewise, Plaintiffs allege that they “did not have actual

12

knowledge of the specifics of Defendants’ decision-making processes with respect to the Plan . . .
because this information is solely within the possession of Defendants prior to discovery.” Id.
Neither the Complaint nor Defendants contend that the annual disclosures sent to Plaintiffs
provided information beyond the fee and performance data—specifically, information regarding
the underlying process for reaching decisions as to each transaction or investment, or as to whether
the fees themselves are reasonable. In other words, there is no factual basis on which the Court
can conclude at the motion to dismiss stage that the Plaintiffs’ claims are time-barred under the
three-year limitations period. See Vellali v. Yale Univ., 308 F. Supp. 3d 673, 692-93 (D. Conn.
2018) (concluding that the defendants failed to show that the plaintiffs’ breach of duty claims are
time-barred under the three-year limitations period because “[t]he various disclosures the
defendants describe give information about transactions or investments, not the underlying process
for reaching the decision regarding each or whether the fees themselves are reasonable”); Walsh,
2022 WL 902285, at *4 (declining to dismiss breach of duty claims at the pleadings stage based
on statute of limitations because “[a]t the least, discovery is needed to ascertain whether [the
plaintiff] obtained ‘actual knowledge’ from the Form 5500 filings”); Moreno v. Deutsche Bank
Ams. Holding Corp., No. 15 Civ. 9936 (LGS), 2016 WL 5957307, at *5 (S.D.N.Y. Oct. 13, 2016)
(“Dismissal is not warranted based on Defendants’ statute of limitations affirmative defense as it
is not clear from the face of the Complaint or judicially noticed court filings that Plaintiffs’ claims
are time barred under 29 U.S.C. § 1113.”).
Accordingly, Defendants have not shown that Plaintiffs’ claims are time-barred under
section 1113(2)’s three-year limitations period. 7

7

Plaintiffs also argue in their Opposition that their claims are timely under the six-year
limitations period under section 1113(1) because they “have limited their claims to the period
fa[l]ling within six years of the date that they filed this action.” Opposition at 22 n.17. Since
13

B. Breach of Fiduciary Duties
“To state a claim for breach of fiduciary duty [under ERISA], a complaint must allege that
(1) the defendant was a fiduciary who (2) was acting in a fiduciary capacity, and (3) breached his
fiduciary duty.” Cunningham v. USI Ins. Servs., LLC, No. 21 Civ. 1819 (NSR), 2022 WL 889164,
at *2 (S.D.N.Y. Mar. 25, 2022). Only the third element is at issue: whether the Complaint alleges
that Defendants breached their fiduciary duties of prudence and loyalty.
1. Duty of Prudence
An ERISA fiduciary has a duty of prudence, which requires that the fiduciary act “with the
care, skill, prudence, and diligence under the circumstances then prevailing that a prudent [person]
acting in a like capacity and familiar with such matters would use in the conduct of an enterprise
of a like character and like aims.” 29 U.S.C. § 1104(a)(1)(B). “The prudence of a fiduciary is
measured according to the objective prudent person standard developed in the common law of
trusts.” Sacerdote v. New York Univ., 9 F.4th 95, 107 (2d Cir. 2021) (internal quotation marks
omitted). Under this standard, the prudence of a fiduciary’s actions “is judged based upon
information available to the fiduciary at the time of each investment decision and not from the
vantage point of hindsight.” Brown v. Daikin Am., Inc., No. 18 Civ. 11091 (PAC), 2021 WL
1758898, at *6 (S.D.N.Y. May 4, 2021) (internal quotation marks omitted). In other words, “this
standard focuses on a fiduciary’s conduct in arriving at an investment decision, not on its results,
and asks whether a fiduciary employed the appropriate methods to investigate and determine the
merits of a particular investment.” Morgan Stanley, 712 F.3d at 716 (cleaned up); Ferguson v.
Ruane Cunniff & Goldfarb Inc., No. 17 Civ. 6685 (ALC), 2019 WL 4466714, at *5 (S.D.N.Y.

Defendants do not dispute the timeliness of Plaintiffs’ claims under the six-year limitations period
in their Motion nor move to dismiss Plaintiffs’ claims on this basis, the Court does not decide
whether Plaintiffs’ claims are timely under the six-year limitations period at this time.
14

Sept. 18, 2019) (“[C]ourts analyze a fiduciary’s process to determine prudence, not outcome.”).
Moreover, a plan fiduciary has “a continuing duty of some kind to monitor investments and remove
imprudent ones.” Tibble, 575 U.S. at 530; see also Morgan Stanley, 712 F.3d at 717 (“An ERISA
fiduciary’s investment decisions also must account for changed circumstances and ‘[a] trustee who
simply ignores changed circumstances that have increased the risk of loss to the trust’s
beneficiaries is imprudent.’” (quoting Armstrong v. LaSalle Bank Nat’l Ass’n, 446 F.3d 728, 734
(7th Cir. 2006))).
In considering a motion to dismiss, the district court must ensure that the complaint “alleges
nonconclusory factual content raising a plausible inference of misconduct and does not rely on the
vantage point of hindsight,” while also being “cognizant that ERISA plaintiffs generally lack the
inside information necessary to make out their claims in detail unless and until discovery
commences.”

Sacerdote, 9 F.4th at 107 (citations and internal quotation marks omitted).

Therefore, “[a] claim for breach of the duty of prudence will survive a motion to dismiss if the
court, based on circumstantial factual allegations, may reasonably infer from what is alleged that
the process was flawed or that an adequate investigation would have revealed to a reasonable
fiduciary that the [decision] at issue was improvident.” Id. at 108 (internal quotation marks
omitted); see also Morgan Stanley, 712 F.3d at 718 (recognizing that the allegations of a complaint
need not “directly address” the process by which the plan was managed); Ferguson, 2019 WL
4466714, at *5 (observing that when a plaintiff relies on “inferences from circumstantial
allegations, this standard generally requires the plaintiff to allege facts, accepted as true, showing
that a prudent fiduciary in like circumstances would have acted differently”). The inquiry into a
plan fiduciary’s decision-making process is necessarily “context specific,” Fifth Third Bancorp,
573 U.S. at 425, and “requires assessing the allegations of the complaint as a whole” to determine

15

whether the “facts alleged are suggestive of, rather than merely consistent with, a finding of
misconduct,” Morgan Stanley, 712 F.3d at 719 (internal quotation marks omitted).
Plaintiffs allege that Defendants acted imprudently by selecting and retaining the MetLife
Index Funds despite their underperformance when there were comparable investment options that
cost less. Compl. ¶¶ 8-9, 42-50. Plaintiffs also allege that Defendants acted imprudently in
continuing to offer the MetLife Index Funds even though they each “underperformed the
alternatives . . . by roughly the difference in costs.” Id. ¶ 47. Defendants move to dismiss the duty
of prudence claim primarily for the reason that Plaintiffs have not alleged sufficient facts to
meaningfully compare the expense ratios and performances of the alternative funds or to even
ascertain whether these investment options are “identical” to the MetLife Index Funds. Motion at
6-12. For example, Defendants argue that “[f]ifteen of the seventeen alternatives plaintiffs offer
are collective investment trusts (CITS),” which are different from and tend to have lower operating
costs than mutual funds since they do not have to meet Securities and Exchange Commission
reporting requirements. Id. at 6. But as Plaintiffs point out in their Opposition, the Complaint
alleges that “[t]he MetLife Index Funds are structured as separate accounts,” not mutual funds.
Compl. ¶ 43; see also Opposition at 13 & n.8. Moreover, “the overwhelming trend with district
courts in this Circuit is to defer deciding the question of whether two funds are proper comparators
until after discovery.” In re Omnicom ERISA Litig., No. 20 Civ. 4141 (CM), 2021 WL 3292487,
at *13 (S.D.N.Y. Aug. 2, 2021); see Cunningham v. Cornell Univ., No. 16 Civ. 6525 (PKC), 2017
WL 4358769, at *7 (S.D.N.Y. Sept. 29, 2017) (noting that whether two funds were proper
comparators raised “factual questions that [we]re not properly addressed on a motion to dismiss”).
It is also worth noting that the pleading requirement for an ERISA plaintiff does not rise to
the standard advanced by Defendants in their Motion. On a motion to dismiss, the Court “must

16

construe [the complaint] liberally, accepting all factual allegations therein as true and drawing all
reasonable inferences in the plaintiffs’ favor.” Sacerdote, 9 F.4th at 106-07 (2d Cir. 2021). As
noted above, the Second Circuit has recognized that “ERISA plaintiffs generally lack the inside
information necessary to make out their claims in detail unless and until discovery commences.”
Morgan Stanley, 712 F.3d at 718; accord Sacerdote, 9 F.4th at 107. Here, the Complaint alleges
that:
•

“[t]here were numerous investment managers in the marketplace, including
BlackRock, Northern Trust, State Street, Vanguard, and Fidelity, that throughout the
relevant period offered products tracking the same benchmark indices as each of the
MetLife Index Funds with a high degree of precision, while charging very low fees,”
Compl. ¶ 44;

•

“the MetLife Index Funds are considerably more expensive—indeed several times
more expensive—than otherwise identical alternatives being used in other large Plans,”
id. ¶ 45;

•

“Defendants chose these proprietary funds even though they charged fees that were
significantly higher than the fees charged by more competitive options that were
identical (other than their lower cost),” id. ¶ 46;

•

“[t]he use of the MetLife Index Funds has resulted in significant losses for participants,
as each index fund underperformed the alternatives listed above by roughly the
difference in costs,” id. ¶ 47; and

•

“[f]or the 5-year period ending in 2019, two of the seven index funds performed as
expected, meaning equal to the benchmark minus expenses, five index funds performed
worse than expected, and no index funds performed better than expected,” id. ¶ 48.
17

The Complaint also provides a chart setting forth the expense ratio for each of the MetLife Index
Funds and comparators. See id. at 14-16. Drawing all reasonable inferences in Plaintiffs’ favor,
the Court finds that Plaintiffs have plausibly alleged that Defendants acted imprudently by
selecting and maintaining the MetLife Index Funds despite their underperformance and higher fees
compared to similar investment options in the marketplace. See, e.g., In re Omnicom ERISA Litig.,
2021 WL 3292487, at *13 (holding that the plaintiffs’ allegations that the two funds “‘appear to
follow essentially the same strategy’ because they have the same glide path . . . make it at least
plausible [at the motion to dismiss stage] that the two suites will be found to be comparable”);
Falberg v. Goldman Sachs Grp., Inc., No. 19 Civ. 9910 (ER), 2020 WL 3893285, at *9 n.15
(S.D.N.Y. July 9, 2020) (rejecting the defendants’ argument that the plaintiff failed to “plead
comparators with specificity” where the plaintiff “identifie[d] them by name and assert[ed] that
they are managed with similar strategies”); Cunningham, 2017 WL 4358769, at *8 (“While it may
turn out that defendants had legitimate and prudent reasons for making the challenged investments
available to participants—or that the retail and corresponding institutional mutual funds were not
truly identical—accepting the Complaint’s allegations as true and drawing all reasonable
inferences in favor of the plaintiffs, plaintiffs’ allegations are sufficient, at this stage, to survive a
motion to dismiss.”).
As to the remainder of Defendant’s arguments that Plaintiffs “cherry-picked alternative
funds,” Motion at 9, failed to identify the factual basis and sources for their financial data, id. at 8,
11 n.9, 12, and failed to meaningfully define certain terms, id. at 7-8, 10-11, these arguments
“appear[] to be based on documents, alleged factual inaccuracies, and the absence of ‘evidentiary
basis’ for the claims—as opposed to arguments that Plaintiffs’ claims have inescapable legal

18

deficiencies.” Mulligan v. Long Island Univ., No. 18 Civ. 2885 (ERK) (SJB), 2018 WL 8014320,
at *2 (E.D.N.Y. Dec. 13, 2018). Such arguments are “not resolvable at this stage.” Id.
2. Duty of Loyalty
An ERISA fiduciary also has a duty of loyalty, which requires that the fiduciary act “solely
in the interest of the participants and beneficiaries and . . . for the exclusive purpose of:
(i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses
of administering the plan.” 29 U.S.C. § 1104(a)(1)(A). “The Second Circuit has described the
duty as one requiring a fiduciary to ‘act’ . . . with an ‘eye single to the interests of the participants
and beneficiaries.’” In re SunEdison, Inc. ERISA Litig., 331 F. Supp. 3d 101, 114 (S.D.N.Y. 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); see also Falberg, 2020 WL 3893285, at
*11 (“Loyalty has been called ‘the most fundamental duty of a trustee’ and the onus it places on
fiduciaries has been described as ‘stricter than the morals of the marketplace.’” (quoting Pegram
v. Herdrich, 530 U.S. 211, 224-25 (2000))). Therefore, a plan fiduciary’s action that “incidentally
benefits” the plan sponsor does not violate the duty of loyalty so long as, “after careful and
impartial investigation, [the plan fiduciary] reasonably conclude[s] [that the action is] best to
promote the interests of participants and beneficiaries.” Donovan v. Bierwirth, 680 F.2d 263, 271
(2d Cir. 1982). At the same time, however, allegations “supporting an inference that the defendant
acted for the purpose of providing benefits to itself or someone else,” and to the expense of plan
participants, may state a claim for breach of duty of loyalty. Ferguson, 2019 WL 4466714, at *4.
Defendants seek dismissal of the duty of loyalty claim for three reasons. First, Defendants
argue that Plaintiffs “merely recast their circumstantial allegations regarding breaches of the duty
of prudence as breaches of the duty of loyalty.” Motion at 12. While the duties of prudence and

19

loyalty are “conceptually distinct from one another,” the “analysis of the duty of loyalty may
inform the analysis of the duty of prudence and vice versa.” Vellali, 308 F. Supp. 3d at 688; Leber
v. Citigroup 401(K) Plan Inv. Committee, 129 F. Supp. 3d 4, 13 (S.D.N.Y. 2015) (“[T]he duty of
loyalty and the duty of prudence . . . are interrelated and overlapping.”). This is particularly true
here, where Plaintiffs allege that Defendants not only imprudently selected and retained the
MetLife Index Funds, but did so for the disloyal purpose of benefiting themselves by way of
investment management fees and tax benefits. See Compl. ¶¶ 42-43. In light of these allegations,
the Court finds that Plaintiffs’ duty of loyalty claim is not duplicative of their duty of prudence
claim.
Second, Defendants argue that “[t]he mere fact that defendants offered proprietary
investment options to plaintiffs does not provide the Court with any basis to infer disloyalty.”
Motion at 13. Defendants are correct that including a proprietary investment fund in a plan’s
investment menu “do[es] not, standing alone, support an inference that a defendant breached its
fiduciary duties.” Bekker v. Neuberger Berman Grp. LLC, No. 16 Civ. 6123 (LTS) (BCM), 2018
WL 4636841, at *6 (S.D.N.Y. Sept. 27, 2018). But Plaintiffs do not merely allege that Defendants
breached their duty of loyalty by selecting and retaining proprietary investments. Rather, Plaintiffs
allege that Defendants applied a disloyal preference for proprietary investments because “[e]ach
of the MetLife Index Funds charge an annual operating expense that is paid to MetLife and
deducted from the rate of return of the fund,” and “MetLife also claims a tax deduction called the
Dividend Received Deduction . . . on dividends received on the assets owned by MetLife on behalf
of the Plan.” Compl. ¶ 43. Such allegations “regarding excessive fees [and tax benefits] from
which Defendants stood to gain is sufficient to support the inference that the process used by the
defendants who were Plan fiduciaries to select and maintain the Plan’s investment options was

20

‘tainted by failure of effort, competence, or loyalty.’” Moreno, 2016 WL 5957307, at *6; see also
Carrigan v. Xerox Corp., No. 3:21-CV-1085 (SVN), 2022 WL 1137230, at *9 (D. Conn. Apr. 18,
2022) (“Plaintiffs’ plausible claim that Defendants’ decision-making process was imprudent, when
combined with their allegations that Defendants ‘stood to benefit from’ the alleged imprudent and
excessive fees, are enough to state a claim of disloyalty.”).
Third, Defendants argue that “Plaintiffs’ three-sentence allegation regarding a Dividend
Received Deduction . . . is insufficient to support their disloyalty claim” because “plaintiffs fail to
specify the ‘MetLife’ entity that claims this tax deduction” and “Defendants would retain the
possibility of a DRD benefit even if the Plan replaced all of the MetLife Index Funds with other
market-offered investment options.” Motion at 13-14. The Court disagrees. As stated above, the
proper standard for a duty of loyalty claim is whether the allegations “support[] an inference that
the defendant acted for the purpose of providing benefits to itself or someone else.” Ferguson,
2019 WL 4466714, at *4; see also Nicolas v. Trs. of Princeton Univ., No. 17-3695, 2017 WL
4455897, at *3 (D.N.J. Sept. 25, 2017) (observing that to state a claim for breach of duty of loyalty,
the plaintiff must plead “facts suggesting Defendant benefitted, financially or otherwise, from any
decisions related to the Plans or engaged in disloyal conduct in order to benefit itself or someone
other than the Plans’ beneficiaries”). Thus, Defendants breached their duty of loyalty if they failed
to act with an “eye single to the interests of the participants and beneficiaries,” regardless of which
MetLife entity may have ultimately benefited from Defendants’ actions. In re SunEdison, Inc.
ERISA Litig., 331 F. Supp. 3d at 114. As to Defendants’ argument that they would retain the
possibility of a DRD benefit regardless of whether they had chosen proprietary investment options
for the Plan, such argument raises factual questions improper for resolution at this stage. Mulligan,

21

2018 WL 8014320, at *2. Construing the allegations in the light most favorable to Plaintiffs, the
Court finds that Plaintiffs plausibly allege a claim for duty of loyalty.
***
Accordingly, the Court denies Defendants’ Motion as to Plaintiffs’ breach of fiduciary duty
claim in Count I.
C. Failure to Monitor
Plaintiffs also allege that MetLife Group and Metropolitan Life violated their duties under
ERISA by (1) “[f]ailing to monitor and evaluate the performance of the Committee or have a
system in place for doing so,” (2) “[f]ailing to monitor the Committee’s fiduciary processes,” and
(3) “[f]ailing to remove members of the Committee whose performance was inadequate in that
they continued to maintain imprudent, excessively costly, and poorly performing index fund
investments within the Plan.” Compl. ¶ 71. As a result of these Defendants’ breaches of their duty
to monitor, Plaintiffs contend that “the Plan suffered millions of dollars of losses due to excessive
fees and investment underperformance.” Id. ¶ 72.
“The duty to monitor, although not explicitly imposed by statute, flows from the other
duties set out in Section 1104(a) and ‘require[s] those fiduciaries with the power to appoint and
remove plan fiduciaries to monitor the performance of those appointees.’” Patterson v. Morgan
Stanley, No. 16 Civ. 6568 (RJS), 2019 WL 4934834, at *7 (S.D.N.Y. Oct. 7, 2019) (quoting In re
Morgan Stanley ERISA Litig., 696 F. Supp. 2d 345, 366 (S.D.N.Y. 2009)). In this regard, an
underlying breach of the duties imposed by ERISA is necessary to maintain a claim for breach of
the duty to monitor. See Rinehart¸ 817 F.3d 56 at 68 (affirming dismissal of monitoring claim
when plaintiffs failed to identify a breach of prudence by the plan committee); Jander v. Int’l Bus.

22

Mach. Corp., 205 F. Supp. 3d 538, 546-47 (S.D.N.Y. 2016) (“Because Plaintiffs have failed to
allege an underlying breach, the duty to monitor claim is dismissed.”).
Defendants principally argue that the duty to monitor claim must be dismissed because
Plaintiffs have failed to adequately allege any underlying breach of fiduciary duty. Motion at 1415. Defendants further argue that even if Plaintiffs have stated a valid claim for an underlying
breach of fiduciary duty, Plaintiffs’ duty to monitor claim nevertheless should be dismissed
because “plaintiffs have not alleged any facts regarding MetLife Group and Metropolitan Life’s
monitoring process.” Motion at 14. Neither ground is availing. As discussed above, see supra
III.B., Plaintiffs have plausibly alleged a claim for breach of fiduciary duty. Moreover, “because
the appropriate ERISA mandated monitoring procedures vary according to the nature of the Plan
at issue and other facts and circumstances, an analysis of the precise contours of the defendants’
duty to monitor at this stage is premature.” In re Xerox Corp. ERISA Litig., 483 F. Supp. 2d 206,
215 (D. Conn. 2007); see also Morgan Stanley, 712 F.3d at 718 (recognizing that the allegations
of a complaint need not “directly address” the process by which the plan was managed).
In any event, the Complaint alleges that MetLife Group and Metropolitan Life were
fiduciaries of the Plan. Compl. ¶¶ 68-69. As fiduciaries, each of these Defendants allegedly has
or had a “responsibility to monitor the performance of the Committee and its members” and to
ensure that they were or are “complying with the terms of the Plan and ERISA’s statutory
standards.” Id.; see Patterson, 2019 WL 4934834, at *9. And as alleged, they breached their
fiduciary monitoring duties by, among other things:
a. failing to monitor and evaluate the performance of the Committee or have a
system in place for doing so, standing idly by as the Plan suffered significant
losses as a result of the Committee’s imprudent actions and omissions with
respect to the Plan;

23

b. failing to monitor the Committee’s fiduciary processes, which would have
alerted a prudent fiduciary to the breaches of fiduciary duties described herein;
and
c. failing to remove members of the Committee whose performance was
inadequate in that they continued to maintain imprudent, excessively costly, and
poorly performing index fund investments within the Plan, all to the detriment
of the Plan and Plan participants’ retirement savings.
Compl. ¶ 71. District courts in this Circuit had found that such allegations sufficiently state a
claim for breach of the duty to monitor at the motion to dismiss stage. See Khan v. Bd. of Dirs. of
Pentegra Defined Contribution Plan, No. 20 Civ. 7561 (PMH), 2022 WL 861640, at *10
(S.D.N.Y. Mar. 23, 2022) (denying motion to dismiss duty to monitor claim where the plaintiffs
alleged, among other things, that the monitoring defendants “fail[ed] to monitor their appointees
and delegees, to evaluate their performance, or to have a system in place for doing so; fail[ed] to
ensure that the monitored fiduciaries had a prudent process in place for evaluating the Plaintiff’s
administrative fees and ensuring that the fees were competitive, . . . and fail[ed] to remove
appointees whose performance was inadequate in that they continued to allow excessive
administrative fees”); Cunningham, 2017 WL 4358769, at *11 (denying motion with respect to
the duty to monitor where the “plaintiffs allege[d] that Cornell created the Committee to oversee
the Plans’ investment options . . . [and] Opperman was Chair of the Committee and was given
authority to appoint and remove other members of the Committee”); In re Am. Int’l Grp., Inc.
ERISA Litig. II, No. 08 Civ. 5722 (LTS), 2011 WL 1226459, at *10 (S.D.N.Y. Mar. 31, 2011) (“A
duty to monitor is pleaded sufficiently to survive a motion to dismiss when a complaint alleges
that the fiduciaries responsible for appointing other fiduciaries utterly failed to establish a
procedure for monitoring the appointed fiduciaries and failed to review those fiduciaries’
performance.” (cleaned up)). Accordingly, Defendants’ motion to dismiss the duty to monitor
claim in Count II is denied.
24

IV.

Conclusion

For the foregoing reasons, Defendants’ motion to dismiss is denied. Within two weeks of
the date of this Opinion and Order, the parties shall file on ECF a proposed case management plan
and scheduling order for the Court’s consideration. The Clerk of Court is respectfully directed to
close the motion pending at Docket Number 34.
SO ORDERED.
Dated: August 1, 2022
New York, New York

__________________________________
JOHN P. CRONAN
United States District Judge

25