Short et al v. Brown University

Filing 33

MEMORANDUM AND ORDER granting in part and denying in part 21 Motion to Dismiss for Failure to State a Claim. So Ordered by Chief Judge William E. Smith on 7/11/2018. (Jackson, Ryan)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
___________________________________
)
DIANE G. SHORT; SAMIRA PARDANANI; )
JUDITH DAVIAU; and JOSEPH BARBOZA, )
Individually and as Representatives)
of a Class of Participants and
)
Beneficiaries in and on Behalf of )
the BROWN UNIVERSITY DEFERRED
)
VESTING RETIREMENT PLAN, and the
)
BROWN UNIVERSITY LEGACY RETIREMENT )
PLAN,
)
)
Plaintiffs,
)
)
v.
)
)
BROWN UNIVERSITY in Providence in )
the State of Rhode Island and
)
Providence Plantations,
)
)
Defendant.
)
___________________________________)

C.A. No. 17-318 WES

MEMORANDUM AND ORDER
WILLIAM E. SMITH, Chief Judge.
I.

Introduction
This case is one of many, look-alike lawsuits filed nationwide

by current and former members of faculty and staff of private
(mainly

elite)

universities

universities

imprudently

in

which

managed

it

is

retirement

detriment of their employee-plan participants.

alleged
accounts

that the
to

the

Plaintiffs Diane

G. Short, Samira Pardanani, Judith Daviau, and Joseph Barboza
(collectively,

“Plaintiffs”),

eligible

faculty

and

staff

at

Defendant Brown University (“Brown” or “Defendant”), and vested

participants

in

one

of

Brown’s

two

retirement

plans,

sue

individually and as representatives of a class of participants and
beneficiaries of the Brown University Deferred Vesting Retirement
Plan (“Deferred Vesting Plan”) and the Brown University Legacy
Retirement

Plan

(“Legacy

Plan”)

(collectively,

“Plans”).

Plaintiffs suggest they were short-changed by Brown in saving for
their retirement.

More precisely, Plaintiffs allege that Brown,

as the Plans’ named fiduciary and plan administrator, has breached
its

duties

of

prudence

and

loyalty

contra

to

the

Employee

Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§
1001-1461.

Brown

moves

to

dismiss

(ECF

No.

21),

suggesting

Plaintiffs have not overcome the pleading standard of Rule 12(b)(6)
of the Federal Rules of Civil Procedure.

For the below reasons,

Brown’s Motion is granted in part and denied in part.
II.

Background 1
Plaintiffs,

individually

and

plan-participants,
on

behalf

of

a

bring

class

of

this

action,

participants

and

beneficiaries of the Plans, under 29 U.S.C. § 1132(a)(2) and (3).
(Compl. ¶ 1, ECF No. 1.)

Brown’s Plans are defined contribution,

1

Because this is a Rule 12(b)(6) motion and the Court
“assume[s] the truth of all well-pleaded facts and indulge[s] all
reasonable inferences therefrom that fit the plaintiff’s stated
theory of liability,” Arruda v. Sears, Roebuck & Co., 310 F.3d 13,
18 (1st Cir. 2002), this section describes the facts as Plaintiffs
allege them.
2

individual account, employee pension benefits plans, defined under
29 U.S.C. § 1002(2)(A) and § 1002(34).
under

which

eligible

faculty

and

(Id. ¶ 11.)

staff

members

The Plans,

at

Brown may

participate, provide the principal source of retirement income for
Brown’s

employees

and

are

premised

on

deferrals

compensation and employer matching contributions.

of

employee

(Id. ¶ 13.)

With assets above $1 billion as of December 31, 2015, the
Legacy Plan constitutes a “Mega” plan.

(Id. ¶¶ 14-15.)

That Plan

had 6,325 participants as of December 31, 2014, and a year later
it had 4,535 participants.

(Id. ¶ 15.)

With more than $244

million in assets as of December 31, 2015, 8,054 participants as
of December 31, 2014, and 9,594 participants one year later, the
Deferred Vesting Plan qualifies as a “Large” plan.
15.)

Brown,

as

1002(16)(A)(i),”
402(a)(1)

of

operations.”

the
and

ERISA,

“Plan
a

Administrator

named
“is

(Id. ¶ 21.)

fiduciary

responsible

under
pursuant

for

(Id. ¶¶ 1429
to

U.S.C.

§

section

day-to-day

plan

Specifically, as Plan Administrator,

Brown:
is vested with exclusive and complete responsibility and
discretionary authority to control the operation,
management and administration of the Plans, with all
powers necessary to enable it properly to carry out such
responsibilities,
including
the
selection
and
compensation of the providers of administrative services
to the Plans and the selection, monitoring, and removal
of the investment options made available to participants
for the investment of their contributions and provision
of their retirement income.

3

(Id. ¶ 22.)

For similar reasons, Brown is a fiduciary to the Plans

because it maintains discretionary authority and/or control with
respect to the Plans’ management, management and disposition of
Plan assets, and discretionary authority or responsibility in the
Plans’ administration.

(Id. ¶ 23.)

Brown’s Plans are known as

403(b) retirement plans. 2
Plaintiffs allege that Brown failed to fulfill its fiduciary
duties pursuant to ERISA.
on

or

before

December

bewildering

array

Investments

and

of

For example, according to Plaintiffs,

31,
175

offered

2014,

the

investment
an

Legacy
options

additional

24

Plan

“offered

through

investment

a

Fidelity
options

through TIAA-CREF, which included numerous duplicative investment
choices (e.g., 9 target retirement date funds offered by Fidelity
Investments and 9 target retirement date funds offered by TIAA
CREF).”

(Id. ¶ 7(a).)

As of December 31, 2015, the Legacy Plan

offered 35 investment options through TIAA-CREF and 26 through
Fidelity

Investments;

those

options

duplicative investment choices.

continued

(Id. ¶ 7(b).)

to

include

On or before

December 31, 2014, similarly, the Deferred Vesting Plan “offered
a bewildering array of 177 investment options through Fidelity

2

Tax-exempt organizations, public schools (including state
colleges and universities), and churches may offer plans that
qualify under § 403(b), commonly called 403(b) plans.
See 26
U.S.C. § 403(b)(1)(A).
4

Investments

and

offered

through TIAA-CREF.”

an

additional

(Id. ¶ 7(c).)

26

investment

options

As of that date, the Deferred

Vesting Plan also included many duplicative investment choices
“and dozens of highly specialized funds that lack diversification
and inappropriate for inclusion in a menu of investment choices in
a participant-directed individual account plan.”

(Id.)

As of

December 31, 2015, at least 35 investment options were offered
through TIAA-CREF whereas Fidelity Investments offered at least
26,

which

included

duplicative

choices.

(Id. ¶ 7(d).)

Specifically, both Plans offered the TIAA Traditional Annuity, “a
fixed

annuity

contract

that

minimum interest rate.” 3

returns

(Id. ¶ 29.)

a contractually

specified

The Plans also offered

“variable annuities that invest in underlying securities for a
given investment style,” including the “CREF Stock Account, CREF
Money Market Account, CREF Inflation-Linked Bond Account, CREF
Social Choice Account, CREF Bond Market Account, CREF Global
Equities Account, CREF Growth Account, and CREF Equity Index
Account.”
investment

(Id. ¶ 31.)
performance

These annuities’ value fluctuated based on
and

the

accounts’

expenses.

(Id.)

Similarly offered was the TIAA Real Estate Account, a TIAA-CREF

3

“Assets invested in the TIAA Traditional Annuity are held
in the general account of Teachers Insurance and Annuity
Association of America and are dependent on the claims-paying
ability of Teachers Insurance and Annuity Association of America.”
(Compl. ¶ 29, ECF No. 1.)
5

maintained,

insurance

company

separate

account,

i.e.,

“an

investment vehicle that aggregates assets from more than one
retirement plan for a given investment strategy, but those assets
are

segregated

assets.”

from

the

(Id. ¶ 33.)

insurance

company’s

general

account

What remains for the Plans’ investment

options are various TIAA-CREF mutual funds, which “charge varying
amounts for investment management, but also charge distribution,
marketing, and other expenses, depending on the type of investment
and share class.”

(Id. ¶ 34.)

III. Legal Standard
To

overcome

a

motion

to

dismiss

under

Rule

12(b)(6),

a

complaint must possess sufficient facts “to state a claim for
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)).

“The court must take all of the pleaded factual

allegations in the complaint as true,” Foley v. Wells Fargo Bank,
N.A., 772 F.3d 63, 71 (1st Cir. 2014), and draw all reasonable
inferences in favor of the plaintiff.

Riggs v. Curran, 863 F.3d

6, 10 (1st Cir. 2017). “Barring ‘narrow exceptions,’ courts tasked
with this feat usually consider only the complaint, documents
attached to it, and documents expressly incorporated into it.”
Foley, 772 F.3d at 71-72 (quoting Watterson v. Page, 987 F.2d 1,
3 (1st Cir. 1993)).

“[A] primary purpose of a Rule 12(b)(6) motion

is to weed out cases that . . . based on the factual scenario on
6

which the case rests, the plaintiff could never win.”

Id. at 72.

“[P]laintiffs are not required to submit evidence to defeat a Rule
12(b)(6)

motion,

but

need

only

complaint a plausible claim.”
Further,

at

the

sufficiently

allege

in

their

Id.

motion-to-dismiss

stage,

“further

record

development — and particularly input from those with expertise in
the arcane area of the law where ERISA’s . . . provisions intersect
with its fiduciary duty requirements . . . [is] essential to a
reasoned

elaboration

of

that

which

fiduciary duty in this context.”
F.3d 1, 6 (1st Cir. 2004).

constitutes

a

breach

of

LaLonde v. Textron, Inc., 369

“In factually complex ERISA cases like

the instant ones, dismissal is often inappropriate.”

Brotherston

v. Putnam Invs., No. 15-13825-WGY, 2016 WL 1397427, at *1 (D. Mass.
2016); see also Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 598
(8th

Cir.

2009)

(“No

matter

how

clever

or

diligent,

ERISA

plaintiffs generally lack the inside information necessary to make
out their claims in detail unless and until discovery commences.”).
IV.

Discussion
At the outset, because Plaintiffs expressly concede that

Counts III and IV do not survive Brown’s Motion for lack of
standing, the Court dismisses those Counts.

(See Pls.’ Opp’n to

Mot. to Dismiss (“Pls.’ Opp’n”) 1 n.2 (“Plaintiffs do not oppose
dismissal

of

Counts

III

and

IV . . . as

borrowers under this loan program.”)).
7

Plaintiffs

were

not

The Court’s discussion is

therefore limited to Counts I and II.

As to these counts, while

many of Plaintiffs’ theories fall away, there is enough heft to
their claims to survive Brown’s Motion to Dismiss.
A. Duty of Loyalty
As an initial matter, Plaintiffs, for at least two reasons, 4
fail to state a claim that Brown breached its duty of loyalty.
First,

Plaintiffs’

Complaint

is

bereft

of

sufficient

factual

allegations to state a claim for breach of the duty of loyalty. 5
And all other allegations with respect to the duty of loyalty
merely “piggy back” on Plaintiffs’ duty-of-prudence allegations,
which is not sufficient to state a claim for the duty of loyalty.
(See, e.g., Compl. ¶¶ 2, 48, 59, 100, 110-28.); see also Cassell
v. Vanderbilt Univ., 285 F. Supp. 3d 1056, 1062-63 (M.D. Tenn.
2018)

(“Plaintiffs’

loyalty

claims

are

piggy back off their prudence claims.

characterizations

that

The facts alleged in the

Amended Complaint assert that Defendants . . . engaged in self-

4

As is true with other aspects of their case, Plaintiffs
are doomed by their failure to substantively respond to Brown’s
Motion on this score, which “operates as a waiver or forfeiture of
the claim and an abandonment of any argument against dismissing
the claim.”
Daugherty v. Univ. of Chi., No. 17C3736, 2017 WL
4227942, at *9 (N.D. Ill. Sept. 22, 2017).
5

The one allegation that might possibly be construed as
stating a claim (although it is largely conclusory) is in the
context of Count III, which Plaintiffs concede should be dismissed.
(See Compl. ¶ 133.)
8

dealing or acted for the purpose of benefitting a third party.
Any

facts

that

remotely

relate

to

a

duty

of

loyalty

are

insufficient to state a claim.”); Cunningham v. Cornell Univ., No.
16-cv-6525 (PKC), 2017 WL 4358769, at *4 (S.D.N.Y. Sept. 29, 2017)
(“Because these claims do not support an inference that defendants’
actions were for the purpose of providing benefits to themselves
or someone else and did not simply have that incidental effect,
the loyalty claims . . . are dismissed.”).
B. Duty of Prudence
1.

Count I

In Count I, Plaintiffs suggest that Brown did not engage in
a prudent process for evaluating and monitoring fees and expenses
that TIAA and Fidelity charged to the Plans in breach of its duty
of prudence under ERISA.

(See Compl. ¶¶ 110-16.)

In support,

Plaintiffs fault Brown for: (1) offering too many investment
options, including duplicative options, rather than a “core” lineup (id. ¶¶ 25-28, 49-50, 121); (2) using more than one recordkeeper (id. ¶¶ 40-48); (3) failing to employ a competitive bidding
process with respect to record-keeping (id. ¶¶ 36-38, 48); (4)
offering

investment

options

that

charged

“multiple

layers

of

expense charges” (id. ¶¶ 32-33); and (5) offering investment
options that charged asset-based fees and used revenue sharing,
instead of a per-participant rate (id. ¶¶ 37, 39, 51-53).
Like Plaintiffs’ duty-of-loyalty claims, Plaintiffs neglect
9

to rebut certain of Brown’s arguments with respect to the dutyof-prudence claims. And for that reason, those particular theories
must fall away.

First, by offering not one word in response to

Brown’s Motion with respect to their allegations that the Plans
offered investments with multiple layers of fees, Plaintiffs waive
this aspect of their imprudence claim.

See Tower v. Leslie-Brown,

326 F.3d 290, 299 (1st Cir. 2003) (“[F]ailure to brief an argument
does, in fact, constitute waiver . . . .”).

Likewise, Plaintiffs

fail to respond and therefore abandon their claim that it was
imprudent for Brown to use asset-based fees and revenue sharing.
See id.
Another aspect of Plaintiffs’ imprudence claim that falls
away — albeit for different reasons — is the allegation that Brown
was imprudent in offering a surplus of investment options and
failing to feature a set of “core” investment options.
fail to state a claim in this respect.

Plaintiffs

Brown is correct that

courts have repeatedly rejected, as a matter of law, identical
claims in factually analogous cases, and ERISA does not impose
that

fiduciaries

limit

plan

participants’

investment

options.

(See Def.’s Mem. in Supp. Mot. to Dismiss (“Def.’s Mem.”) 18-20,
ECF No. 21-1.)

The Court finds these cases persuasive.

Allegedly

offering too many investment options for participants does not
suffice for a breach of ERISA’s duty of prudence.

See, e.g.,

Henderson v. Emory Univ., 252 F. Supp. 3d 1344, 1350 (N.D. Ga.
10

2017)

(“Having

too

many

options

does

not

hurt

the

Plans’

participants, but instead provides them opportunities to choose
the investments that they prefer.”); Sacerdote v. N.Y. Univ., No.
16-cv-6284 (KBF), 2017 WL 3701482, at *11 (S.D.N.Y. Aug. 25, 2017)
(“But while ERISA requires fiduciaries to monitor and remove
imprudent investments, nothing in ERISA requires fiduciaries to
limit plan participants’ investment Options in order to increase
the Plan’s ability to offer a particular type of investment (such
as funds offering institutional share classes).

Indeed, courts

have bristled at paternalistic theories that suggest ERISA forbids
plan sponsors to allow participants to make their own choices.”)
(internal

quotation

marks

and

citations

Univ., 285 F. Supp. 3d at 1066-67 (same).

omitted);

Vanderbilt

And, in any event,

Plaintiffs fail to rebut Brown’s argument on this score, so the
Court disregards any duty-of-prudence claim conditioned on such a
theory.

See Alioto v. Town of Lisbon, 651 F.3d 715, 721 (7th Cir.

2011) (“[T]he rule that a person waives an argument by failing to
make it before the district court . . . [applies] where a litigant
effectively abandons the litigation by not responding to alleged
deficiencies in a motion to dismiss.”); cf. Rocafort v. IBM Corp.,
334

F.3d

115,

121

(1st

Cir.

2003)

(applying

waiver

rule

to

situation where “a plaintiff properly raises an issue in his
complaint, but then fails to adequately address it as part of his
summary judgment”).
11

Notwithstanding, enough remains to Plaintiffs’ Count I claim
to withstand Brown’s Motion.

The Court first considers whether

Plaintiffs state a claim that Brown acted imprudently by using
more than one record-keeper.

Because Plaintiffs do not allege

what services TIAA and Fidelity provided as record-keepers, Brown
suggests, the Court cannot infer that no prudent fiduciary could
have chosen to use both companies.

(See Def.’s Mem. 20.)

Although

conceding that a single record-keeper is not a legal prerequisite,
Plaintiffs argue that a prudent fiduciary in these circumstances
would have chosen fewer record-keepers.

(Pls.’ Opp’n 16.)

Plaintiffs’ allegation that a prudent fiduciary would have
chosen one — rather than two — record-keepers suffices at this
stage to state a plausible claim.

In Henderson, 252 F. Supp. 3d

at 1353, the district court allowed a nearly identical allegation
to move past a motion to dismiss. There, the plaintiffs’ complaint
cited the use of three separate record-keepers “[d]espite the longrecognized

benefits

of

a

single

recordkeeper”

as

causing

an

inefficient and costly structure that passed on excessive and
unreasonable fees to plan participants.

The plaintiffs also

alleged that comparably sized plans maintained only one, rather
than multiple, record-keepers, which helped minimize costs.

Id.

Swap out three with two record-keepers and you have Plaintiffs’
allegations in this case.

(See, e.g., Compl. ¶¶ 47-49.)

And at

this stage, what Plaintiffs allege on this score suffices to allow
12

their duty-of-prudence claim to proceed.

See Henderson, 252 F.

Supp. 3d at 1353; see also Nicolas v. Trustees of Princeton Univ.,
Civ. No. 17-3695, 2017 WL 4455897, at *4 (D.N.J. Sept. 25, 2017)
(finding

plaintiff’s

allegation

that

defendant

“imprudently

contracted with two recordkeepers, creating an ‘inefficient and
costly structure’” sufficient to clear motion-to-dismiss stage);
Sacerdote, 2017 WL 3701482, at *9 (“While it should be noted that
having a single recordkeeper is not required as a matter of law,
based on the facts here alleged . . . the allegation that a prudent
fiduciary would have chosen fewer recordkeepers and thus reduced
costs for Plan participants — the ‘recordkeeping consolidation’
allegation — is sufficient at this stage . . . .”).
The Court next considers whether Plaintiffs state a claim
that Brown acted imprudently by failing to engage in a competitive
bidding

process.

Brown

argues

that,

as

a

matter

of

law,

“[a]llegations that a plan administrator should have engaged in
competitive bidding for services are also not sufficient to support
a claim of breach of fiduciary duty under ERISA.”
21.)

(Def.’s Mem.

And it argues bidding is but one available process to

determine fees and expenses, and that it is not required that
fiduciaries

use

competitive

bidding

to

select

record-keepers.

(Id.) Brown also faults Plaintiffs for not alleging or challenging
the process through which Brown retained TIAA and Fidelity as
record-keepers.

(Id.)
13

Plaintiffs’
circumstances

claim

would

that

have

a

prudent

solicited

competitive

alleges a breach of the duty of prudence.
considered

analogous

arguments

by

fiduciary

in

bids

like

plausibly

Like courts that have

defendant-universities,

the

Court deems unpersuasive Brown’s point that ERISA does not per se
require competitive bidding.

See Sacerdote, 2017 WL 3701482, at

*8; Tracey v. Mass. Inst. of Tech., No. 16-11620-NMG, 2017 WL
4478239, at *1, *3 (D. Mass. Oct. 4, 2017) (finding unpersuasive
defendants’ argument that “ERISA does not require a fiduciary to
solicit competitive bids” in context of allegation that “MIT never
engaged

in

a

competitive

bidding

process

for

[recordkeeping]

services” because “[a]s part of the ‘prudent man standard’ one
would expect a fiduciary to obtain bids at some point during the
extensive period of managing the fund, considering that the fees
amount to millions of dollars per year”); Vanderbilt Univ., 285 F.
Supp. 3d at 1064-65 (finding factually analogous claims sufficient
to survive motion to dismiss and, in any event, that, “[w]hether
[it] was actually imprudent involves questions of fact that the
Court cannot consider at this stage of the litigation”).
Finally, the Court considers whether Plaintiffs state a claim
generally

regarding

excessive

fees

and

expenses.

Plaintiffs

allege that the Plans paid significantly too much for recordkeeping
compared to market rates, suggesting that $35-$45 annually per
participant would be reasonable, when Plan participants annually
14

pay about $300.

(Compl. ¶¶ 55-58; Pls.’ Opp’n 12.)

Brown argues

that Plaintiffs fail to allege that no reasonable fiduciary would
make

the

same

decisions

as

Brown.

That

is,

Brown

suggests

Plaintiffs’ allegation that a “reasonable recordkeeping fee for
the

Plans

would

approximately

have

$35-$45

been
per

a

fixed

amount

participant”

between

(Compl.

¶

.
55),

.

.
is

insufficient because Plaintiffs fail to include a comparison to
what other universities with 403(b) plans pay for recordkeeping
services or how many use a flat-fee per participant.
23-24.)

(Def.’s Mem.

Further, Brown argues, “so many universities have been

sued for paying more than the ‘$35-$45’ selected by Plaintiffs as
the ‘right’ amount . . . that their fee estimate is not a plausible
basis for a claim of imprudence.”

(Id. at 24.)

Brown’s averment is not persuasive at the motion-to-dismiss
stage.

Plaintiffs allege specific facts to support their claim,

including identifying what, based on various factors including the
record-keeping market, “the outside limit of a reasonable recordkeeping fee for the Plan[s] would be . . .”

Vanderbilt Univ., 285

F. Supp. 3d at 1064; see also Sacerdote, 2017 WL 3701482, at *9
(“[C]aselaw also supports claims for imprudence based on specific
allegations of the level of fees and why such fees were/are
unreasonable . . . . Plaintiffs allege that ‘[e]xperts in the
recordkeeping industry’ determined that the ‘market rate’ for
administrative fees for plans like [these] . . . was $35 per
15

participant, and that the Plans’ recordkeeping fees far exceeded
that amount.”).
And, in any event, “[t]he question whether it was imprudent
to

pay

a

particular

amount

of

record-keeping

fees

generally

involves questions of fact that cannot be resolved on a motion to
dismiss.”

Vanderbilt Univ., 285 F. Supp. 3d at 1064.

comparison to other universities is premature.

Brown’s

This aspect of

Plaintiffs’ claim survives.
2. Count II
In Count II, Plaintiffs aver that rather than “engage in a
prudent process for the selection and retention of Plan investment
options,”

Brown

selected

“more

expensive

historical performance.” (Compl. ¶ 122.)

funds

with

inferior

Specifically, Plaintiffs

challenge Brown’s process with respect to: (1) the CREF Stock
Account (id. ¶¶ 63-76, 123); (2) the TIAA Real Estate Account (id.
¶¶ 77-89, 124); and (3) the TIAA Traditional Annuity 6 (id. ¶¶ 9099, 125).
Brown argues that because “hindsight and allegations of poor
performance are all that Plaintiffs offer on their claim that Brown
was imprudent in the selection and retention of the three TIAA

6

Beyond conclusory recitations and references to the
complaint’s allegations (see Pls.’ Opp’n 4), Plaintiffs offer no
response
with
respect
to
the
TIAA
Traditional
Annuity;
accordingly, they abandon any aspect of their claim pertaining to
this particular investment account.
16

annuity

investment

Plaintiffs’

claim

options
should

about
be

which

Plaintiffs

dismissed.

(Def.’s

complain,”
Mem.

25.)

Underperforming funds is alone insufficient to allege that no
prudent fiduciary would have made the same choices, Brown avers.
(Id.)
Plaintiffs respond that Count II states a plausible claim for
excessive investment management fees and performance losses in
contravention of Brown’s duty to “minimize costs” and to “incur
only costs that are reasonable.”

(Pls.’ Opp’n 17.)

“Plaintiffs

allege — and Brown cannot dispute — the CREF Stock and TIAA Real
Estate funds had both drastically underperformed comparable lowercost alternatives over the preceding one-, five-, and ten-year
periods.”

(Id. at 18; see Compl. ¶¶ 68-89.)

Plaintiffs

cite

a

recommendation

from

For example,

independent

investment

consultant Aon Hewitt in March of 2012 that the CREF Stock Account
should be removed based on its historic underperformance and
strategy that vastly reduced the ability of the fund to produce
excess returns over time.

(Pls.’ Opp’n 18-19; Compl. ¶ 73.)

To the extent Brown suggests otherwise, or presents different
benchmarks to measure the Plans’ performance, it raises factual
issues that cannot be decided at the pleading stage.

The court

deems persuasive the analysis of courts considering analogous
theories in analogous circumstances, which have allowed a theory
like

Plaintiffs’

to

move

forward
17

in

spite

of

the

defendant-

university’s

attempt

(like

performance benchmarks.

Brown’s

here)

to

insert

different

See Henderson, 252 F. Supp. 3d at 1352

(“[T]he proper benchmark can be more appropriately determined on
summary judgment.”).

For instance, in Henderson, the court held

that the plaintiffs properly alleged a plausible imprudence claim
in alleging that the “defendants failed to remove the CREF Stock
Account

and

TIAA

Real

Estate

Account

after

periods

of

underperformance and higher costs compared to similar funds.”

Id.

There, the court cited the Supreme Court’s decision in Tibble v.
Edison Int’l, 135 S. Ct. 1823, 1829 (2015), for the principle that
“[a] plaintiff may allege that a fiduciary breached the duty of
prudence by failing to properly monitor investments and remove
imprudent ones.”

Id.; see also Daugherty v. Univ. of Chi., No.

17C3736, 2017 WL 4227942, at *7-8 (N.D. Ill. Sept. 22, 2017)
(finding sufficient plaintiffs’ allegation “that the CREF Stock
Account and TIAA Real Estate Account underperformed for years
compared to industry standards, and that Defendant failed to
prudently

evaluate,

monitor,

and

remove

those

investment

options”).

But see Cunningham, 2017 WL 4358769, at *5 (dismissing

as dicta Tibble’s suggestion that a plan fiduciary has a continuing
duty to monitor and remove investments and finding the case did
not preclude dismissal).
Brown’s argument has been considered — and rejected — by
courts considering near-identical circumstances.
18

See Sacerdote,

2017 WL 3701482, at *10 (“While it is true that a decline in price
indicates only that, in hindsight, the investment may have been a
poor one . . . here there is the additional allegation of a tenyear record of consistent underperformance.”).
allegation

that

the

accounts

in

Brown’s

Here, Plaintiffs’
Plans

consistently

underperformed satisfies Plaintiffs’ burden to overcome a motion
to dismiss.

(See, e.g., Compl. ¶¶ 71, 80.)

C. Statute of Limitations
Also reserved for another day is Brown’s argument that ERISA’s
statute of limitation bars Plaintiffs’ claims.

Brown submits that

ERISA’s six-year statute of limitations bars Plaintiffs’ claims
because
selecting

most

decisions

various

that

investment

Plaintiffs
accounts,

challenge
using

an

(including
asset-based

revenue-sharing model for administrative expenses and two recordkeepers, and offering too many investment options) were decisions
Brown made more than six years ago.

(Def.’s Mem. 33.)

Plaintiffs

respond that, rather than “challenge the initial design aspects of
the Plans,” they challenge the excessive recordkeeping fees that
Plaintiffs are now paying (and have been paying over the past six
years), and other ongoing conduct by Brown.

(Pls.’ Opp’n 20.)

A

fuller record is necessary to resolve any statute-of-limitations
problems posed by this case.

See, e.g., Vanderbilt Univ., 285 F.

Supp. 3d at 1070 (“It is possible that further development of the
record will reveal that Plaintiffs had actual knowledge of these
19

alleged breaches . . . but the Court cannot dismiss claims based
on the three-year statute of limitations at this time.”); Cates v.
Trs. of Columbia Univ., No. 16-cv-6524, 2017 WL 3724296, at *2
(S.D.N.Y.

Aug.

28,

2017)

(“Defendants’

allegations

under

the

statute of limitations survive as well, as the Court does not have
enough information to rule on them at this stage — a fuller record
is necessary.”); Sacerdote, 2017 WL 3701482, at *15 (“On the
circumstances here, the Court cannot dismiss any claims based on
the statute of limitations at this time.
needed.

Whether

or

not

plaintiffs

had

A fuller record is
actual

knowledge

of

defendant’s alleged breach . . . is a question for another day.”).
V.

Conclusion
Accordingly, Brown’s Motion (ECF No. 21) is DENIED in part

and GRANTED in part, as outlined above.
IT IS SO ORDERED.

William E. Smith
Chief Judge
Date: July 11, 2018

20