Trauernicht, et al. v. Genworth Financial Inc., et al.

Filing 315

MEMORANDUM OPINION. Signed by District Judge Robert E. Payne on 8/29/2024. (adun, )

IN THE UNITED

STATES DISTRICT

FOR THE EASTERN DISTRICT

COURT

OF VIRGINIA

Richmond Division

PETER TRAUERNICHT,

et al.,

Plaintiffs,
Civil Action No.

V.

GENWORTH FINANCIAL,

3:22-cv-532

INC.,

Defendant.

MEMORANDUM OPINION

This

matter

SUMMARY JUDGMENT

opposing,

is

before

(ECF No.

the

Court

213)(the

and reply memoranda

w

on

DEFENDANT'S

Motion"),

(ECF Nos.

MOTION

FOR

and the supporting.

217,

246,

266) .

For the

following reasons, the Motion will be denied.
BACKGROUND

I.

Factual Background

Class Representatives Peter Trauernicht and Zachary Wright
("Plaintiffs"),
Inc.

Retirement

on behalf of
and

similarly

situated

Financial,

Inc.

themselves,

Savings

Plan

individuals.

("Genworth" or

\\

(the
filed

the
w

Genworth Financial

Plan") ,

suit

and

all

against

other

Genworth

Defendant") alleging that Genworth

breached its fiduciary duties under the Employee Retirement Income
Security

Act

("ERISA"),

29

U.S.C.

§

1001

("Second Amended Class Action Complaint

it

or

et
w

seq.

SAC")

ECF

H 1.

No.

103

According to Plaintiffs,

Genworth violated those fiduciary

duties because it failed to appropriately monitor, and as a result,
imprudently

retained,

("BlackRock

TDFs")

Genworth

LifePath

Target

Date Funds

despite

their

significant

BlackRock
the

in

SAC nil

underperformance.

had

the

1,

Plan
57-63,

6,

appropriately

84-86.

Plaintiffs say that

the

monitored

BlackRock

TDFs'

the BlackRock TDFs would have been removed from the

performance,

Plan and would have been replaced with a suitable alternative no
later than the first quarter of 2017.

SAC HU 63,

84-86;

ECF

No.

217-3 ("Marin Rpt.") H 25. Plaintiffs seek to recover any resulting
losses to the Plan and to obtain any appropriate equitable relief
on

behalf of the Plan and on behalf of a class of Plan participants

and beneficiaries pursuant to 29 U.S.C. § 1109(a) and § 1132(a) (2) .
SAC nn 91/

COUNT

100; ECF No.

ONE

404(a)(1)(A),

alleges

(B) ,

1104(a) (1) (A) ,

144 at 6.

and

(B) ,

Breach
(D)

and

of

(D) .

of

Fiduciary

ERISA,

SAC HU

Duty

codified

82-91.

at

29

under

§§

U.S.C.

§§

Additionally,

to the

extent that Genworth did not directly breach its duties, COUNT ONE
alleges that Genworth is liable under 29 U.S.C.
fiduciary which

duty

by

Financial,

the
Inc.

W

§

1105(a)

as a co¬

knowingly failed to cure a breach of fiduciary

[Fiduciary
(the

&

Investment

Committee")]

efforts to remedy the breach.

//

of

Genworth

and failed to take reasonable

SAC n 88.

2

Committee

COUNT TWO alleges that Genworth failed to monitor and evaluate
the

performance

of

the

Committee

its

and

members

that

were

overseeing and managing the Plan. SAC HH 92-101.
II.

Procedural Background

On April 17, 2023, Plaintiffs filed their SECOND AMENDED CLASS
ACTION

COMPLAINT

PARTIAL

MOTION

(ECF

TO

No.

DISMISS

103).

The

Court

UNDER

RULE

granted

DEFENDANT'S

(ECF

12(b)(1)

No.

106),

dismissing Plaintiffs' request for prospective injunctive relief,
and denied

No.

104).

On
EXCLUDE

No.

195)

DEFENDANT'S

ECF No.

May
THE

29,

MOTION TO DISMISS

12(b)(6)

(ECF

139.

2024,

EXPERT

the

Court

OPINIONS

AND

denied

TESTIMONY

DEFENDANT'S
OF

TO

MOTION
MARIN

RICHARD

(ECF

and DEFENDANT'S MOTION TO EXCLUDE THE EXPERT OPINIONS AND

TESTIMONY OF ADAM WERNER

2024,

UNDER RULE

(ECF No.

201).

ECF No.

310.

On August 15

the Court granted PLAINTIFFS' MOTION FOR CLASS CERTIFICATION

(ECF No.

143).

Plaintiffs'

ECF No.

MOTION

TO

LATHAM AND RUSSELL R.

312.

On August

EXCLUDE

WERMERS,

29,

OPINIONS

PH.D.

AND

2024,

the Court denied

TESTIMONY

(ECF No.

207).

OF

LORIE

ECF No.

L.

314.

DISCUSSION

I.

Legal Standard

A movant

is

entitled to

summary judgment

if

it

\\

shows

that

there is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.

Fed.

R.

Civ.

P.

56(a).

A dispute is genuine if 'a reasonable jury could return a verdict
3

for the nonmoving party.

718

F.3d

308,

313

Corp. of Am.,
The

Id.

in

at 312-13.

scintilla

of

(4th

Libertarian Party of Virginia v.

it

Cir.

673 F.3d 323,

court

inferences

/

must

v.

Dulaney

Packaging

(4th Cir. 2012}).

the

facts

and

draw

all

reasonable

the light most favorable to the nonmoving party.
the non-movant must provide more than

However,
evidence

to

//

overcome
Inc.,

a

summary

477 U.S.

242,

judgment
252

it

"a

motion.

(1986).

Analysis

Genworth
causation and
A.

A
w

330

construe

Anderson v. Liberty Lobby,
II.

2013) (quoting

Judd,

Loss

moves
the

statute

summary
of

judgment

limitations.

on

two

ECF No.

issues:

217

at

loss

1-2.

Causation

fiduciary

who

personally liable"

[the]

for

29

breach.

breaches

for

U.S.C.

the

duties

"any losses
§

1109(a).

to
In

imposed

by

ERISA

the plan resulting from
the

Fourth

Circuit,

fiduciary duty and a loss.

the plaintiff proves a breach of

is

once
the

burden of proof shifts to the fiduciary to show that the loss did
not

result

from

the

breach

Pension Inv.

Comm.,

standard,

plaintiff

a

(i. e. ,

761 F.3d 346,

who

has

loss

363

causation).

(4th Cir.

proved

procedural imprudence and a prima facie

the

Tatum v.

2014).

RJR

Under this

defendant-fiduciary's

loss prevails unless the

defendant-fiduciary can show, by a preponderance of the evidence.
that

its

conduct

did not

cause

the

4

loss.

Id.

at

364.

When

a

fiduciary

engages

in

imprudent

an

decision-making

the fiduciary carries its burden on loss causation by

process

showing

that

prudent.

f

its

Id.

f/

at

ultimate
363.

investment

[A]

\\

decision

decision is

was

'objectively
if

'objectively prudent'

'a hypothetical prudent fiduciary would have made the same decision
/

anyway.

//

Union No.

Id.
96

(emphasis

in original)(quoting

Pension Plan v.

Pepper,

663

Plasterers'

F.3d 210,

218

Local

(4th Cir.

2011)).

To determine what a hypothetical prudent fiduciary would have
done,

courts

consider

what

under the circumstances
Univ. ,
w

595 U.S.

17 0,

172

others

\\

in a like capacity

then prevailing.

f/

Hughes v.

(2022) (quoting 29 U.S.C.

would

n

do

Northwestern

§ 1104 (a) (1) (B)) .

[T]he appropriate inquiry will necessarily be context specific.

Fifth

Third

Therefore,

Bancorp

v.

573

Dudenhoeffer,

evidence

disclosures,

may

analysts'

include

855 F.3d 553,

V .

425

(4th Cir.

//

Tatum,

[p]Ian
and

(2014) .

as part of

761 F.3d at 368.

public

documents,
associated

//

Pension

Inv.

2017). It may also include

the

See Tatum v.

RJR

research

of other expert professionals both to invest and not

decision[s]

to divest"

559

\\

reports [,]

regarding a challenged investment.

Comm. ,

409,

all relevant evidence should be considered

a totality-of-the-circumstances inquiry.
Relevant

U.S.

a challenged fund during the same time period.

State St.

Bank & Tr.

Co.,

806

F.3d 377,

388

(6th Cir.

Pf eil

2015);

Ramos V. Banner Health, 461 F. Supp. 3d 1067, 1129 (D. Colo. 2020),
5

aff

1

F.4th 769

(10th Cir.

2021) (finding

other mega plans also offered the
same time that
.

would

Finally,

the

retained

court

must

Plan's own governing
Statement
act

under

("IPS"),
the

[challenged investment]

[plaintiff's expert]
have

such

take

account

including

761

Tatum,

[the]

in

compliance

its

at the

F.3d at

plan").
with

the

Investment Policy

in determining how a prudent

circumstances.

that

claimed no prudent fiduciary
investments

into

documents,

persuasive

it

fiduciary would

367

("courts have

found a breaching fiduciary's failure to follow plan documents to

be highly relevant in assessing loss causation.").
Genworth claims
material

fact on the

that there is no genuine
issue of

loss

causation.

dispute as

ECF No.

217 at

to

any

1.

To

determine what Genworth would have done had it prudently monitored

the BlackRock TDFs,i Genworth says that the Court should consider
the views of

8.

the broader retirement investment

If an investment was

community.

Id.

at

the evidence would show

truly imprudent,

investors shedding the fund. Id. at 10. But, at the time Plaintiffs

say Genworth should have removed the BlackRock TDFs from the Plan,
market analysts and sophisticated plan fiduciaries considered them
to

be

sound

investments.

Id.

at

11.

Genworth

under the circumstances then prevailing,

therefore

says that

there is no dispute that

the BlackRock TDFs were objectively prudent—a hypothetical prudent

^

Genworth

process was

reserves

for

adequate.

trial

ECF No.

the

issue

266 at

of

4.
6

whether

its

investment monitoring

fiduciary would have made the same decision to retain the BlackRock
TDFs

in

the

Plan.

Id.

Genworth says that leading market analysts viewed the

First,

BlackRock TDFs favorably.
the

BlackRock

TDFs

as

ECF No.

"Gold,

217

at

11.

Morningstar ranked

the highest rating available,

n

every year of the class period.

for

Id. at 11. Aon Hewitt Investment

Consulting {"AHIC"), a well-respected investment consultant in the
retirement

investment

consultant,

also

and

described

gave

them

space
the

as

and

Genworth's

BlackRock TDFs

a

w

own

Buy"

investment

rating

in 2016

among the best target date solutions for

\\

plan sponsors looking for a low cost,
managed target date fund.

Id.

tr

at 12

well-constructed,

passively

(quoting GENWORTH-0024952 at

25000). Genworth says that Plaintiffs have offered no evidence of

any market analyst contemporaneously offering an alternative view.
Id.

at

13.

Second,

401 (k)

Genworth

says

that

numerous

sophisticated

large,

plans retained the BlackRock TDFs during

the same period

when Plaintiffs say that Genworth should have dropped them.

6,

14.

Genworth

BlackRock TDFs,
menus.

inflow

Id.
of

says

this

939

at 6. Additionally,
money

time.

plans

continued

offering

at

the

and 819 plans added the funds to their investment

during

similarly sized 401(k)
over

that

Id.

Id.

at

the

the BlackRock TDFs experienced an
class

period;

the

assets

held

by

plans in the BlackRock TDFs nearly tripled
6,

14.

From
7

2016

to

2022,

the

BlackRock

TDFs' share of total TDF assets increased from nearly eight percent

to

Id.

nine percent.

at

6.

Genworth also

notes

that

Plaintiffs'

own expert, Marcia Wagner, never cautioned any of the plans she or

her company advised to remove the BlackRock TDFs during the Class
Period.

at 7,

12.

(citing ECF No.

217-1

("Wagner Depo.

Tr.")

200:12-19).

Plaintiffs
data

on which

that a "Buy"

at

Genworth

relies.

the

significance

ECF

No.

246 at

of

26.

the

industry

Plaintiffs

26.

And,

there

is

say

Gold" rating from Morningstar

rating from AHIC or a

insulate an investment from removal under the Plan's

does not
Id.

first dispute

evidence

that

the

IPS.

Committee previously

had removed from the Plan for underperformance an investment that
had

also

offer

received

evidence

BlackRock

evidence

TDFs

that

those

that

not

all

favorably

14 7

Id.

ratings.

plans

401(k)

as

did

Additionally,

retirement

Genworth

drop

the

Plaintiffs
viewed

the

pointing

to

plans

suggests,

BlackRock

TDFs

in

2017,

comprising fourteen percent of all plans that held the BlackRock
TDFs

at

that

Second,

time.^

id.

at

Plaintiffs

19,

24.

say that

the

loss causation inquiry is

context specific. Id. at 21. The relevant inquiry is not what other
unspecified plan fiduciaries decided to do, but whether this Plan's
fiduciaries

would

have

retained

the

BlackRock

TDFs

within

the

2 The parties dispute whether these plans dropped the BlackRock TDFs for
performance reasons or for other non-performance reasons such as a plan going
out

of

existence.

ECF

No.

266

at

10-11.

8

context of this Plan's governing documents and the then applicable
circumstances.

Id.

at

22

(citing

761

Tatum,

F. 3d

at

367) .

The

decisions of other unspecified fiduciaries to retain the BlackRock

TDFs is only of limited relevance to what a hypothetical prudent
fiduciary in Genworth's position would do in the context of this
Plan.

Id.

at

21-22.

The Plan's

IPS provided specific criteria to consider when

evaluating the BlackRock TDFs for removal.
expert,

Richard

replacement
standards

Rpt.")

framework

of

M

established

Marin,

the

grounded

IPS.

26-44).

Id.

in

at 24-25

Under

that

Id.

at

24.

Plaintiffs'

an

investment

removal

and

those

specific

policies

and

(citing ECF No.

framework,

Marin

246-3

found

("Marin

that

the

BlackRock TDFs' performance fell below the objectives set forth in
the

Plan's

dropped

IPS,

the

and

therefore,

BlackRock

TDFs

opined that

for

Genworth would have

a better-performing

investment

product had the Committee been adequately monitoring the Plan's
investments. Id. at 25-26. Plaintiffs say that Genworth's focus on

the retirement plan industry as a whole overlooks the performance
criteria explicitly identified in the IPS.
Genworth

responds

that

Marin's

Id.

post

hoc

opinions

stand

against the collective wisdom of the retirement community at the
time in question.
that

the

IPS

ECF No.

included

criteria analogous

266 at

7.

Furthermore,

industry-standard

to other plans,
9

Genworth says

investment

which Plaintiffs'

monitoring
own

expert

Id.

acknowledged.

expected

to

at

act

9-10.

Thus,

differently,

Genworth

under

its

would

not

IPS,

own

have
than

been
other

fiduciaries who were using similar monitoring criteria and data as

Genworth. Id. The same performance metrics were publicly available
and reviewed by prudent fiduciaries across the industry, and still,
those other fiduciaries did not interpret those metrics as a reason

to drop the BlackRock TDFs from their investment offerings.
On this

record,

the

Court cannot

say,

as

Id.

a matter of

law,

that a hypothetical prudent fiduciary in Genworth's position would
have made

the

same

Genworth's

circumstances.

retirement

investment

dispositive of,
against
Plan's

decision to

the

to

the

evidence

community

issue of

the

regarding

is

relevant

loss causation.

broader
but

to.

634

Inc . ,

not

It must be weighed

facts

of

the

case.

That weighing of evidence is

not appropriate at the summary judgment stage. See Pizarro v.
Depot,

the

evidence and expert testimony applying this

Plaintiffs'
IPS

the BlackRock TDFs under

retain

F.

Supp.

3d

1260,

1297

(N.D.

Ga.

Home

2022) {"an

evaluation of their argument requires a weighing of evidence that
is

inappropriate

inferences

in

at

summary

favor

of

judgment.")

Plaintiffs,

Drawing

the

all

Court

reasonable

finds

that

a

reliance

on

reasonable juror could find in favor of Plaintiffs.
Furthermore,

Hall

(E.D.

V.

Va.

Capital

Mar.

1,

the

One

Court

Fin.

2023)

does

not

Corp.,

No.

or Tullgren v.
10

find Genworth's

22-CV-857,

2023

WL

2333304

Booz Allen Hamilton,

Inc.,

No.

22-CV-856,

persuasive.

2023

In

WL

those

2307615

cases,

the

(E.D.

Va.

Mar.

court

found

1.,

that

2023)

the

to

be

plaintiffs

had not plausibly alleged a claim for fiduciary breach based solely
on

the underperformance of the BlackRock TDFs relative to the S&P

Index and
Tullgren,

four Comparator TDFs.
2023 WL 2307615,

2023

Hall,

at *5-6.

WL

2333304,

at

the court held

In those cases,

some

that the BlackRock TDFs underperformance relative to

TDFs at some points during a three- or five-year window,
more,

does

not

outside the
make.

at

f

n

.

suggest

that

offering

the

'range of reasonable judgments'

Hall,

2023 WL 2333304,

at *6;

*5-6;

BlackRock

other

without

TDFs

fell

that fiduciaries may

Tullgren,

2023 WL 2307615,

*6 .

In

this

case,

the

explicitly stated that

facts

are

The

different.

Plan's

IPS

the performance of the BlackRock TDFs is

compare favorably" to the S&P TDF Index and its peer

expected to

ECF No.

ECF No.

10.

simply pointing to a fund with better

So,

Plaintiffs are not

performance

t

tr

as in Hall and Tullgren,

BlackRock TDFs violated the

Hall,

2023

WL

246 at 27;

217-11 at

group of target date funds.

2333304,

at

they are alleging that the

stated criteria

*5;

Tullgren,

in the

2023

WL

And as discussed, compliance with a plan's IPS is
to

loss

causation.

Tatum,

761

F.3d

at

367.

Plan's own IPS.

2307615,
\\

at

*5.

highly relevant

Whether

the

//

BlackRock

TDFs' performance fell below the IPS's stated criteria is a factual

11

question which the parties' experts dispute and is not appropriate
for summary judgment.
Pizarro

2022)

is

v.

Home

similarly

summary judgment

Depot,

In

inapposite.

F.

that

Supp.

material

lacked

would have

concluded that

future.

tt

evidence

the

Id.

3d 1260

case,

to the defendant on loss

plaintiffs

improve in the

634

Inc.,

the

no

1298.

The

granted

showed

the

fiduciary
would

performance

record

Ga.

because

prudent

BlackRock TDFs'

at

court

causation

that

(N.D.

the

that

BlackRock TDFs tracked their custom benchmark throughout the Class

Period, were popular among other large 401(k)
fees,

is

charged low

Id.

and were endorsed by AHIC.

Pizarro

plans,

distinguishable

because

it

applies

a

different
that

burden of proof on loss causation—the plaintiff had to prove
no prudent
1298.

In

the

burden of

made

the

same

however.

the

defendant

fiduciary would have
Fourth

proof

Circuit,

on

loss

causation and must

decision.

Id.

carries

demonstrate

at

the

that a

hypothetical prudent fiduciary would have made the same decision
anyway to

retain

the

challenged

investment.

Tatum,

761

F.3d

at

363. Applying that burden of proof, the Court finds that Genworth's
(similar)

evidence

falls

short

of

the

threshold

for

summary

j udgment.
In

sum,

fact exists

the Court finds that a genuine dispute of material
on

the

issue of

loss

causation.

12

B.

Statute

Genworth
barred

of

Limitations

also

because

contends

the

that

BlackRock

Plaintiffs'

TDFs

allegedly

outside of the six-year limitations period.
u

became

imprudent

217

ECF No.

time-

are

at

17-19.

A breach of fiduciary duty complaint is timely if filed no

than

more

claims

six

years

'the

after

date

of

the

last
or

constituted a part of the breach or violation'

action

'in

the

which

case

of

an omission the latest date on which the fiduciary could have cured
the

525

breach

or

violation.

/

//

Tibbie v.

(2015) (quoting 29 U.S.C.

§

1113) .

Edison

Int'l,

575

U.S.

523,

the plaintiffs

In Tibbie,

sued on behalf of the Edison 401(k) Savings Plan alleging that the

defendants acted imprudently by adding mutual

funds to the plan

with higher fees than materially identical mutual funds which could
have

been

included

The district

three

of

these

instead.

court

Id.

and the

funds were

at

525-26.

Ninth Circuit

initially

held that,

selected

for

the

than six years prior to the filing of the complaint,
were

time-barred under the

statute

of

limitations.

because

plan more

those claims

Id.

at 526-27.

The Supreme Court overruled their decisions because a breach of
fiduciary

duty

selection.

can

occur

not

only

at

the

[a]

plaintiff may allege

prudence

of

investment

but also during the period in which the fiduciary had

a continuing duty to monitor the investments.
\\

time

by

failing

to

Id.

at 528-29. Thus,

that a fiduciary breached the duty of

properly monitor
13

investments

and

remove

imprudent ones.

the

Id.

continuing

at

[S]o long as the alleged breach of

530.

duty occurred within

claim is timely.
Plaintiffs'

six

years

of

suit,

the

the

Id.

claims

fall

within

the

statute

of

limitations

because at least part of the alleged failure to monitor occurred
within the limitations period.
claim

Plaintiffs

as part of its continuing duty to monitor,

that,

should

ECF No. 246 at 28, n.l4.

have

met

to

the

review

BlackRock

Genworth

TDFs'

alleged

underperformance in late 2016 and should have decided to remove
the funds by the first quarter of 2017.
Marin Rpt.

which

H 25.

begins

Complaint was

David V.

on

246 at 28,

n.l4;

Those dates fall within the limitations period
August

1,

2016,

six years

before

the

date the

filed.

Alphin,

on which Genworth relies.
704 F.3d 327

applicable to this case.
the

ECF No.

defendant,

Bank

of

America,

(4th Cir.

allegedly

is

not

2013).

directly

In David,

offered

its

own

affiliated mutual funds in its retirement plan when better options
were

available.

Id.

at

331.

The

initial

selection of

the

Bank

of

America-affiliated mutual funds occurred prior to the limitations

period,
its

so the plaintiffs alleged that Bank of America breached

fiduciary duty of prudence and loyalty by

later failing to

remove or replace those funds for better alternatives.
The

Fourth

Circuit

held that

the

claim

a failure to remove an imprudent investment
14

is

not

\\

Id.

at

341.

truly one

because the

of

"alleged

poor performance
selection.

and high
At

Id.

fees

its

existed

//

core,

the

at

the

claim

time

was

of

initial

simply

another

challenge to the initial selection of the funds to begin with.
which was time-barred.

Id.

The Fourth Circuit,

therefore,

did

decide whether ERISA fiduciaries have an ongoing duty to

\\

tf

not

remove

imprudent investment options in the absence of a material change
in

circumstances.

Id.

ft

This case raises that question that David declined to answer,
and

which

was

later

addressed

in

Tibbie.

It

does

not

involve

a

challenge to an initial imprudent selection of a fund, but rather.
a

failure

existing

to

fund

monitor

and

a

material

respond

to

change

circumstances

in

Genworth's

it.

argument

in

that

an

the

statute of limitations runs from the time the challenged investment
accrues

problematic

attributes

IS

not

supported

by

David's holding. ECF No. 266 at 15-16. Tibbie has since made clear
that the statute of

constituting

that act

the

is the

limitations runs from the

breach.

Tibbie,

575

U.S.

at

last act or omission

530.

In this case.

failure to properly monitor the BlackRock TDFs,

which allegedly occurred, to some degree, within six years of the
initial

suit.

15

CONCLUSION

For

the

foregoing

JUDGMENT

(ECF No.

It

ORDERED.

is

so

213)

DEFENDANT'S

reasons,

MOTION

FOR

SUMMARY

will be denied.

/s/
Robert E. Payne
Senior United States District Judge

Richmond,

Virginia

Date: August m'

2024

16