The Supreme Court recently granted the writ of certiorari requested by Northwestern University retirement plan participants, following the Solicitor General’s plea for the Court to hear the case.  Hughes v. Northwestern Univ., No. 19-1401, 2021 U.S. LEXIS 3583 (July 2, 2021). The certiorari petition phrased the question presented as: “[w]hether allegations that a defined-contribution retirement plan paid or charged its participants fees that substantially exceeded fees for alternative available investment products or services are sufficient to state a claim against plan fiduciaries for breach of the duty of prudence under ERISA.”

In Hughes, the plan participant-plaintiffs alleged that Northwestern breached the duty of prudence by (1) paying excessive recordkeeping fees (by using multiple recordkeepers and allowing recordkeeping fees to be paid through revenue sharing) and (2) offering mutual funds with excessive investment management fees.

The district court granted defendants’ motion to dismiss, and the Seventh Circuit affirmed. Finding no ERISA violation with respect to Northwestern’s recordkeeping arrangement, the Seventh Circuit noted that ERISA does not require a sole recordkeeper, and there is “nothing wrong – for ERISA purposes – with plan participants paying recordkeeper costs through expense ratios” under a revenue sharing agreement.

As for the excessive investment management fee claim, the Seventh Circuit concluded that the types of funds plaintiffs wanted (low-cost index funds) were and are available to them, thus “eliminating any claim that plan participants were forced to stomach an unappetizing menu.” The Seventh Circuit emphasized that Northwestern had provided the plans “with a wide range of investment options” and offered “prudent explanations for the challenged fiduciary decisions.”

The Solicitor General argued that the Seventh Circuit’s decision is incorrect and that its decision conflicts with decisions in the Third and Eighth Circuits. Northwestern argued no circuit conflict exists; instead the circuits “simply reached different results on different complaints.”

The Supreme Court’s order granting the writ of certiorari noted that Justice Barrett took no part in the consideration of this petition. Justice Barrett did not participate because she was a judge on the Seventh Circuit at the time the Seventh Circuit issued its decision. Regardless how the Supreme Court ultimately rules in this case, it is certain to have a significant impact on the more than 127 retirement plan fee class actions that have been filed since January 2020.

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Photo of René E. Thorne René E. Thorne

René E. Thorne is co-leader of the firm’s ERISA Complex Litigation group, and is a principal in the New Orleans, Louisiana office of Jackson Lewis P.C. René started the New Orleans office and was the managing principal for ten years.

Her national practice…

René E. Thorne is co-leader of the firm’s ERISA Complex Litigation group, and is a principal in the New Orleans, Louisiana office of Jackson Lewis P.C. René started the New Orleans office and was the managing principal for ten years.

Her national practice covers the full range of complex benefit litigation matters, including representation of employers, plans, plan fiduciaries, third party administrators, and trustees. In that regard, she has handled numerous ERISA class actions alleging breach of fiduciary duty; breach of the duty of loyalty; prohibited transactions; 401(k) plan asset performance, fees, and expense issues; defined benefit plan asset issues, accrual issues, and cut-back issues; cash balance plan issues; ESOP litigation; fiduciary misrepresentation claims; sophisticated preemption issues; executive compensation litigation, both pension and welfare claims; retiree rights litigation; severance plan claims; Section 510 cases; and complex benefit claim cases.

During the course of her national practice, she has been admitted pro hac vice in courts across the country, including Alabama, the District of Columbia, California, Florida, Illinois, Massachusetts, Michigan, Mississippi, Nevada, New Jersey, New York, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, and Wisconsin.

René also has been retained in complex ERISA breach of fiduciary duty, prohibited transaction, and cash balance cases. René has been qualified and testified on ERISA matters in federal court.

René is active on the Employee Benefits Subcommittee of the Labor and Employment Section of the American Bar Association, and was a management co-chair of the Employee Benefits Subcommittee Newsletter. She is a past instructor for the National Institute for Trial Advocacy, and a former barrister in the Thomas More Inn of Court.

While attending Loyola University School of Law, René was a member of the Loyola Law Review and Moot Court.