On October 12, 2021, Aon Hewitt Investment Consulting, Inc. (“Aon”) defeated a class action in the Western District of North Carolina brought by nearly 250,000 current and former Lowe’s Companies, Inc. (“Lowe’s”) employees who were participants in Lowe’s 401(k) retirement plan (the “Plan”). Plaintiffs alleged that Aon and Lowe’s breached their fiduciary duties of loyalty and prudence under ERISA to the Plan by directing substantial Plan assets to Aon’s proprietary investment products. Specifically, Plaintiffs asserted that Aon violated ERISA by limiting the menu of investment options available to the participants and by transferring more than $1 billion of Plan assets to its own proprietary fund, the Aon Growth Fund, which allegedly resulted in a substantial loss of investment gains. In April 2021, Lowe’s reached a $12.5 million settlement with the Plan participants, leaving only Aon to stand trial.
Aon managed the Plan from 2009 to 2016 and had selected the Aon Growth Fund as an investment option for Plan participants. In 2015, Aon transferred more than half of the Plan’s total assets to the Aon Growth Fund which ultimately performed poorly, according to the participants. Consequently, Plaintiffs sued both Lowe’s and Aon in 2018, alleging that their imprudent and disloyal actions cost the participants more than $100 million by shifting their investments to the Aon Growth Fund. Plaintiffs further accused Aon of recommending its proprietary fund to Lowe’s for its own financial interests.
Following a five-day bench trial, U.S. District Judge Kenneth Bell ruled in favor of Aon on all claims, concluding that “Aon acted loyally and prudently with respect to its recommendations to change the plan’s investment choices — which were consistent with its industry research and the thinking of other financial consultants — as well as its selection and retention of the Aon Growth Fund in the plan, which was similarly reasonable based on Aon’s investment expertise and legitimate strategic choices.” In so holding, Judge Bell opined that Aon “did not breach its fiduciary duty as an investment advisor to the plan in proposing and encouraging Lowe’s to change the plan’s investment structure and menu of investment options nor did it violate ERISA in its efforts to ‘cross-sell’ its delegated fiduciary services.”
In rejecting Plaintiffs’ argument that Aon breached its fiduciary duty because its proprietary fund did not generate as much growth as other investment options, Judge Bell noted that Plaintiffs’ “hindsight attacks” on Aon’s alleged failure to consider alternative investments based on historical results were “unpersuasive,” acknowledging that the “dynamics of the market could have changed at any time making the Aon Growth Fund not only reasonable but likely more profitable for plan participants.” The court further recognized that the Aon Growth Fund was well-diversified and carried reasonable fees, making it an appropriate choice for the Plan. Based on these findings, the court rendered a bench judgment in Aon’s favor.
The case is Reetz v. Lowe’s Cos., No. 5:18-cv-00075 (W.D.N.C. Oct. 12, 2021).