Lack of standing travel (another) excessive expense suit

A federal judge has dismissed an excessive expense lawsuit involving a $7.8 billion 401(k) plan, accepting the argument that the plaintiff participant was not even invested in the funds in question.

Remember, as we noted earlier, the legal standard for surviving a defendants’ motion to dismiss a lawsuit is relatively high. Basically, there must be a failure to state a plausible allegation (not mere speculation) upon which relief may be awarded, while making “all reasonable inferences” in favor of the party that does not seek to dismiss the claim. affair.

Well, in the opinion of Judge Anthony J. Trenga (Morales vs. Capital One Fin. Company., ED Va., No. 1:21-cv-01454, 05/27/22), the case presented by participant-plaintiff Raul Morales (represented by Capozzi Adler,[1] a company that has been very active in these lawsuits lately) was not enough to withstand even this level of scrutiny.

He was apparently persuaded by the facts advanced by the Capital One defendants, who in their motion to support the dismissal of the case explained that if the lawsuit involved three national equity funds[2] available to scheme participants between 2015 and 2020,” however, the applicant has never invested in any of these funds. Instead, since joining the scheme in early 2019, the applicant has always invested his plan assets in a different investment option that the complaint does not dispute.” In other words, no harm, no fault – and therefore no reason to sue.

However, Capital One’s rebuttal didn’t stop there (although it probably could have), but went on to say that even if the lawsuit claimed the funds in question were more expensive than the medians and averages in their investment category and underperformed their peers, the participant-plaintiff here had cited a “single study that courts consistently reject – without identifying any specific investments purported to be prudent alternatives.” Capital One also noted that “…the Complaint separately alleges recklessness based on the assertion that the Plan’s recordkeeping fees were higher – in a single year over the entire alleged Class Period of six years – than the fees allegedly paid by seven other plans,” going on to state that “…even though a handful of other plans paid less in a single year, it doesn’t show recklessness, that is, say that the plan’s fees were outside the range of fees that other plans pay.

They also disputed the comparison of the total alleged charges of the Capital One plan with only the direct charges of the other comparator plans, and that the lawsuit focused “only on the price that different registrars would have charged to other plans, without any service claims. these plans received or how they compare to the services provided by Fidelity to the Capital One plan. The motion goes on to state that “the incomplete valuation says nothing about the reasonableness of the alleged Plan costs, and it certainly does not support the inference that the Plan Trustees’ process was so flawed as to be outside the “range of reasonable judgments” that trustees make.

That said, Judge Trenga gave the plaintiff 14 days to “fix” (amend) his claims for excessive recordkeeping fees.


[1] This is not the first action brought by Capozzi Adler for lack of standing by the participant-plaintiff.

[2] The Northern Small Cap Value Fund, the Fidelity Capital Appreciation Fund and the T. Rowe Price Institutional Large Cap Value Fund. As of 2020, the Plan no longer offers these investment options.

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