On January 19, 2010, the US Supreme Court denied plaintiffs’ petition for a writ of certiorari in the Hecker v. Deere & Co. 401(k) fee case. (see Expect Focus, Vol. II , Spring 2009). The Court’s denial marks the latest–and, most likely, ultimate–defeat for the plaintiff retirement plan participants in this putative class action originally filed in December 2006 in the Western District of Wisconsin.
In February 2009, a Seventh Circuit panel affirmed the district court’s dismissal of plaintiffs’ complaint alleging breach of fiduciary duty claims under ERISA. The plan participants’ claims were brought against the plan sponsor (Deere), the plan recordkeeper (Fidelity Management Trust), and the investment adviser to the mutual funds offered in the Deere plan (Fidelity Management & Research). While the claims against Deere focused on its alleged imprudence in selecting allegedly higher-cost “retail” mutual funds rather than institutional funds, the claims against the Fidelity defendants were directed to their allegedly improper receipt and distribution of “revenue sharing” fees drawn from the asset-based charges imposed on fund shares.
In affirming the dismissal as to Fidelity, the panel held that revenue sharing fees are not plan assets for purposes of ERISA’s fiduciary rules and need not be disclosed where the total fees charged by each mutual fund are disclosed. Moreover, despite the Department of Labor’s amicus support for plaintiffs, the panel held that plaintiffs failed to state a fiduciary breach claim against Deere and, in any event, Deere was protected by ERISA’s section 404(c) safe harbor because Deere provided plan participants with a sufficient mix of investment options with varying fees. After the Seventh Circuit denied plaintiffs’ requests for panel rehearing and rehearing en banc, plaintiffs petitioned the Supreme Court for review of the panel’s affirmance of the Deere dismissal, but not the Fidelity dismissals. Despite the ostensibly narrowed request, the Court denied the petition.