United States District Court, W.D. Missouri, Western Division
ORDER GRANTING IN PART DEFENDANTS' MOTION FOR
KAYS, CHIEF JUDGE
case involves claims for breach of fiduciary duty and
prohibited transactions pursuant to the Employee Retirement
Income Security Act of 1974 (“ERISA”), 29 U.S.C.
§ 1001 et seq. Plaintiffs Steve Wildman
(“Wildman”) and Jon Borcherding
(“Borcherding”), participants in the American
Century Retirement Plan (the “Plan”) established
by American Century Investment Management, Inc.
(“ACIM”), bring this suit, on their own behalf,
and on behalf of a class of participants in the Plan, against
Defendants American Century Services, LLC
(“ACS”), ACIM, American Century Companies, Inc.
(“ACC”) (ACIM, ACS, and ACC collectively
“American Century”), the American Century
Retirement Plan Retirement Committee (the
“Committee”), and past and present members of the
Committee,  seeking damages and declaratory and
before the Court is Defendants' motion for summary
judgment (Doc. 145). For the following reasons, the motion is
GRANTED in part and DENIED in part.
Century is a financial services company primarily offering
mutual funds and other investments to retirement plans and
other investors. Plaintiffs Wildman and Borcherding are
former employees of American Century and Plan participants.
Plan is a defined contribution,
“401k” plan that allows participants to
contribute a percentage of their earnings and invest those
contributions in one or more investment options offered by
the Plan. Additionally, American Century makes contributions
into these accounts in the form of voluntary matching
contributions and discretionary profit-sharing contributions.
sponsors the Plan for current and former employees of
American Century. As the Plan Sponsor, ACS appointed the
Committee to assist in administering the Plan. ACIM manages
American Century's investment products and to the extent
the Plan offers American Century mutual funds, ACIM is the
manager of those mutual funds. Both ACS and ACIM are
subsidiaries of ACC. ACS and the Committee are Plan
Committee is responsible for supervising, monitoring, and
evaluating the performance of the Plan. The Committee held
regular meetings to discuss performance of the investment
options offered in the Plan, the Plan's fees, investment
options on the “watch list, ” and other relevant
information. When the Committee sought to make changes to the
Plan, they reviewed the proposed changes with American
Century senior management.
the relevant time, American Century offered 106 mutual funds
to its customers; a subset of which were included in the
Plan's lineup of investment options. During the class
period, the Plan offered between 33 and 46 investment
options. Other than American Century mutual funds,
the Plan included six American Century Collective Investment
Trusts (“CIT”), and a self-directed brokerage
account (“SDBA”). The SDBA includes American
Century and non-American Century investment options including
index mutual funds, exchange traded funds, and individual
stocks and bonds.
the Plan, there are two categories of expenses,
administrative expenses and investment management expenses.
Administrative expenses are expenses used to pay for services
such as recordkeeping and accounting. Investment management
expenses are fees charged by the investment manager. ACIM, as
the investment manager of the American Century mutual funds,
charges a management fee for its services. This fee is paid
from each mutual fund's assets. This fee can vary by
mutual fund and by share class within each mutual fund. The
Plan paid the same fee as other shareholders.
party service providers like recordkeepers can be paid on a
per-participant basis or through revenue sharing. In a
revenue sharing compensation model, the fee for the
recordkeeper is based on a percentage of the assets,
resulting in a larger payment as asset levels increase. In
some instances, the recordkeeper then “rebates” a
portion of those fees back to the retirement plan. Those
rebates can be used to pay for services like third-party
consultants, plan audits, or paid back to plan participants.
Plan used a revenue sharing compensation model to pay its
recordkeeper, J.P. Morgan Retirement Plan Services LLC
(“J.P. Morgan RPS”) until February 2012. After
that time, American Century paid all of the Plan's
recordkeeping fees on a per-participant basis. The fee paid
to J.P. Morgan RPS was $125 per-participant per year. Even
though J.P. Morgan RPS was not compensated through revenue
sharing for shares held by the Plan, American Century did
make revenue sharing payments in connection with shares held
by other retirement plans.
November 21, 2013, American Century replaced J.P. Morgan RPS
with Schwab Retirement Plan Services, Inc. (“Schwab
RPS”). As to the Plan, Schwab RPS was paid on a
per-participant basis but as to shares held by other
retirement plans, American Century compensated Schwab RPS
through revenue sharing.
Committee hired a consultant to review the Plan and produce a
benchmarking report (the “Hewitt Report”), and in
November 2010, the Hewitt Report was presented to the
Committee. It made several findings: (1) the Plan offered 38
investment options and the average plan offered 14 options;
(2) the Plan offered more proprietary funds than the plans of
other financial services organizations; (3) the Plan did not
offer a stable value fund, although 83% of plans did offer
that type of fund; (4) the Plan offered two money market
funds, although only 37% of plans include a money market
fund; (5) the Plan's investment management fees were $963
per-participant, while the average investment management fee
for similar sized plans was $172 per-participant; and (6) the
Plan had a high percentage of active funds.
Hewitt Report suggested the Committee review the use of
passive options and assess overlapping funds within an asset
class, noting there were ten large cap equity options within
the Plan. The report also suggested the Committee add a
stable value fund to the Plan's core lineup. At that
time, American Century did not offer a stable value fund.
None of the Committee members could recall a discussion to
offer a stable value fund after reviewing the recommendations
made in the Hewitt Report.
the Hewitt Report presentation, the Committee decided to
reduce the investment options in the Plan. Initially, the
Committee proposed removing eleven funds. Ultimately, the
Committee removed five funds, one fund was one of the ten
large cap equity funds and one fund from the watch list. In
2011, the Committee replaced fifteen mutual funds with six
CITs. Except for the five funds that were removed, no other
investment options were removed from the Plan during the
class period except for closures of an investment fund or the
introduction of a CIT that matched the investment strategy as
a mutual fund in the Plan.
the class period, the Committee received ten requests from
asset managers to add particular funds, all of which were
declined except for one, the American Century Strategic
Inflation Opportunities Fund, a newly launched fund. In
particular, in 2011, an American Century asset manager
contacted the Committee requesting it to add the Global Real
Estate Fund. The Committee declined to add the fund because
it was duplicative to another offering.
8, 2015, Schwab RPS presented another benchmarking study to
the Committee. The report stated that other plans of
investment firms that offered non-proprietary funds had an
average of 6.3 index funds in the plan's investment
lineup, and that plans of investment firms that offered
primarily proprietary funds had an average of 4.1 index funds
in the plan's investment lineup. On September 12, 2016,
the Committee added five Vanguard passively managed index
funds to the Plan's core lineup.
judgment is appropriate if, viewing all facts in the light
most favorable to the non-moving party, there is no genuine
dispute as to any material fact, and the moving party is
entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a);
Celotex Corp. v. Catrett, 477 U.S. 317, 322-23
(1986). The party seeking summary judgment bears the burden
of showing that there is no genuine dispute as to any
material fact. Celotex Corp, 477 U.S. at 323.
Summary judgment is only appropriate when “there is no
dispute of fact and where there exists only one
conclusion.” Crawford v. Runyon, 37 F.3d 1338,
1341 (8th Cir. 1994) (citation omitted).
disputes over facts that might affect the outcome of the suit
under the governing law will properly preclude the entry of
summary judgment. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986). Factual disputes that are
irrelevant or unnecessary will not be counted. Id.
“[I]n ruling on a motion for summary judgment, the
nonmoving party's evidence ‘is to be believed, and
all justifiable inferences are to be drawn in [t]hat
party's favor.'” Hunt v. Cromartie,
526 U.S. 541, 552 (1999).
Amended Complaint alleges five counts under ERISA. Count I
asserts ACS, ACIM, the Committee, and the Committee Members
(collectively “Fiduciary Defendants”), breached
their duties of loyalty and prudence, in violation of 29
U.S.C. § 1104(a)(1)(A)-(B). Count II alleges ACS
breached its duty to monitor ACIM, the Committee, and
Committee members who allegedly caused losses to the
Plan. Counts III and IV allege Defendants
American Century, ACIM, and ACS engaged in prohibited
transactions, in violation of 29 U.S.C. § 1106(a)(1) and
(b). Count V is a claim for other equitable relief based on
ill-gotten proceeds, 29 U.S.C. § 1132(a)(3).
argue they are entitled to summary judgment on all of
Plaintiffs' claims because Plaintiffs lack evidence to
support their allegations. The Court discusses each claim
There are disputes of material fact preventing summary
judgment on Count I - Breach of Fiduciary
I, alleges Fiduciary Defendants failed to employ a prudent
and loyal process for selecting, monitoring, and reviewing
the Plan's core lineup by: failing to consider
investments from companies other than American Century;
failing to promptly transfer to lower-cost R6 share classes
of American Century Funds; and by allowing the Plan to pay
imposes the duties of loyalty and prudence on fiduciaries.
Tussey v. ABB, Inc., 746 F.3d 327, 335 (8th Cir.
2014). To sustain a claim for breach of fiduciary duty, a
plaintiff has the burden to show the defendant breached its
fiduciary duties and a prima facie case of loss to the plan.
Pegram v. Herdrich, 530 U.S. 211, 225-26 (2000);
Roth v. Sawyer-Cleator Lumber Co., 16 F.3d 915, 917
(8th Cir. 1994) (Roth I). “Once the plaintiff
has satisfied these burdens, ‘the burden of persuasion
shifts to the fiduciary to prove that the loss was not caused
by . . . the breach of duty.'” Roth I, 16
F.3d at 917 (quoting Martin v. Feilen, 965 F.2d 660,
671 (8th Cir. 1992)). In other words, the burden shifts to
the defendant to show a prudent fiduciary would have made the
same decision. Id. at 919 (“Even if a trustee
failed to conduct an investigation before making a decision,
he is insulated from liability if a hypothetical prudent
fiduciary would have made the same decision anyway.”).
argue Plaintiffs cannot establish the elements of a breach of
fiduciary duty claim,  specifically that there is no evidence
that Fiduciary Defendants acted disloyally, that the
investment options were imprudent, or that Fiduciary
Defendants' conduct resulted in a loss to the Plan.
There are material facts in dispute as to whether
Defendants' conduct met the prudent
ERISA, fiduciaries are required “to act ‘solely
in the interest of [plan] participants and beneficiaries'
and to carry out their duties with ‘the care, skill,
prudence, and diligence under the circumstances then
prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an
enterprise of a like character and with like
aims.'” Braden v. Wal-Mart Stores Inc.,
588 F.3d 585, 598 (8th Cir. 2009) (alterations in original)
(quoting 29 U.S.C. § 1104(a)(1)). “Section
's prudent person standard is an objective standard
that focuses on ...