Employees of Deloitte LLP brought a putative class action under the Employee Retirement Income Security Act (ERISA) against the firm and its plan fiduciaries. The plaintiffs alleged that the fiduciaries breached their duty of prudence by failing to negotiate lower administrative and recordkeeping fees for the company's 401(k) plan. They claimed the plan paid significantly higher per-participant fees than comparable large plans, despite Vanguard providing similar services. The district court initially dismissed the complaint but allowed the plaintiffs to file a First Amended Complaint (FAC). After reviewing the FAC, the district court denied leave to amend on futility grounds, concluding the new allegations still failed to plausibly allege imprudence. The Second Circuit now reviews the denial of the motion to amend de novo.
The Second Circuit applied the standard from *Fifth Third Bancorp v. Dudenhoeffer* and *Ashcroft v. Iqbal*, requiring plaintiffs to plead sufficient factual matter to support a plausible inference that a prudent fiduciary would have acted differently. The court emphasized that the duty of prudence is context-specific and that the cheapest option is not necessarily the prudent one. The court found the FAC deficient because it relied on conclusory allegations that 'nearly all recordkeepers offer the same range of services' without providing specific facts to support that assertion. The plaintiffs failed to compare the type and quality of services provided by the Deloitte plan against the comparator plans. Furthermore, the court noted the comparison was flawed because the FAC compared direct costs of the Deloitte plan against direct costs of comparators, ignoring indirect costs which plaintiffs had previously alleged were part of the total fee. The court also rejected the plaintiffs' reliance on a market survey and a stipulation from an unrelated case, finding these lacked the necessary context to serve as a meaningful benchmark. Unlike the complaint in *Mator v. Wesco Distribution*, which provided specific details on identical services and price drops, the FAC here offered no facts showing that the services were comparable or that the fee disparity indicated imprudence. Consequently, the court held that the claim remained in the realm of possibility rather than plausibility.
The dismissal of the case is final, and plaintiffs are barred from filing further amended complaints as such amendment would be futile. This decision reinforces the high pleading bar for ERISA excessive fee cases, requiring plaintiffs to provide detailed, context-specific comparisons of services and costs rather than general assertions of price disparity. It signals that courts will not infer imprudence from fee differences alone without evidence that the services provided were identical or that the fiduciary ignored available, cheaper, and comparable alternatives.
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