DENSO International America Faces Multi-Pronged ERISA Suit

Plaintiffs filed a new Employee Retirement Income Security Act lawsuit in the U.S. District Court for the Eastern District of Michigan against DENSO International America Inc., the U.S. division of the global component and technology maker automobiles.

DENSO International America, along with its board of directors and various committees and professionals allegedly responsible for administering the company’s defined contribution pension plan for its employees, are named as defendants in the lawsuit.

Early on, the complaint cites the recent Supreme Court decision in Hughes v. Northwestern University, which concluded that a pension plan fiduciary cannot simply put a large number of investments on his or her menu, some of which may or may not be prudent, and assume that this relieves the plan sponsor of the obligation to monitor and eliminate bad investments. In other words, having a large menu of investments does not in itself protect a plan sponsor from allowing an overly expensive or otherwise imprudent investment to persist, and sponsors cannot hide behind the fact that plan members ultimately choose which funds to invest their money in.

The new complaint suggests that the Hughes means that it has now been established under ERISA that a “hard rule” is inconsistent with the context-specific inquiry required by ERISA, and as such a claimant may allege that a fiduciary has breached the duty of care by failing to properly monitor investments and removing imprudent ones.

“Even in a defined contribution plan where participants are responsible for selecting plan investments, plan trustees are required to make their own independent assessment to determine which investments can be prudently included in the plan’s menu of options. diet,” the complaint reads, again citing Hughes as well as the Supreme Court’s earlier decision in Tibble c. Edison.

“If the trustees fail to remove an imprudent investment from the plan within a reasonable time, the trustees are in breach of their duty of care,” the lawsuit states. “Defendants … are ERISA Trustees because they exercise discretionary power or discretionary control over the 401(k) Defined Contribution Pension Plan – known as the DENSO Retirement Savings Plan – which it sponsors and provides to its employees.”

Specifically, the complaint alleges that, during the putative class action period from May 23, 2016, to the date of judgment, the defendants allowed the plan to pay excessive registrar fees and failed to withdraw their “high-cost archivist”.

“Defendants, as plan trustees, as that term is defined in ERISA Section 3(21)(A), 29 USC § 1002(21)(A), also breached their fiduciary duty. caution in offering unnecessarily expensive investment options, in the form of high-cost share classes and funds, as well as offering an underperforming stable value fund,” the complaint states. objectively unreasonable record keeping and investment, as well as the underperforming stable value fund, cannot be justified by the context and fall outside the range of reasonable judgments that a fiduciary can make based on their experience and his expertise.”

The complaint further alleges that the defendants “unreasonably failed to leverage the size of the plan to pay reasonable fees for the plan’s recordkeeping and investment services.”

The complaint continues, “ERISA’s duty of care applies to the conduct of plan trustees in negotiating recordkeeping fees, as well as the selection and custody of investments, based on that which is reasonable (not the cheapest or average) in the applicable market. There is no need to allege the actual improper fiduciary actions taken, as a claim for breach of fiduciary duty under ERISA can survive a motion to dismiss without well-founded factual allegations relating directly to the methods employed by the ERISA Trustee if the Complaint alleges facts which, if proven, would show that a proper investigation would have disclosed to a reasonable Trustee that the investment in question was improvident.

According to plaintiffs, the allegedly unreasonable recordkeeping fees paid, and the allegedly unreasonable selection and retention of plan investments based on cost and return, “inferentially and plausibly establish that a proper investigation would have disclosed to a reasonable fiduciary that the plan’s investment and the services at issue were improvident. The Complaint suggests that these alleged breaches of fiduciary duty have caused the Named Plaintiffs and Proposed Class Members millions of dollars in harm in the form of lower retirement account balances than they otherwise would have had in the absence of the allegedly unreasonable plan fees and expenses, as well as the absence of the allegedly underperforming Stable Value Fund.

DENSO International America Inc. has not yet responded to a request for comment on the litigation.

The full text of the compliance is here.

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