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Court revives ERISA suit against Washington University

A federal appeals court has revived part a suit in which employees of Washington University in St. Louis alleged the university mismanaged their retirement savings plan.

On May 22, a three-judge panel of the U.S. 8th Circuit Court of Appeals unanimously reversed part of a lower-court ruling dismissing the suit.

The ruling came in the case of Latasha Davis, Jennifer Elliott and Marla Aliece Sims-King, who filed a putative class action suit against the university and its board of trustees in June 2017 in the U.S. District Court for the Eastern District of Missouri.

The plaintiffs, all participants in the university’s retirement plan, alleged two counts of breach of fiduciary duty under the Employee Retirement Income Security Act, or ERISA.

In September 2018, U.S. District Judge Ronnie L. White dismissed the case for failure to state a claim. The plaintiffs appealed.

According to the order, written by Judge David R. Stras, the plaintiffs’ suit is one of a series of lawsuits filed against some of the largest universities in the United States, alleging mismanagement of retirement plans.

Wash U’s plan includes 24,000 participants and has $3.8 billion in assets, making it one of the largest of its kind nationally, Stras said. It is a defined-contribution plan, which allows for contributions from the employee, the employer or both.

The plaintiffs alleged that the university allowed fees to get out of control and that it kept several underperforming investments in the plan for too long.

Stras noted that the case was only at the pleading stage when it was dismissed. To proceed, the complaint needed only to give the district court enough to infer from what is alleged that the process by which the university made retirement-plan decisions was flawed, he said.

“The first claim clears this pleading hurdle,” he said. “It alleges that fees were too high and that Wash U should have negotiated a better deal.”

Judges Jane Kelly and Michael J. Melloy concurred.

Stras said the court reached the opposite conclusion on the plaintiffs’ second claim regarding three specific investment options. In that claim, he said the plaintiffs alleged the university should have “jettisoned” the plans for their poor performance and for costing too much.

In order to proceed on that claim, he said, the plaintiffs were required to provide in their complaint a sound basis for comparison — a meaningful benchmark. The court ruled that the plaintiffs’ allegations failed to establish a meaningful benchmark for evaluating the three investment options.

Todd S. Collins, managing shareholder at Berger Montague in Philadelphia, Pennsylvania, represented the plaintiffs.

“We are pleased by the court’s ruling and we look forward to taking discovery and moving the case on toward trial,” he said.

Brian T. Ortolere of Morgan, Lewis & Bockius also in Philadelphia, represented the university and its board. He did not respond to messages seeking comment.

The case is Davis et al. v. Washington University in St. Louis et al., 18-3345.