Yet Another ERISA “Excessive Fee” Lawsuit Is Tossed in the Eighth Circuit

On May 23, 2023, the U.S. District Court for the Western District of Missouri dismissed a putative ERISA class action challenging “excessive” fees in a 401(k) plan. Barrett v. O’Reilly Automotive, Inc., 6:22-cv-03111-BCW (W.D. Mo.). This is the latest in a trend of ERISA lawsuits in the Eighth Circuit that have fallen short of the governing pleading standard set forth in Meiners v. Wells Fargo & Co., 898 F.3d 820 (8th Cir. 2018).

As we discussed here, the Eighth Circuit in Meiners clarified what is necessary to state an ERISA breach-of-fiduciary-duty claim based on allegedly “excessive” 401(k) fees. Specifically, the court held that “a plaintiff must provide a sound basis for comparison—a meaningful benchmark.” Only by comparing the fees of “meaningful benchmark” fund can a plaintiff plausibly allege that the challenged funds were too expensive. In 2022, the Eighth Circuit clarified that plaintiffs also must meet the “meaningful benchmark” requirement to state a viable claim that a plan’s recordkeeping costs are “excessive.” Matousek v. MidAmerican Energy Co., 51 F.4th 274 (8th Cir. 2022).

In Barrett, the plaintiffs alleged that fiduciaries of the O’Reilly Automotive, Inc. Profit Sharing and Savings Plan (the “Plan”) breached ERISA fiduciary duties by allegedly failing to monitor the Plan’s investment management fees and recordkeeping costs. Among other allegations, the Amended Complaint compared the Plan’s recordkeeping costs (allegedly $47-$87 per participant per year) to the costs of 19 comparator plans (ranging from $23-$36 per participant per year). The defendants filed a Rule 12(b)(6) motion and challenged whether the plaintiffs’ 19 comparator plans were truly “meaningful benchmarks,” arguing that they were “cherry-picked” and that plaintiffs had not adequately alleged that recordkeeping costs were excessive “in relation to the specific services” at issue.

At the hearing on the motion to dismiss in May 2023, the Court orally granted the motion, dismissed the case in full, and denied the plaintiffs’ request to file another amended complaint. The court concluded that the plaintiffs failed to plead “meaningful benchmarks” sufficient to pass muster under the Meiners standard.

The plaintiffs have appealed. See Barrett O’Reilly Automotive, Inc., No. 23-2501 (8th Cir.). Look for future updates on this appeal on ERISA Insights.