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Compliance March 26, 2010
Solis Asks Court to Overturn Exelon Excessive Fee Case Decision
March 26, 2010 (PLANSPONSOR.com) - Secretary of Labor Hilda L. Solis has filed an amicus brief asking the 7th U.S. Circuit Court of Appeals to overturn a trial court's dismissal of a class action against Exelon Corp.
Reported by Rebecca Moore
The class action alleged Exelon Corp. breached its fiduciary duties by selecting retirement plan investment options that charged fees that were excessive. U.S. District Judge John W. Darrah of the U.S. District Court for the Northern District of Illinois compared allegations in the Exelon case to those in Hecker v. Deere & Co. and found they were nearly identical (see Hecker Fee Case Prompts Exelon Suit Dismissal ).
According to BNA, Solis argued in the brief that in dismissing the Exelon employees’ Employee Retirement Income Security Act fiduciary duty claims, the trial court required an “unduly high pleading standard” not contemplated by ERISA. Solis’s also contended the lower court misread the 7th Circuit’s ruling in Hecker.
BNA said the secretary argued that the Hecker decision was confined to the facts of that case as presented in the pleadings and the decision was not intended to bar all types of claims in situations where tax code Section 401(k) plan participants claim that plan service providers charged excessive fees in relation to the services provided. “By continually returning to the point that the panel’s opinion was limited to the particular facts as alleged, Hecker clearly and deliberately left the door open for other cases like this one in which the allegations about fees are tied directly to allegations about services,” Solis said in the brief.
Solis argued that the 7th Circuit and U.S. Supreme Court precedent establishes that the federal civil court system operates on a “notice pleading standard,” and the employees’ complaint in this case met that standard because the allegations were sufficient to put the defendants on notice of the claims against them.
“[I]t was not appropriate for the district court to resolve factual issues, such as whether the plaintiffs received additional services for the fees they paid, at this stage in favor of the defendants, particularly as well-pleaded facts are to be construed in the non-moving party’s favor,” the brief said, according to BNA.
In addition, the secretary argued that the district court misread the Hecker decision when the lower court said the outcome of the case against Exelon was controlled by Hecker. “Hecker is not controlling because the participants’ amended complaint distinguishes this case from Hecker in key part. Notably, given the opportunity to clarify its opinion in response to the petition for rehearing, the Hecker panel went out of its way to explain that the decision is narrowly tailored to its facts,” Solis wrote.
Among other things, the secretary argued that the Hecker decision should not be read as establishing, as a legal proposition, that the particular range of fees for the plans’ investment in that case was prudent, without regard to the particular facts, circumstances, and context of each case. “Nothing in ERISA or Hecker establishes that a particular numerical range of fees is either per se prudent or per se imprudent, or authorizes the courts to fashion a simple numerical test, without regard to what evidence actually shows after the plaintiffs have been given an opportunity to present their case at trial or on summary judgment,” the brief said.
