Fidelity Self-Dealing Case to Go to Trial on Zoom

The trial for an Employee Retirement Income Security Act (ERISA) lawsuit against Fidelity will proceed July 6 as a Zoom video conference.

In a letter to U.S. District Judge William G. Young in the U.S. District Court for the District of Massachusetts, attorneys for both sides noted that the liability issues in the case were previously decided by Young on a case stated basis. In a case stated decision, the parties waive trial and present the case to the court on the undisputed facts in the pre-trial record. The court is then entitled to engage in a certain amount of fact finding, “including the drawing of inferences.”

Young’s previous ruling focused on answering important threshold questions as to whether Fidelity’s actions in the operations of its retirement plan violated ERISA—thereby establishing liability but not causation or loss. He found that Fidelity breached its duty of prudence by failing to monitor its mutual fund investments and by failing to monitor/control recordkeeping expenses. He said Fidelity, however, had not breached its duty of prudence by failing to investigate alternatives to those mutual funds because a prudent fiduciary would not be required to conduct those specific investigations.

Young also found that Fidelity had not engaged in prohibited transactions because its dealings with proprietary products were no less favorable to the plan as a whole than to other shareholders of Fidelity funds. The ruling stated that one defendant—FMR LLC—is liable for the breach of its duty to monitor the plan fiduciaries “with regards to their ongoing handling of the mutual fund investments and recordkeeping expenses.” Young also ruled that the plaintiffs “may recover from Fidelity entities for any profits traceable to the aforementioned breach of the fiduciary duty to monitor.”

In their letter, the attorneys suggested ways to help streamline the trial and to eliminate all or significant parts of the testimony of several witnesses. According to the court docket, Young treated the letter as a joint motion to amend the pre-trial order, and allowed the motion. He instructed the parties to inform the court of the reduced number of trial days now necessary for receiving evidence and arguments.

The progress in the case provides evidence of how ERISA lawsuit activity is continuing despite court lockdowns caused by the COVID-19 pandemic. Jamie Fleckner, partner at Goodwin Procter in Boston, previously told PLANSPONSOR, “Many judges, even before the outbreak, were sometimes deciding motions what they call ‘on the papers’ without lawyers coming in to present oral argument. They are doing so exclusively now.”

He said judges are either coming up with creative ways to keep cases moving or are continuing their own practice of not seeing lawyers until trial. Fleckner added that much of what an expert witness does happens before trial. The attorneys in the Fidelity case said in their letter that the defendants would provide the relevant portion of the supplemental report of their damages expert prior to the trial start date.