ICON Clinical Research Sued for Excessive Fees

The text of the new complaint closely resembles others from the increasingly well-known law firm Capozzi Adler, which has filed numerous ERISA excessive fee lawsuits in the past several years.

A new Employee Retirement Income Security Act (ERISA) lawsuit filed in the U.S. District Court for the Eastern District of Pennsylvania levels various fiduciary breach claims against ICON Clinical Research, a provider of outsourced development and commercialization services to the pharmaceutical, biotechnology and medical device industries.

The text of the new complaint closely resembles others from the increasingly well-known law firm Capozzi Adler, which has filed numerous ERISA excessive fee lawsuits in the past several years. In other words, the complaint says the defendants have failed to objectively and adequately review the plan’s investment portfolio with due care to ensure that each investment option was prudent, in terms of cost. The complaint further alleges the plan’s fiduciaries improperly maintained certain funds in the plan despite the availability of identical or similar investment options with lower costs and/or better performance histories. Finally, it alleges the defendants failed to control the plan’s administrative and recordkeeping costs.

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Based on this alleged conduct, the plaintiffs assert claims against the defendants for breach of the fiduciary duty of prudence and for failure to monitor fiduciaries.

Another feature the new complaint has in common with suits filed previously by Capozzi Adler is its reliance on comparing the plan’s expenses for investments and administration services with a group of alleged peers who, according to the complaint, pay less for similar services.

“As of 2019, the plan is ranked as having one of the highest overall plan costs of any plan with over $500 million in assets under management [AUM],” the complaint states. “The median total plan cost for a plan between $250 million and $500 million is 0.43% of total assets in a plan. Here, the total plan costs during the class period ranged from a high of 0.78% in 2015 to 0.69% in 2019.”

It’s important to note that such claims have met varying levels of success across the federal court system, based mainly on the degree to which a given complaint establishes that an imprudent fiduciary management process was potentially in place. In other words, it is not enough for a potential class of plaintiffs to merely point out that its plan has relatively expensive investments or administrative fees relative to its peers. (See Davis v. Salesforce and Kurtz v. Vail Corp.)

This is likely why the complaint seeks to establish that the allegedly excessive fees were only paid due to a lack of care and diligence on the part of the plan’s fiduciaries.

“Another indication of defendants’ failure to prudently monitor the plan’s funds is that the plan retained 11 mutual funds—having more than $156 million in participant assets as of 2019—as plan investment options despite the fact that these funds charged grossly excessive fees compared with identical, comparable and/or superior alternatives, and despite ample evidence available to a reasonable fiduciary that the costs associated with these funds were imprudently high,” the complaint states. “Out of the 24 mutual funds in the plan in 2019, 11 of them, or more than 45%, remained unchanged since 2013. Failure to remove or change imprudent funds to less expensive share classes or cheaper cost structures over the course of several years is a clear indication that defendants were not monitoring the plan’s funds as they should have been.”

The full text of the complaint is available hNesbethvIconClinicalResearchComplainthere.

Claims Over Fidelity’s Use of Participant Data Dismissed

A federal judge determined participant data is not considered plan assets, meaning Fidelity was not a fiduciary with regard to the claims.

Fidelity Investments Institutional Operations Co. Inc. (FIIOC), recordkeeper for the Shell Provident Fund 401(k) Plan, has succeeded in getting claims against it dismissed in an Employee Retirement Income Security Act (ERISA) excessive fee lawsuit.

The lawsuit, filed in January 2020, named other Fidelity defendants, including FIIOC’s parent, FMR LLC, and four other FMR LLC subsidiaries. The lawsuit alleged that Fidelity breached its ERISA fiduciary duties and engaged in prohibited transactions by sharing information it maintained about the 401(k) plan participants with various Fidelity affiliates. The lawsuit accused those affiliates of then using the participant data to solicit the purchase of non-plan-related retail financial products and services. According to the plaintiffs, Fidelity derives substantial revenue from the use of this data, through the sale of individual retirement accounts (IRAs), high-interest credit cards, life insurance, banking products, advisory accounts, individual brokerage accounts, options trading accounts, 529 accounts and other retail products and services.

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The plaintiffs allege that the participant data is considered a “plan asset” under ERISA, which makes FIIOC a fiduciary and makes profiting from the data a violation of its fiduciary duties.

Judge Jeffrey Vincent Brown, of the U.S. District Court for the Southern District of Texas, said for that allegation to be true, he would first have to find that participant data is considered a plan asset under ERISA. He looked to the plain text of the statute and said he found ERISA provides that “the term ‘plan assets’ means plan assets as defined by such regulations as the secretary [of Labor] may prescribe.” When looking at the DOL’s regulations defining “plan assets,” Brown noted that it provides that “the plan’s assets include its investment,” but makes no mention of any data.

Looking at a second regulation focusing on “participant contributions” to the plan, he found that it likewise fails to mention data.

“Neither of the promulgated regulations either expressly or by any plain-language interpretation includes participant data as plan assets under ERISA,” Brown wrote in his opinion. He also noted that the view that participant data does not amount to a “plan asset” under ERISA aligns with how other courts have ruled on this question.

Finding that participant data is not a plan asset, Brown also dismissed a claim that Fidelity engaged in ERISA prohibited transactions.

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