In a rejection of key arguments advanced in many of the raft of fee lawsuits across the country, U.S. District Judge John Shabaz of the U.S. District Court for the Western District of Wisconsin contended that Deere, Fidelity Management Trust Company, and Fidelity Management and Research Company had followed current laws and regulations regarding retirement plan fee disclosures. Fidelity is trustee and recordkeeper for the farm equipment maker’s 401(k) retirement savings plan.

The four Deere workers, who were seeking class action status for their suit, charged that not only were their plan fees excessive, but Deere and Fidelity failed to disclose to participants information about a revenue sharing setup between the two (See Deere Workers Hit Fidelity with Excessive 401(k) Fee Suit ).

Deere had asked Shabaz to throw out the suit, arguing that it obeyed the law on fee disclosures and was protected by the safe harbor provisions in the Employee Retirement Income Security Act (ERISA). Fidelity Trust asked for dismissal because the workers’ claims were outside what it said was its limited fiduciary role while Fidelity Research contended simply that it was not a fiduciary at all.

“We believe it was the correct ruling,” Fidelity spokesman Vin Loporchio told Reuters.

Plaintiff lawyer Jerome Schlichter, who has spearheaded much of the plan fee legal action, told Reuters: “It is just one event in a process that will be ongoing and will take considerable time.”

Participant Responsibility

In his 18-page ruling, Shabaz asserted that no law or rule compelled Deere or Fidelity to disclose more fee information than they were already disclosing , that participants had to bear some of the responsibility for the Deere plan fees because of their investment choices, and that the safe harbor provisions would, in fact, apply in the case.

“Participants could choose to invest in 20 primary mutual funds and more than 2,500 others through BrokerageLink,” Shabaz wrote. “…Unquestionably, participants were in a position to consider and adjust their investment strategy based in part on the relative cost of investing in these funds. It is untenable to suggest that all of the more than 2,500 publicly available investment options had excessive expense ratios. The only possible conclusion is that to the extent participants incurred excessive expenses, those losses were the result of participants exercising control over their investments within the meaning of the safe harbor provision.”

Shabaz also contended that the plaintiffs were asking the court to go beyond the applicable laws and rules. “The allegedly omitted disclosures are not required by the language of the regulations and would instead require judicial expansion of the detailed disclosure regime crafted by Congress and the Department of Labor pursuant to its statutory authority,” Shabaz wrote. “Furthermore, there is nothing to suggest that receiving this additional non-prescribed information would effectively enhance investment decisions. In assessing the likely return on an investment, the fees netted against the return are certainly relevant, but knowing the subsequent distribution of those fees has no impact on the investment’s value.”

Shabaz turned aside the workers’ argument that Deere and Fidelity requests for the case to be thrown out were in part based on the Deere plan Summary Plan Description (SPD) and prospectuses. Because those documents were not attached to the plaintiffs’ original suit, they should not be the basis for a motion for dismissal, the plaintiffs had argued.

Shabaz blasted the argument as well as the plaintiffs’ original legal complaint. “Although many of the allegations are derived from the documents, they have not been attached to the complaint in an apparent effort to evade assessment of the legal merits of the claims on a motion to dismiss,” Shabaz asserted. “Far from a short and plain statement of claims … , the complaint is a rambling 38-page collection long on legal argument, public policy rhetoric, and repetition, but vague in its allegations of facts which might be relevant to the claims alleged.”