Prudential, Captrust win 401(k) fiduciary breach lawsuit

The judge dismissed claims of fiduciary breach under ERISA, largely falling in line with judgments from similar cases

Jan 4, 2017 @ 4:48 pm

By Greg Iacurci

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Prudential Financial and CAPTRUST Financial Advisors have defeated allegations of fiduciary breach in a 401(k) lawsuit against the two companies and the employer sponsoring the retirement plan.

Connecticut district court judge Victor A. Bolden granted requests from the defendants to dismiss the class-action lawsuit because the plaintiff, a plan participant, failed to state a claim, according to a decision filed Dec. 30 in Rosen v. Prudential Retirement Insurance and Annuity Co. et al.

Plaintiff Richard A. Rosen argued Prudential, the record keeper for the $1.3 billion Ferguson Enterprises Inc. 401(k) plan, breached its fiduciary duties by engaging in self-dealing when servicing the plan.

Prudential allegedly did this through receipt of revenue-sharing payments and including its GoalMaker asset-allocation product in the plan, which supposedly steered participants into “high-cost investment options to the benefit of Prudential,” according to the court document.

Prudential argued it couldn't be held liable for fiduciary breach under the Employee Retirement Income Security Act of 1974 because it wasn't acting as a fiduciary with respect to the alleged conduct, an argument Judge Bolden supported.

“Prudential cannot be held liable under ERISA for breach of fiduciary duties or prohibited transactions with respect to its selection of investment options, determination of compensation, administration of the GoalMaker program, or alleged securities lending activities,” the judge wrote. “Plaintiffs have failed to plausibly plead any ERISA violations with respect to these activities, and any related claims are dismissed for failure to state a claim.”

Laura Burke, a Prudential spokeswoman, declined to comment on the lawsuit. Ronald Kravitz, an attorney at Shepherd Finkelman Miller & Shah representing the plaintiff, didn't return a request for comment.

The lawsuit was originally filed in December 2015. In May, the case was consolidated with a similar action, Muir v. Prudential Retirement Insurance and Annuity Co.

Duane Thompson, senior policy analyst at fiduciary consulting firm fi360 Inc., said the judge's decision is largely “in the mainstream” when looking at decisions from similar cases involving insurance companies.

CapFinancial Partners, which does business as CAPTRUST, was the investment adviser to the Ferguson Enterprises retirement plan that ultimately selected Prudential as the record keeper.

The plaintiff had claimed CapFinancial and the employer had breached their fiduciary duties by choosing “an overly expensive menu of investment options and by failing to monitor Prudential in its administration of these various plans and investments,” according to the court document.

However, the judge dismissed these allegations, essentially saying they “were too vague,” Mr. Thompson said.

Prudential and CAPTRUST are among several financial services companies that have been sued within the past year or so for alleged fiduciary breach in 401(k) plans.

Others include Voya Financial, Fidelity Investments, Neuberger Berman, Franklin Templeton, New York Life Insurance Co., American Century Investments, Edward Jones and Morgan Stanley, some of which were sued for conduct within their own company plans.


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