(PlanSponsor) - Fiduciary breach allegations against the Mitre Corp. will advance, after a federal judge in Massachusetts ruled in favor of the plaintiffs and denied Mitre’s motions to dismiss the lawsuit.
U.S. District Judge Denise J. Casper, of the U.S. District Court for the District of Massachusetts, ruled in favor of the plaintiffs, ordering the fiduciary breach lawsuit Brown et al v. The MITRE Corporation et al, brought against Mitre for failing to leverage the bargaining power and size of assets in the plan to negotiate lower fees, to proceed. The order dismissed the lead plaintiff, Aaron Brown, from the proposed class action litigation for his failure to demonstrate standing.
Casper found the plaintiffs’ allegations sufficient to proceed and rejected Mitre’s motions to dismiss for failure to state a claim upon which relief can be granted, she wrote in the memorandum and order.
The plaintiffs alleged fiduciary breach of prudence to participants in Mitre retirement plans and alleged failure to adequately monitor other fiduciaries.
“The court finds that the complaint’s factual allegations are sufficient to state a plausible claim of imprudence for [Fiduciary Duty of Prudence (Count I)],” Casper wrote. “The court finds that plaintiffs’ revenue sharing allegations are sufficient to infer imprudence … that plaintiffs’ allegations that the committee failed to conduct an RFP at reasonable intervals are sufficient to infer imprudence [and] the use of the same two recordkeepers for at least fourteen years despite relatively high recordkeeping fees is sufficient to infer imprudence.”
TIAA and Fidelity Investments were the plan’s recordkeepers, beginning in 2006, and were retained through the class period, the order shows.
Casper cited precedent from the 1st U.S. Circuit Court of Appeals, which oversees federal cases brought in Massachusetts, in ruling for the order.
Casper also ruled against the defendants’ motion to dismiss the allegations that the plan improperly used higher-cost share classes of funds when lower-fee, identical investments were available for the plans. Casper also allowed a claim to advance for failure to monitor, according to the court order.
“Given that the court has already determined that plaintiffs alleged sufficient facts to infer that defendants breached the duty of prudence, the court concludes that plaintiffs have also plausibly alleged that they breached their monitoring duties,” Casper stated.
The plaintiffs brought the lawsuit in a 2022 complaint that alleged fiduciary breaches committed in two retirement plans: the Mitre Corp. Tax Sheltered Annuity Plan and the Qualified Retirement Plan.
As of June 2016, the plans had a combined total of at least $3.5 billion dollars in assets, according to the complaint.
Named defendants to the lawsuit are the Mitre Corp., its board of trustees, its investment advisory committee and 30 unnamed individuals.
The proposed class of plaintiffs is represented by attorneys from law firm Capozzi Adler PC, based in Harrisburg, Pennsylvania, and the law office of Jeffrey Hellman LLC in New Haven, Connecticut.
The defendants are represented by attorneys from the law offices of Morgan Lewis, headquartered in Philadelphia.
Casper ordered an initial scheduling conference between the parties to be held on April 3.
By Noah Zuss
March 10, 2023