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Fujitsu Technology & Business of America Inc. couldn’t convince a federal court in California to dismiss a lawsuit accusing it of breaching fiduciary duties by making imprudent investments in its 401(k) plan ( Johnson v. Fujitsu Tech. & Business of Am., Inc. , N.D. Cal., No. 5:16-cv-03698, 4/11/17 ).
The plan participants’ allegations—including that Fujitsu’s plan was the “most expensive ‘mega plan’ in the country in 2013 and 2014, with expenses three times higher than average for similarly-sized plans with over $1 billion in assets"—were sufficient to survive dismissal, Judge Nathanael M. Cousins said April 11. With his ruling, Cousins denied the motions to dismiss by Fujitsu and its investment adviser Shepherd Kaplan LLC, finding that their arguments were better suited for summary judgment.
So far this year, lawsuits challenging how companies manage their employees’ 401(k) plans have seen some early success, with judges refusing to dismiss claims against Oracle Corp., American Airlines Inc. and Safeway Inc. Other companies, including Intel Corp. and CVS Health Corp., have won early dismissal of lawsuits challenging the investment options in their retirement plans.
Cousins declined to rely on the “extensive” plan documents submitted by both parties, limiting his review to the facts alleged in the participants’ lawsuit.
Fujitsu argued that the participants’ claims should be limited to a three-year limitations period instead of the six-year period they alleged in their lawsuit. Cousins declined to resolve, at this stage of the proceedings, Fujitsu’s timeliness argument, holding that a ruling on that matter would require the court to make factual findings as to when the participants became aware of the disputed transactions.
As to Fujitsu’s argument that the participants didn’t have standing on investment options they didn’t invest in, Cousins said that he would resolve those issues at the class certification stage.
Finally, Cousins found that the participants’ fiduciary breach allegations were sufficient to move on. Some of the allegations included Fujitsu’s failure to monitor fees paid to service providers, to investigate the availability of lower-cost share classes and to imprudently design the plan’s custom target-date funds.
Nichols Kaster PLLP represents the participants. Orrick Herrington Sutcliffe LLP represents Fujitsu. Christopher Browne and Morgan Lewis & Bockius LLP represent Shepherd Kaplan.
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