Record-Keeper Defeats Second Round of Robo-Adviser Fee Litigation

As we reported here, record-keepers for large 401(k) plans have thus far been successful in defending ERISA fiduciary-breach litigation over investment advice powered by Financial Engines.  These lawsuits generally claim that fees collected by record-keepers for investment advice were unreasonably high because the fees exceeded the amount actually paid to Financial Engines.  Plaintiffs in Chendes v. Xerox HR Solutions, LLC were given a second chance to plead their claims, this time alleging that the defendant record-keeper was a fiduciary because it “used its influence” as the plan’s record-keeper to force the plan sponsor to engage Financial Engines—primarily by refusing to use any other investment adviser—and therefore exercised de facto control over the plan’s retention of Financial Engines.  The court rejected the argument that constraining the plan’s service provider choices amounted to de facto control since the plan had other alternatives to choose from (such as not using an investment adviser or changing record-keepers) and dismissed the claim without leave to amend, ending the case at the district court.  The case is Chendes v. Xerox HR Solutions, LLC., Case No. 2:16-cv-1398, ECF No. 63 (E.D. Mich., June 25, 2018).