In McCaffree Financial Corp. v. Principal Life Insurance Company, No. 15-1007 (8th Cir. 2016), McCaffree Financial Corp. (“McCaffree”) was maintaining a retirement plan covered by ERISA. McCaffree brought a class action lawsuit on behalf of those participating employees against Principal Financial Group (“Principal”), the company with whom McCaffree had contracted to provide the plan’s investment options. McCaffree alleged that Principal had charged McCaffree’s employees excessive fees in breach of a fiduciary duty Principal owed to plan participants under ERISA. The district court granted Principal’s motion to dismiss for failure to state a claim. Upon reviewing the case, the Eighth Circuit Court of Appeals (the “Court”) affirmed. Why?
In so affirming, the Court said that, in order to state a claim that a service provider to an ERISA-governed plan breached a fiduciary duty by charging plan participants excessive fees, a plaintiff first must plead facts demonstrating that the provider owed a fiduciary duty to those participants. The Court concluded that the plaintiff fails to do this here, since Principal owed no duty to plan participants during its arms-length negotiations with McCaffree under which the fees were set, and McCaffree did not otherwise plead a connection between any fiduciary duty Principal may have owed and the excessive fees Principal allegedly charged.