In Tussey v. ABB, 2015 U.S. Dist. LEXIS 89068 (Western District of Missouri 2015), the Eighth Circuit Court of Appeals had remanded the case back to the District Court (the “Court”) for application of the Firestone abuse of discretion standard to the defendants’ decision to remove the Vanguard Wellington Fund from the PRISM Plan and transfer the plan’s assets to the Fidelity Freedom Funds.
Upon reviewing the case, the Court found that the defendants had abused their discretion in connection with the asset removal. The Firestone abuse of discretion standard means that a court will uphold a fiduciary’s decision relating to asset investment if it is reasonable, measured by whether substantial evidence exists to support the decision. In this case, the removal of the Wellington Fund from the PRISM platform and the mapping of its assets to the Freedom Funds was an abuse of discretion because: (1) it was motivated in large part to benefit Fidelity Trust (the PRISM Plan’s trustee and record keeper) and ABB (the PRISM Plan’s sponsor), not the Prism Plan participants, by producing greater revenue sharing for Fidelity Trust and ABB, (2) there is an absence of substantial evidence (e.g., presence of lower fees) supporting the prudence of the decision to remove and map and (3) ABB had a conflict of interest pertaining to such decision, because Fidelity Trust rendered services to ABB paid for with fees from the PRISM Plan.
However, the Court also found that the plaintiffs failed to prove damages consistent with the method of damage calculation suggested by the Eighth Circuit (that method being, generally, treating the damages as being equal to the difference between the performance of the Fidelity Freedom Funds and the minimum return of the subset of managed allocation funds the ABB fiduciaries could have chosen to invest in those funds without breaching their fiduciary obligations). Therefore, the Court did not award any damages to the plaintiffs.