In Brotherston v. Putnam Investments, LLC, No. 17-1711 (1st Cir. 2018), plaintiffs John Brotherston and Joan Glancy are two former employees of Putnam Investments, LLC who participated in Putnam’s defined-contribution 401(k) retirement plan (the “Plan”). They brought this lawsuit on behalf of a now-certified class of other participants in the Plan, and on behalf of the Plan itself pursuant to the civil enforcement provision of ERISA. Section 502(a)(2) of ERISA. They claim that Putnam (as well as other Plan fiduciaries) breached fiduciary duties owed to Plan participants by offering participants a range of mutual fund investments that included all of (and, for most of the class period, only) Putnam’s own mutual funds without regard to whether such funds were prudent investment options. They also claim that Putnam structured fees and rebates in a manner that was both unreasonable and treated Plan participants worse than other investors in those Putnam mutual funds.
In a series of rulings before and after plaintiffs presented their evidence at trial, the district court found that plaintiffs failed to prove that any lack of care in selecting the Plan’s investment options resulted in a loss to the Plan, and that the manner in which Putnam transacted with the Plan was neither unreasonable nor less advantageous than the manner in which Putnam dealt with other investors in its mutual funds. Finding several errors of law in the district court’s rulings, the First Circuit Court of Appeals vacated the district court’s judgment in part and remanded the case back to the district court for further proceedings.