The ERISA Litigation Explosion
ERISA fiduciary breach litigation — particularly excessive fee cases targeting 401(k) plan sponsors — has become one of the most active areas of federal civil litigation over the past decade. From a handful of cases in the mid-2000s, the docket has grown to hundreds of active cases at any given time, targeting companies ranging from major corporations to small nonprofits and universities.
The Supreme Court's decisions in Tibble v. Edison International (2015) and Hughes v. Northwestern University (2022) have repeatedly reaffirmed broad fiduciary duty principles that make plan sponsors vulnerable, while simultaneously giving defendants meaningful procedural tools. Understanding how courts are applying these decisions is essential for attorneys on both sides of the bar.
Excessive Fee Claims: The Core Theory and Its Evolution
The foundational theory in most 401(k) excessive fee cases is straightforward: ERISA's prudent investor standard requires plan fiduciaries to ensure that plan fees are reasonable in light of the services provided. When recordkeeping fees, investment management fees, or revenue sharing arrangements exceed what a prudent fiduciary would have negotiated, participants have a claim for breach.
The litigation landscape has evolved significantly since the early wave of cases:
- Courts are now more sophisticated about the distinction between process challenges (was the fiduciary's decision-making process sound?) and outcome challenges (were the fees actually reasonable?) — process-focused defenses have become more important
- The "meaningful benchmark" requirement for pleading has been refined — plaintiffs must plead facts supporting a comparison to genuinely comparable plans
- The emerging wave of litigation targets not just fees but investment menu construction — specifically, whether plans offered too many underperforming proprietary funds
Standard of Review: The Threshold Battle
For benefit denial cases (as distinct from fiduciary breach cases), the standard of review remains critically important. When a plan grants the administrator discretionary authority, courts apply abuse of discretion review rather than de novo review — a substantially more deferential standard that changes both litigation strategy and settlement value.
Post-MetLife v. Glenn, courts examine whether structural conflicts of interest affected the administrator's decision even under deferential review. In the Ninth Circuit and some others, structural conflict of interest is a factor that can shift the effective standard of review toward something closer to de novo scrutiny. Identifying and developing the conflict of interest record is essential in cases where the plan document grants discretion.
Class Certification in ERISA Cases
ERISA fiduciary breach cases are frequently litigated as class actions. The class certification analysis under Rule 23 in ERISA cases has developed distinct features:
- Commonality is generally easier to establish in fee cases where the same fees were charged to all participants
- The predominance inquiry focuses on whether common questions — were the fiduciaries' decisions prudent? — predominate over individual issues
- Damages methodologies for ERISA class cases have been scrutinized heavily since Wal-Mart v. Dukes and Comcast v. Behrend — defendants frequently challenge certification on the grounds that damages cannot be calculated on a class-wide basis
Settlement Patterns
ERISA excessive fee class actions settle at high rates — typically between 70-80% of cases that survive motions to dismiss. Settlement values vary enormously based on plan size, fee level, and litigation stage. Cases against very large plans (billion-dollar asset bases) have generated eight-figure settlements; mid-market plan cases typically settle in the single-digit millions.
For plan sponsors evaluating early settlement, the data strongly supports early resolution in cases with clear procedural deficiencies — no investment committee, undocumented review processes, or obvious fee disparities with the market. Cases with strong procedural records and genuine uncertainty about damages are better positioned to defend through summary judgment.