Awaiting Third Circuit Action, District Court Returns Split Decision in Princeton ERISA Lawsuit

Among the final decisions handed down in 2017 by the U.S. District Court for the District of New Jersey was a complicated ruling on the Employee Retirement Income Security Act (ERISA) lawsuit filed against the retirement plans of Princeton University.

The initial lawsuit charged the university with failing to leverage its retirement plans’ collective and massive bargaining power to benefit participants and beneficiaries. Defendants were also accused of inappropriately contracting with two recordkeepers instead of one; and with failing to investigate, examine and understand the real cost to participants for administrative services, thereby causing the plans to pay unreasonable and excessive fees for recordkeeping and investments.

Plaintiffs suggested Princeton inappropriately agreed to pay an asset-based fee for administrative services that increased as the value of his participant account rose, even though no additional services were being provided. Further, the suit contended, Princeton “selected and retained investment options for the plans that historically and consistently underperformed their benchmarks and charged excessive investment management fees, as well as share classes that were more expensive than other share classes readily available to qualified retirement plans that provided plan investors with the identical investment at a lower cost.”

Since the initial lawsuit was filed, both the plaintiffs and defendants have raised and countered numerous cross motions and procedural challenges. Next in the timeline, on August 7, 2017, Princeton filed a motion to dismiss and for summary judgment against the would-be class of plaintiffs. On September 19, the court granted in part and denied in part Princeton’s various motions.

The court explained its decision in an amended opinion filed on September 25, 2017. The amended opinion dismissed the first two counts of the plaintiffs’ complaint with respect to the duty of loyalty and also dismissed the third count of the plaintiffs’ complaint in its entirety, granting plaintiffs leave to amend on all counts. At that juncture, the court further denied Princeton’s alternative motion for summary dismissal on statute of limitations grounds.

Moving ahead in the timeline, with court approval, the parties agreed to a revised briefing schedule for Princeton to file a motion for reconsideration and for plaintiffs to file an amended complaint. On October 31, 2017, Princeton filed its motion for reconsideration and simultaneously filed a motion to stay, in view of the docketed appeal to the 3rd U.S. Circuit Court of Appeals in the similar but unrelated matter of Sweda v. University of Pennsylvania. In response, the plaintiffs opposed both motions, leading to the current decision. 

What does it all mean?

On the motion for reconsideration of its previous choice to rule against summary dismissal, the court is quite skeptical: “Reconsideration is not an opportunity to raise new matters or arguments that could have been raised before the original decision was made. See Bowers v. NCAA. Nor is a motion for reconsideration an opportunity to ask the court to rethink what it has already thought through. See Oritani Sav. & Loan Ass ‘n v. Fidelity & Deposit Co. of Md. Rather, a motion for reconsideration may be granted only if there is a dispositive factual or legal matter that was presented but not considered that would have reasonably resulted in a different conclusion by the court. Mere disagreement with a court’s decision should be raised through the appellate process and is inappropriate on a motion for reconsideration.”

However the discussion of the successful motion to stay is far more nuanced and sets out important details in terms of the way the district court views its obligation to follow and potentially respond to similar cases in different districts within its appellate circuit.

The decision explains as follows: “Defendant has brought to the court’s attention an appeal pending before the Third Circuit Court of Appeals in Sweda v. University of Pennsylvania. In that case, a plaintiff brought a putative class action claiming fiduciary breaches of ERISA by the University of Pennsylvania, on the basis of substantially overlapping factual allegations as those alleged by plaintiff here. Two days after this court granted in part and denied in part defendant’s motion to dismiss, Judge Gene Pratter of the Eastern District of Pennsylvania granted the University of Pennsylvania’s motion to dismiss on all claims, finding that Sweda’s complaint failed to create a plausible inference of fiduciary breach sufficient to survive a motion to dismiss. Sweda appealed.”

With this process unfolding in the background, Princeton sought a stay of its own case until that appeal is decided, asserting that the ERISA claims against each university defendant are “strikingly similar and disposition of the appeal will clarify the controlling law, conserve judicial resources, and be highly instructive in this action going forward.”

Naturally, the plaintiffs asserted that Princeton is “engaging in litigation gamesmanship and delaying tactics.” Of all the cases brought to the court’s attention, however, the only other case decided in the 3rd Circuit and governed by the law of this circuit is Sweda, and the appeal of that case alone directly bears on the prior and future rulings of this court.

With this ruling, the New Jersey district court agrees that a stay would simplify issues and promote judicial economy to some extent: “While plaintiff disputes defendant’s characterization of the overlaps between Sweda and the instant action, it is undoubtedly true that a Third Circuit ruling on the viability of claims raised in both lawsuits will create a more definite roadmap for this court in applying controlling law. Should the Third Circuit affirm the Sweda decision, which dismissed the complaint in its entirety for failing to state a plausible claim to relief, this court would need to revisit its earlier opinion allowing certain of plaintiffs’ claims to proceed under the same standard. The court finds that a stay would promote judicial economy by preventing needless back-and-forth in discovery or motion practice on disputed legal standards in the Third Circuit’s law on fiduciary breaches under ERISA, streamlining discovery and guiding future proceedings. This weighs heavily in favor of granting a stay.”

The full text of the Princeton decision includes additional considerations weighing ultimately in favor of granting the stay.