NYU Moves to Limit Evidence Used in Trial Over 403(b) Plans

In the excessive fee case against New York University (NYU) regarding its 403(b) plans, NYU filed motions in limine to have certain evidence excluded from trial.

The case is the first of many excessive fee cases against large universities to go to trial.

In its motion, NYU asks that U.S. District Judge Katherine B. Forrest of the U.S. District Court for the Southern District of New York issue an order “precluding from trial … any testimony, evidence, or arguments concerning claims that were previously dismissed by the court in its August 25, 2017, opinion.” In that opinion, Forrest dismissed all of the plaintiffs’ loyalty claims, finding that the plaintiffs failed to plead sufficient facts to support the loyalty-based claims.

Forrest previously dismissed certain duty of prudence claims under the Employee Retirement Income Security Act (ERISA), saying that in order to state a claim for breach of the duty of prudence connected to the retention of certain investment options, plaintiffs must raise a plausible inference that “the investments at issue were so plainly risky at the relevant times that an adequate investigation would have revealed their imprudence, or that a superior alternative investment was readily apparent such that an adequate investigation would have uncovered that alternative”; that is, that “a prudent fiduciary in like circumstances would have acted differently.” The defendant’s contractual agreement to include certain investment options does not, by itself, demonstrate imprudence, she said.

In addition, Forrest found that merely having a contractual arrangement for recordkeeping services does not, as a matter of law, constitute a breach of the duty of prudence—to support a claim on this basis, plaintiff must make a plausible factual allegation that the arrangement is otherwise infirm. She also said that having a single recordkeeper is not required as a matter of law, and based on the facts alleged (for instance, that NYU consolidated recordkeeping for one plan but not the other), the allegation that a prudent fiduciary would have chosen fewer recordkeepers and thus reduced costs for plan participants—the “recordkeeping consolidation” allegation—is sufficient at this stage to support the plaintiffs’ claims.

Claims Forrest did move forward included the “failure to get bids” claim and the “excessive recordkeeping fees” claim. “More broadly, when plaintiffs’ prudence allegations in Count III are viewed as a whole, they plausibly support an assertion that the Plan fiduciaries failed to diligently investigate and monitor recordkeeping costs,” she wrote in her August 2017 opinion.

In its motions in limine, NYU also asks that the plaintiffs not be able to attempt to use evidence that their prudent measures and conduct that occurred subsequent to the plaintiffs’ filing of the lawsuit proves that prior conduct was imprudent.