Schlichter Bogard Obtains Victory in the Seventh Circuit in Ongoing Lawsuit on Behalf of Northwestern University Retirement Plan Participants

As reported by Law360, the United States Court of Appeals for the Seventh Circuit—following the unanimous decision of the United States Supreme Court—reversed a lower court’s dismissal of claims brought by participants in Northwestern University’s retirement plan in a case brought by Schlichter Bogard & Denton.

Originally filed in 2016, the case challenges Northwestern’s retirement plan investments and fees, and alleges that defendants “failed to monitor the Plans’ investments in a number of ways, including by retaining recordkeepers that charged excessive fees . . . and neglecting to provide cheaper and otherwise-identical alternative investments.”

In March 2020, the Seventh Circuit Court of Appeals initially ruled in favor of the University. However, on January 24, 2022, the U.S. Supreme Court unanimously found that the reasoning adopted by the Seventh Circuit was flawed. Citing to Tibble v. Edison—the first ERISA excessive fee case to be heard by the U.S. Supreme Court, which was also brought by Schlichter Bogard & Denton—the Court ruled that “even in a defined-contribution plan where participants choose their investments, plan fiduciaries are required to conduct their own independent evaluation to determine which investments may be prudently included in the plan’s menu of options.” The Supreme Court further held that “if the fiduciaries fail to remove an imprudent investment from the plan within a reasonable time, they breach their duty.”

In its Order, the Seventh Circuit reviewed and reversed its earlier dismissal of claims that Northwestern “(1) failed to monitor and incurred excessive recordkeeping fees, and (2) failed to swap out retail shares for cheaper but otherwise identical institutional shares.” The Court held, among other things, that “a fiduciary who fails to monitor the reasonableness of plan fees and fails to take action to mitigate excessive fees may violate the duty of prudence.”

The case will now return to the United States District Court for the Northern District of Illinois for further proceedings.

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