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Capital One dismisses imprudent investment suit

Where participants in a defined contribution plan alleged it was imprudent to include certain target-date funds as an investment option, because they were significantly worse performing than alternatives, their complaint was dismissed. Allegations of underperformance alone fail to state a plausible claim and the plaintiffs failed to allege any meaningful benchmarks by which the court could assess the target-date funds.


The Capital One Financial Corporation Savings Plan is a defined contribution plan within the meaning of the Employee Retirement Income Security Act, or ERISA. The plan has offered participants the BlackRock LifePath Index Funds, a suite of ten target date funds, or TDFs, as an investment option since at least Dec. 31, 2013.

Andre Hall was an employee of Capital One Financial Corporation and a former participant in the plan. Jermaine Minitee is currently employed by Capital One and is a participant in the plan. Plaintiffs contend that the BlackRock TDFs “are significantly worse performing” — both in terms of total and risk- adjusted returns — “than most of the mutual fund alternatives” throughout the Class Period.”

Plaintiffs’ amended complaint asserts three counts: (1) breach of fiduciary duty, (2) failure to monitor fiduciaries and co-fiduciary breaches, and in the alternative (3) liability for knowing breach of trust. Defendants have filed a motion to dismiss.

Count One

Plaintiffs allege in conclusory fashion that the “fiduciaries here employed a fundamentally irrational decision-making process (i.e., inconsistent with their duty of prudence).” But the amended complaint is completely devoid of facts about the particular decision-making process undertaken by defendants with respect to the plan at issue here.

To state a claim for breach of fiduciary duty, therefore, plaintiff relies on solely circumstantial allegations. Specifically, plaintiff argues that the “significantly worse performing” BlackRock TDFs “could not have supported an expectation by prudent fiduciaries that their retention in the Plan was justifiable.” Were the fiduciaries to have objectively evaluated the BlackRock TDFs’ performance, plaintiffs posit, they would have selected “a more consistent, better performing, and more appropriate TDF suite.” Plaintiffs base these allegations solely on quarterly performance data of the four comparator TDFs, the S&P indices and the Sharpe ratio.

Defendants argue that plaintiff’s allegations are insufficient to state a fiduciary breach claim under ERISA because allegations of underperformance alone fail to state a plausible claim and that plaintiff fails to allege any meaningful benchmarks by which this court can assess the BlackRock TDFs. The court agrees.

When the court dismissed plaintiff’s original complaint, it concluded that plaintiff failed to set out circumstantial factual allegations from which the court could reasonably infer that the decision to retain the BlackRock TDFs was the product of a flawed decision-making process. It also concluded that plaintiff failed to allege that the BlackRock TDFs severely underperformed the comparator TDFs or that the comparator TDFs were appropriate, meaningful benchmark comparators. The addition of the S&P index and the Sharpe ratio to plaintiff’s amended complaint fails to resolve these deficiencies.

The duty of loyalty requires that a fiduciary discharge duties “for the exclusive purposes of[] providing benefits to participants and their beneficiaries[] and “defraying reasonable expenses of administering the plan[.]” To survive a motion to dismiss, plaintiff must plead specific facts from which this court may plausibly infer that defendants breached their duty of loyalty. Here, plaintiff has simply recast the alleged breaches of the duty of prudence as breaches of loyalty. Plaintiff merely asserts the fiduciaries breached their duty of loyalty without alleging any supporting facts. That is insufficient to state a claim for disloyalty.

Plaintiff similarly alleges that defendants failed to “act in accordance with the documents and instruments governing the Plan,” in violation of 29 U.S.C. § 1104(a)(1)(D). Again, the amended complaint is devoid of any factual allegations to support the allegation. Plaintiff, for instance, does not even specify the particular documents or instruments to which defendants are alleged to have failed to adhere.

Counts Two and Three

Plaintiff’s claim alleging failure to monitor is wholly derivative of the underlying fiduciary breach claim. Because the court finds plaintiff’s amended complaint deficient with respect to the fiduciary breach claim, the court dismisses Count Two with prejudice. Count Three of the amended complaint alleges knowing breach of trust. This claim too is derivative of the underlying fiduciary breach and is dismissed with prejudice.

Defendants’ motion to dismiss granted.

Tullgren v. Capital One Financial Corp., Case No. 1:22-cv-00857, March 1, 2023. EDVA at Alexandria (Nachmanoff). VLW 023-3-102. 17 pp.

VLW 023-3-102