Adidas America Inc.’s defense was strong in a recent challenge to the oversight of its 401(k) plan, with the company on Tuesday taking home a decisive win.
The athletic outfitter was accused of failing in its fiduciary duty by not selecting the lowest-cost, highest performing investment options of its $871 million plan. A group of plaintiffs represented by several law firms brought the class-action case in 2019, taking aim at the T. Rowe Price target-date funds used within the 401(k) between 2013 and 2018.
They claimed that Adidas’ not opting for lower-fee funds from competitors, with stronger historical returns, amounted to a breach of its duties under the Employee Retirement Income Security Act. They also claimed that the sponsor should have considered the collective investment trust version of the T. Rowe mutual fund series that was on the plan menu.
Those claims did not convince the court, however.
On Tuesday, the federal judge presiding over the case approved a motion to dismiss, accepting the recommendation of a magistrate judge who in August issued findings that sided with the defendant. Neither party in the case filed any objections to the magistrate judge’s findings, the district court judge noted.
Although the named plaintiffs in the case only held shares in two of the 25 funds that were central to the case, they still had standing to bring claims on behalf of a class of plan participants that invested in the other funds, the magistrate judge wrote in the August recommendation.
But even after filing two amended complaints, the plaintiffs failed to make any factual allegations about the Adidas plan sponsor’s process of selecting investments, the magistrate judge noted.
“At best, plaintiffs’ argument boils down to a claim that defendant should have foreseen that the price of T. Rowe Price investment options would go up and accordingly renegotiated its fee arrangement or sought alternative options,” the recommendation read. “But plaintiffs have not raised allegations suggesting that the challenged decision was imprudent at the time the fiduciaries made the decision, nor have they adequately articulated why passively managed funds serve as an appropriate benchmark for measuring the success of an actively managed fund.”
The judge in U.S. District Court in the District of Oregon dismissed the claims with prejudice, meaning that the plaintiffs cannot file an amended complaint. They could, however, file an appeal with a higher court.
Andrew is half-human, half-gamer. He’s also a science fiction author writing for BleeBot.