In re Biogen, Inc. ERISA Litigation

In re Biogen, Inc. ERISA Litigation

No. 20-cv-11325-DJC

United States District Court, D. Massachusetts

July 22, 2021

MEMORANDUM AND ORDER

Denise J. Casper, United States District Judge

I. Introduction

Plaintiffs Sarah Gamble (“Gamble”), David Covington (“Covington”), Tansy Wilkerson (“Wilkerson”) and Daisy Santiago (“Santiago”) (collectively “Plaintiffs”) have filed this lawsuit on behalf of a proposed class against Defendants, Biogen Inc (“Biogen”), the Board of Directors of Biogen Inc (the “Board”), the Biogen, Inc. 401(k) Savings Plan Committee (the “Committee”) and Does No. 1-10, who are members of the Committee or other fiduciaries of the Plan (collectively, “Defendants”) alleging Defendants breached certain of its fiduciary duties under the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001, et. seq. D. 22. Defendants have moved to dismiss. D. 28. For the reasons stated below, the Court DENIES in part and ALLOWS in part Defendants' motion to dismiss.

II. Standard of Review

On a motion to dismiss for failure to state a claim upon which relief can be granted pursuant to Fed.R.Civ.P. 12(b)(6), the Court must determine if the facts alleged “plausibly narrate a claim for relief.” Schatz v. Republican State Leadership Comm., 669 F.3d 50, 55 (1st Cir. 2012) (citation omitted). Reading the complaint “as a whole, ” the Court must conduct a two-step, context-specific inquiry. Garda-Catalan v. United States, 734 F.3d 100, 103 (1st Cir. 2013). First, the Court must perform a close reading of the claim to distinguish the factual allegations from the conclusory legal allegations contained therein. Id. Factual allegations must be accepted as true, while conclusory legal conclusions are not entitled credit. Id. Second, the Court must determine whether the factual allegations present a “reasonable inference that the defendant is liable for the misconduct alleged.” Haley v. City of Boston, 657 F.3d 39, 46 (1st Cir. 2011) (citation omitted). In sum, the complaint must provide sufficient factual allegations for the Court to find the claim “plausible on its face.” Garda-Catalan, 734 F.3d at 103 (citation omitted).

III. Factual Background

The following summary is based upon the allegations in the complaint, which the Court assumes to be true for the purpose of resolving the motion to dismiss. Biogen is a global biotechnology company focused on neuroscience research. D. 22 ¶ 13. The company sponsors the Biogen, Inc. 401(k) Savings Plan (the “Plan”), a participant-directed 401(k) plan that permits participants to direct the investment of their contributions into various investment options offered by the Plan. Id. ¶ 21. The Plan is considered a defined contribution retirement plan, of which the Plaintiffs are former Plan participants. Id. ¶¶ 2, 9-12. Biogen is a fiduciary charged with administering the Plan and is responsible for selecting, monitoring and retaining service providers that provide investment, recordkeeping and other administrative services. Id. ¶¶ 5, 85-86. Biogen delegates its Plan administration duties to the Committee, id. ¶ 15, and as part of those duties, the Committee is responsible for Plan management and/or authority or control over management or disposition of Plan assets. . Id. ¶¶ 5, 14.

During the Class Period of July 14, 2014 to the present, id. ¶ 66, the Plan assets were held in a trust by Fidelity Management Trust Company (“Fidelity”), the Plan Trustee, and all investment and asset allocations were performed through this trust instrument, id. ¶ 24. The proposed Class consists of “[a]ll participants and beneficiaries in the [Plan] at any time on or after [the Class Period], including any beneficiary of a deceased person who was a participant in the Plan at any time during the Class Period.” Id. ¶ 66.

Under the Plan, each participant's account is credited with participant contributions, employer matching contributions and any discretionary contributions and earnings or losses thereon. Id. ¶ 21. The Plan then pays its expenses from Plan assets and most administrative expenses are paid by participants as a reduction of invested income. Id. Each participant's account is charged with the number of distributions taken and an allocation of administrative expenses. Id. Plan participants' available investment options include mutual funds and collective investment trusts. Id. The Plan lineup also offers the Freedom Funds-a suite of thirteen target date funds, which are investment vehicles that offer an all-in-one retirement solution via a portfolio of underlying funds that gradually become more conservative as the expected target retirement year approaches. Id. ¶ 26. Target date funds are “inherently actively managed.” Id. Allocation shifts, also known as a fund's “glide path, ” are made over time. Id.

A. Freedom Funds

The Plan has offered the Fidelity Freedom fund target date suite since at least December 31, 2009. Id. ¶ 27. Among its several target date offerings, Fidelity offers a spectrum of Freedom Funds: the Active suite, which includes riskier and more costly Freedom Funds, and the Index suite, which includes less risky, less costly Freedom Funds. Id. The Active suite invests predominately in actively managed Fidelity mutual funds while the Index suite places no assets under active management, instead electing to invest in Fidelity funds that track market indices. Id. ¶ 28. In 2013 and 2014, the Active suite underwent a strategy overhaul, authorizing investment managers to deviate from glide path allocations by ten percent. Id. ¶¶ 34-35. The Active suite and most of its components have underperformed compared to the Index suite since the overhaul. Id. ¶¶ 42-43. The Active suite experienced $16 billion in net outflows from 2014 to 2018. Id. ¶ 40. By December 31, 2018, approximately thirty percent of the Plan's assets were invested in the Active suite. Id. ¶ 30.

Defendants were responsible for crafting the Plan lineup, id. ¶ 27, and played a role in the Plan's Qualified Default Investment Alternative (“QDIA”). Id. ¶ 29. To aid participants who lack the knowledge or confidence to make investment elections for their retirement assets, a retirement plan can designate one of the investment offerings from its lineup as a QDIA. Id. By so doing, participants who do not direct their assets to a specific offering for investment will have all contributions automatically invested in the QDIA. Id.

At all times during the glide path, the Active suite's top three domestic equity positions were in the Fidelity Series funds, two of which trailed their respective indices over their lifetimes- the Intrinsic Opportunities Fund and the Large Cap Stock Fund. Id. ¶33. The Intrinsic Opportunities Fund, which is allocated 8.13 percent of the total assets in the 2040-2060 Funds, has missed its benchmark, over its lifetime, by 326 basis points (3.26 percent) on an annualized basis. Id. Similarly, the Large Cap Stock Fund, which is allocated 7.11 percent of the total assets in the 2040-2060 Funds, has missed its benchmark, over its lifetime, by 357 basis points (3.57 percent) on an annualized basis. Id.

B. Other Mutual Funds and Expense Ratios

The Mainstay Large Cap Growth Fund Institutional Class underperformed the benchmark set by its investment manager, the Russell 1000 Growth Index, on a rolling five-year annualized basis by as much as -2.30 percent. Id. ¶¶ 45-46. By the end of the second quarter of 2020, the fund had trailed its benchmark over the preceding five years by 44 basis points (0.44 percent), annualized. Id. ¶ 46. Defendants did not replace this investment option with a better performing alternative. Id. ¶ 47. The Allianz NFJ Small Cap Value Fund Institutional Class was replaced in 2018, having underperformed its benchmark since 2012. Id. ¶ 48. By the end of 2016, the Allianz NFJ Small Cap Value Fund trailed the benchmark set by its investment manager, the Russell 2000 Value Index, by 393 basis points (3.93 percent) on a five-year annualized basis. Id. ¶¶ 48-50. The Harbor International Fund was similarly replaced following underperformance in 2018, with annualized returns trailing the MSCI EAFE Index, the benchmark set by its investment manager, on an annualized basis over a trailing five-year period “for many consecutive years” prior to its removal. Id. ¶¶ 51-52. The MFS New Discovery Fund was added in 2018 after having demonstrated an inability to beat its benchmark under the Russell 2000 Growth Index, the benchmark set by its investment manager, by as much as 3.66 percent over a five-year period. Id. ¶ 54.

In 2018, at least nineteen of the Plan's thirty-two funds were more expensive than comparable funds found in similarly sized plans according to a 2020 study conducted by Brightscope/ICI. Id. ¶ 56. From 2014 to 2018, the Plan paid out investment management fees of 0.49 percent to 0.50 percent of its total assets, id. ¶ 57, paying more for investment management fees than the average total plan expenses of 0.28 percent of similarly sized plans. Id. The investment management fee component that the Plan paid during the relevant period was 75 to 79 percent higher than the average total cost for other large plans. Id.

IV. Procedural History

Plaintiffs Covington, Wilkerson and Santiago instituted this action on July 14, 2020. D. 1. Plaintiff Gamble later filed a similar lawsuit, after which the Court consolidated both actions. D. 23. Plaintiffs filed an amended, consolidated complaint, on September 25, 2020. D. 22. Defendants now have moved to dismiss. D. 28. The Court heard the parties on the pending motion and took the matter under advisement. D. 48.^[1]

V. Discussion

A. Statute of Limitations

ERISA does not contain a statute of limitations. Accordingly federal courts are required to borrow...