Waldner v. Natixis Inv. Managers

1

BRIAN WALDNER, individually and as the representative of a class of similarly situated persons, and on behalf of The 401k Savings and Retirement Plan, Sponsored by Natixis Investment Managers, L.P., Plaintiff, v. NATIXIS INVESTMENT MANAGERS, L.P., NATIXIS INVESTMENT MANAGERS, L.P. RETIREMENT COMMITTEE, Defendants.

No. 21-cv-10273-LTS

United States District Court, D. Massachusetts

August 20, 2024

REPORT AND RECOMMENDATION ON DEFENDANTS' MOTION FOR SUMMARY JUDGMENT AND MOTIONS IN LIMINE

LEVENSON, U.S.M.J.

INTRODUCTION

Plaintiff Brian Waldner sues individually and as the representative of a class (the “Class”) comprised of participants in the 401(k) Savings and Retirement Plan (the “Plan”) sponsored by Mr. Waldner's former employer, Defendant Natixis Investment Managers, L.P. (“Natixis”). Under the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended, 29 U.S.C. § 1001, et seq., Plaintiff alleges that Natixis and its Retirement Committee (the “Committee” and collectively “Defendants”) breached their fiduciary duties of loyalty and prudence. Specifically, Plaintiff alleges that in selecting a menu of investment options for Plan participants, Defendants improperly favored mutual funds and other investment products that were offered by Natixis, or by money managers with current or historical ties to Natixis over more suitable products from Natixis' competitors. According to Plaintiff, this favoritism yielded a menu that was poorly balanced in terms of asset classes and investment styles.

Currently before the Court are Defendants' Motion for Summary Judgment (Docket No. 138), Defendants' Motion in Limine to Exclude Certain Opinions and Exhibits of Plaintiff's Expert Donald C. Stone (Docket No. 153), and Defendants' Motion in Limine to Exclude Certain Opinions of Plaintiff's Expert Brian C. Becker, PhD (Docket No. 155), together with the supporting briefings, the opposing briefings, and the Statement of Undisputed Material Facts in Support of Defendants' Motion for Summary Judgment (the “Statement of Undisputed Material Facts”) (Docket No. 152-1).^[1]Given the overlap in the issues raised by the three motions, I will address them in a single report and recommendation.^[2]

I. Introductory Comments

As discussed in depth below, the First Circuit, in Brotherston v. Putnam Investments, LLC, 907 F.3d 17 (1st Cir. 2018), has set forth the parameters for summary judgment in cases such as this. In that decision, the First Circuit explicitly warned against deciding questions of investment suitability and comparability as a matter of law, particularly when there are competing expert views before the Court. Furthermore, in Brotherston, the First Circuit has set forth a framework for determining which party bears the burden of proof with respect to various aspects of causation and damages. This framework further constrains summary disposition. Against this backdrop, it is unsurprising that there are few issues ripe for summary judgment in this complex ERISA case.

As detailed below, summary judgment is appropriate only as to two issues in this case, of which one (the absence of evidence to support Plaintiff's claims with respect to Oakmark International Fund) is likely to have a material impact on the conduct of the trial or the outcome of the case.

II. Factual Background

The following recitation of facts is based primarily on the parties' Statement of Undisputed Material Facts.^[3]See Docket No. 152-1.

During the Class Period, which began on February 18, 2015, Natixis offered the Plan, a 401(k) savings and retirement plan, to its employees and the employees of certain of its affiliates. Id. ¶ 2.^[4] Participants in the Plan were offered a menu of investment options, which included both proprietary funds (i.e., investment products sold by Natixis and its affiliates) and nonproprietary funds. Id. ¶ 69. The Plan's nonproprietary offerings were wide-ranging: they included actively- and passively-managed funds, with funds in all major asset classes and most^[5]major asset categories. Id. ¶¶ 74, 75, 76. Defendants offered 18 different proprietary funds in the Plan menu at various points during the Class Period; during each year of the Class Period there were between 12 and 14 proprietary options available to Plan participants. Id. ¶¶ 118, 120. The following actively-managed, proprietary funds were offered during the Class Period (the “At-Issue Funds”):

• AEW Global Properties Trust Fund

• AEW Global Focused Real Estate Fund (f/k/a AEW Real Estate Fund)

• AlphaSimplex Global Alternatives Fund

• Delafield Fund

• Gateway Fund

• Loomis Sayles Bond Fund

• Loomis Sayles Core Bond Fund

• Loomis Sayles Growth Fund

• Loomis Sayles Small Cap Growth Fund

• Loomis Sayles Small Cap Value Fund

• Mirova Global Sustainable Equity Fund

• Natixis Vaughan Nelson Mid Cap Fund

• Oakmark Equity & Income Fund

• Oakmark Fund

• Oakmark Select Fund

• Oakmark International Fund

• WCM Focused Emerging Markets Fund

• WCM Focused International Growth Fund

Docket No. 140-76, at iv.

When a participant enrolled in the Plan during the Class Period, he or she was automatically invested in a nonproprietary, passively-managed, low-cost target date suite of funds, the Vanguard Target Retirement Series Funds (“Vanguard TDFs”). See Docket No. 152-1, at ¶¶ 127-32. The Vanguard TDFs were, in other words, the Plan's Qualified Default Investment Alternative (“QDIA”). Id. ¶¶ 127, 128. Plan participants who wanted to invest in other options had to affirmatively elect to do so. See id. ¶¶ 130-32. In every year of the Class Period, participants invested more than half of Plan assets in Natixis-affiliated funds. Id. ¶ 134.

The Committee, which was comprised of four to six senior Natixis executives throughout the Class Period, was responsible, among other duties, for selecting the Plan's investment options and for monitoring their performance. Id. ¶¶ 7, 9. This included responsibility for adding, removing, or replacing investment options. Id. ¶ 7. The Committee held meetings (although the parties dispute whether it met with sufficient regularity), during which the Committee reviewed, among other things, the performance of funds on the Plan menu. See id. ¶¶ 58, 79, 80, 82.

At some point prior to the Class Period (the exact date appears to be in dispute, see Id. ¶ 34), the Committee engaged Mercer, the “world's largest investment consultant by assets under advisement,” to provide investment consulting services to the Plan.^[6]Id. ¶¶ 34-36. Mercer's responsibilities during the Class Period included (among other things) preparing quarterly investment performance evaluation reports for the Committee^[7] (Id. ¶ 41); attending Committee meetings (Id. ¶ 45); providing updates on manager and organizational changes of the Plan's investment options, (Id. ¶ 46); preparing an investment structure review for the Committee (id. ¶47); assisting with drafting, revising, and maintaining the Plan's Investment Policy Statement (“IPS”) (Id. ¶ 50); and providing Committee governance services (Id. ¶ 53). According to the minutes, the Committee reviewed recommendations from Mercer before deliberating and making decisions on the Plan menu. Id. ¶ 83.

In June 2016, the Committee engaged Sullivan & Worcester as external ERISA counsel. Id. ¶ 54. Since then, one or more Sullivan & Worcester attorneys have regularly attended Committee meetings, and the firm provided fiduciary training on at least two occasions (once in 2017 and again in 2019). Id. ¶¶ 58, 60.

It is undisputed that, on various occasions during the Class Period, both proprietary and nonproprietary funds were added to and removed from the Plan menu. Id. ¶ 89. Beyond this, the parties agree on little, with significant disagreements about the actual practices employed by the Committee and about the efficacy of those practices for considering the Plan's investment options.

For example, Defendants contend that the Committee meeting minutes-and the materials provided by Mercer-establish that the Committee considered each individual fund on the Plan menu. See id. ¶ 86. Plaintiff, by contrast, points to specific funds for which, he claims, there is no evidence that the Committee paid any particularized attention. See id. (“[T]here is no evidence that the Committee specifically considered its decision to offer both the Oakmark and Oakmark Select Fund on the Plan menu.”).

Similarly, Defendants contend that, in deciding whether to add funds as offerings, the Committee considered the overall composition of the Plan menu, including whether and how new funds would complement existing options and provide participants with the opportunity to diversify. Id. ¶ 87. Plaintiff disputes whether this was a uniform practice. See id. (identifying Natixis Sustainable Futures Funds as an example of an exception).

III. Overview of Applicable Legal Standards

As a starting point, I will briefly review the broad contours of the legal duties at issue in this case-that is, the fiduciary obligations of ERISA trustees. I will also review the standards that govern motions for summary judgment generally, as well as the burden-shifting framework specific to ERISA claims, which the First Circuit enunciated Brotherston. I will delve more deeply into the case law as I review the parties' various contentions, but I note at the outset that ERISA cases are manifold, and it is not always clear whether summary judgment decisions from other circuits can be mapped to the Brotherston framework that controls here.

A. Fiduciary Duties under ERISA: Loyalty and Prudence

“ERISA section 404(a) . . . imposes two duties upon a fiduciary: the duty of loyalty and the duty of prudence.” Ellis v Fid. Mgmt. Tr. Co., 257 F.Supp.3d 117, 126 (D. Mass. 2017), aff'd, ...