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Fidelity Escapes Claims Over Use of Workers’ 401(k) Plan Data

March 31, 2021, 9:25 PM

Fidelity Investments Institutional Operations Co. dodged a lawsuit accusing it of profiting off the confidential data of Shell Oil Co.'s 401(k) plan participants.

The case was being closely watched for its potential to increase the number of people who can be held liable for a breach of fiduciary duty. But the court kept a narrow definition of plan assets, limiting the number of people who can be sued.

The U.S. District Court for the Southern District of Texas dismissed claims that Fidelity was a fiduciary of Shell’s 401(k) plan and breached its alleged duties under the Employee Retirement Income Security Act (ERISA) when it used participant data to peddle financial products and services that weren’t part of the plan.

The plan participants, who brought the suit in January 2020, argued confidential participant data is a plan asset that imposes specific obligations under ERISA on the person or people who manage the plan.

But Judge Jeffrey Brown said that’s not how courts have viewed it.

“Neither of the promulgated regulations either expressly or by any plain-language interpretation includes participant data as plan assets under ERISA,” he said in a nine-page ruling Tuesday.

“This view—that participant data does not amount to ‘plan assets’ under ERISA—comports with how other courts have ruled on this question,” he said, adding that he finds no reason to depart from those holdings.

Participants said Fidelity had their names, contact information, social-security numbers, financial information, investment history, account balances, and information on when they would retire. Fidelity allegedly uploaded that information into a software program that was shared with various Fidelity affiliates and used to market other financial products and services.

The case is Harmon v. Shell Oil Co., S.D. Tex., No. 3:20-cv-00021, 3/30/21.

To contact the reporter on this story: Lydia Wheeler in Washington at lwheeler@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Alexis Kramer at akramer@bloomberglaw.com