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Oshkosh’s Win in 401(k) Fee Suit Will Stand in Seventh Circuit

Sept. 21, 2022, 5:13 PM

Oshkosh Corp.'s Seventh Circuit victory over allegations of 401(k) mismanagement will stand after the court on Wednesday denied a petition for rehearing filed by workers who said the decision “overlooked or misapprehended” certain facts and points of law.

A proposed class of Oshkosh workers objected to the court’s August opinion affirming the dismissal of their Employee Retirement Income Security Act claims. This decision overlooked a court ruling suggesting that plan fiduciaries may be required to choose higher-cost share classes in some instances, and it incorrectly treated a common concept—that retirement plan fiduciaries should consider the amount of money rebated to plan participants by service providers—as novel, when in fact it’s “the industry norm,” the workers said in their petition for rehearing.

The ruling marked the US Court of Appeals for the Seventh Circuit’s first official word on the recent explosion in 401(k) plan fee litigation since the US Supreme Court’s January decision in Hughes v. Northwestern University. Hughes, which held that retirement plan participants’ ultimate choice over their investments doesn’t excuse a plan that offers expensive funds and charges excessive administrative fees, vacated the Seventh Circuit’s 2020 decision rejecting a challenge to Northwestern University’s plan management.

Since Hughes, a handful of federal appeals courts have addressed 401(k) plan fees. The Ninth Circuit sided with plan participants in a pair of cases reviving lawsuits against Trader Joe’s Co. and Salesforce.com Inc., while the Sixth Circuit issued two rulings that largely favored defendants in cases against CommonSpirit Health Inc. and TriHealth Inc.

The Seventh Circuit’s Oshkosh decision—which rejected claims that the company mismanaged its $1.1 billion 401(k) plan by offering expensive funds and charging excessive recordkeeping fees—has caused ripple effects in district courts within the circuit.

Both Faith Technologies Inc. and Prevea Clinic Inc. have sought reconsideration of adverse decisions in light of Oshkosh, and a federal judge in Chicago allowed Northshore University HealthSystem workers challenging their retirement plan fees to file an amended complaint to reflect the development. Two employers facing 401(k) fee challenges within the circuit—Kerry Inc. and Aurora Health Care Inc.—have announced class settlements in the weeks since Oshkosh.

Morgan, Lewis & Bockius LLP and Ogletree, Deakins, Nash, Smoak & Stewart PC represent Oshkosh. Walcheske & Luzi LLC represents the plan participants.

The case is Albert v. Oshkosh Corp., 7th Cir., No. 21-2789, order denying petition for rehearing 9/21/22.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Andrew Harris at aharris@bloomberglaw.com