T. Rowe Price Group Inc. must face a proposed class action alleging it packed its 401(k) plan with proprietary funds to the detriment of the plan's participants after a Maryland federal judge ruled that all of the Employee Retirement Income Security Act claims in the suit were adequately pled.
U.S. District Judge James K. Bredar denied the asset management company's motion to dismiss Monday, holding that the participants sufficiently alleged T. Rowe Price and its affiliates breached their fiduciary duties and engaged in prohibited transactions under the federal benefits law. The participants had sued T. Rowe Price, its subsidiaries, retirement program trustees and other related committees in February 2017, claiming they flouted ERISA by allowing the asset management company to profit at the expense of the participants by offering only its own products in the retirement plan and collecting excessive fees on them.
The judge rejected the company's arguments that the participants' breach of fiduciary duty claims failed because the 401(k)'s plan document required that plan trustees only include T. Rowe Price funds. The judge noted the participants also alleged that poorly performing funds were wrongly kept in the plan and that in some cases higher-fee funds were chosen instead of their less expensive, identical counterparts.
An attorney representing the participants, Scott M. Lempert of Cohen Milstein Sellers & Toll PLLC, told Law360 on Wednesday that Judge Bredar's ruling was "replete with support for the retirement savings protections contemplated by ERISA."
"We are very pleased that Judge Bredar's decision stands strong with ERISA's core purpose — to protect retirement security for all employees, including those who work for financial institutions that develop and sell their own proprietary financial products," Lempert said.
The participants are represented by Scott M. Lempert, Karen L. Handorf and Jamie Bowers of Cohen Milstein Sellers & Toll PLLC and J. Brian McTigue, James A. Moore and Mikael Neville of McTigue Law LLP.
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