Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_16-cv-03994/USCOURTS-cand-3_16-cv-03994-11/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 28:1132 E.R.I.S.A.

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

MARIA KARLA TERRAZA,

Plaintiff,

v.

SAFEWAY INC., et al.,

Defendants.

Case No. 16-cv-03994-JST 

ORDER DENYING DEFENDANTS’ 

MOTION TO EXCLUDE THE 

TESTIMONY OF MARTIN DIRKS

Re: ECF No. 155

In this ERISA1case, defendants Safeway Inc., the Safeway Benefit Plans Committee 

(erroneously sued herein as Benefit Plans Committee Safeway Inc. n/k/a Albertsons Companies 

Retirement Benefit Plans Committee), Peter J. Bocian, David F. Bond, Michael J. Boylan, Robert 

B. Dimond, Laura A. Donald, Dennis J. Dunne, Robert L. Edwards, Bradley S. Fox, Bernard L. 

Hardy, Russell M. Jackson, Peggy Jones, Suz-Ann Kirby, Robert Larson, Melissa C. Plaisance, 

Paul Rowan, and Andrew J. Scoggin (collectively “the Safeway Defendants”) now move to 

exclude the expert report of Plaintiff’s expert witness Martin Dirks. ECF No. 155. Plaintiff 

opposes the motion. ECF No. 168. 

For the reasons set forth below, the Court will deny the motion.2 

I. FACTUAL BACKGROUND

Martin Dirks is the founder and manager of an expert witness and consulting firm called 

 

1 ERISA refers to the Employee Retirement Income Security Act. 

2 The Court has filed this order under seal because it contains or refers to material subject to 

sealing orders. Within seven days of the filing date of this order, the parties shall provide the 

Court a stipulated redacted version of this order, redacting only those portions of the order 

containing or referring to material for which the Court has granted a motion to seal and for which 

the parties still request the material be sealed. The Court will then issue a redacted version of the 

order. 

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Investment Strategy & Analysis, based in San Francisco. ECF No. 156-2 at 2. He is also a Board 

Member of the Federated Retirement System for the City of San Jose, California and an Adjunct 

Professor in the Master in Business Administration program at Golden Gate University in San 

Francisco, California. Id. Prior to starting his own firm, he spent several years as an investment 

consultant advising defined benefit and defined contribution state and municipal pension plans, 

endowments, and corporate pension plans, among other clients. Id. at 3. He received an M.B.A.

from Harvard Business School in 1987 and a B.S. in Physics from Bemidji State University in 

1979. Id.

Plaintiff’s counsel retained Dirks “to provide an opinion on the selection and monitoring of 

investment managers for [Safeway’s 401(k)] Plan and to calculate the economic damages 

sustained by the Plan and its participants.” Id.

The Safeway Defendants now move to exclude Dirks’ opinion. They argue that his 

opinion that “an investment option should have been removed from the Plan if it was not within 

the top quartile of its peer group for six consecutive quarters” is “completely arbitrary[] and not 

rooted in any industry standards or academic analysis,” ECF No. 155 at 3; and that his testimony 

regarding the alleged unreasonableness of the Plan’s recordkeeping fees is similarly unreliable” 

because Dirks did not use a sufficiently similar comparator to establish a reasonable fee, id. at 4. 

II. LEGAL STANDARD

Federal Rule of Evidence 702 provides:

A witness who is qualified as an expert by knowledge, skill, experience, training, or 

education may testify in the form of an opinion or otherwise if:

(a) the expert’s scientific, technical, or other specialized knowledge will help the 

trier of fact to understand the evidence or to determine a fact in issue;

(b) the testimony is based on sufficient facts or data;

(c) the testimony is the product of reliable principles and methods; and

(d) the expert has reliably applied the principles and methods to the facts of the 

case. 

Trial courts serve a “gatekeeping” role “to ensure the reliability and relevancy of expert 

testimony.” Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 152 (1999) (citing Daubert v. 

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United States District Court

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Merrell Dow Pharm., Inc., 509 U.S. 579 (1993)). They should screen “unreliable nonsense 

opinions, but not exclude opinions merely because they are impeachable.” City of Pomona v. 

SQM N. Am. Corp., 750 F.3d 1036, 1044 (9th Cir. 2014). The reliability test under Rule 702 and 

Daubert “is not the correctness of the expert’s conclusions but the soundness of his methodology.” 

Id. “Shaky but admissible evidence is to be attacked by cross examination, contrary evidence, and 

attention to the burden of proof, not exclusion.” Primiano v. Cook, 598 F.3d 558, 564 (9th Cir. 

2010). The proponent of the expert testimony has the burden of proving admissibility. Lust By & 

Through Lust v. Merrell Dow Pharm., Inc., 89 F.3d 594, 598 (9th Cir. 1996).

“Motions in limine are usually unnecessary in a bench trial.” See Standing Order for Civil 

Bench Trials (“Standing Order”) ¶ E. However, if a party chooses to file such motion, the moving 

party “must first seek a stipulation from the opposing party or parties to the relief requested in the 

motion.” Id. Here, Defendants did not seek a stipulation with respect to the relief they now 

request. ECF No. 168-1 ¶ 8. 

III. DISCUSSION

As an initial matter, as stated above, the Court does not typically need motions in limine 

regarding exclusion of evidence before a bench trial. Nothing about Martin Dirks’ testimony 

warrants deviation from the Court’s ordinary practice. 

Turning to the merits, the Court first addresses the Safeway Defendants’ arguments 

regarding Dirks’ opinion that an investment option investment option offered by the Plan should 

have been removed if it was not within the top quartile of its peer group for six consecutive 

quarters. ECF No. 156-2 at 57; ECF No. 155 at 3. Safeway argues that Dirks’ criteria are 

“completely arbitrary[] and not rooted in any industry standards or academic analysis.” ECF No. 

155 at 3. 

The Court rejects the argument. Evaluating whether to keep a fund in a retirement plan 

based on that fund’s performance over a set number of consecutive quarters is both a commonsense and well-established practice in the field of retirement investment advice. For example, a 

2002 article in the Journal of Compensation and Benefits described the following approach:

Trustees should define responses to changes in a fund by designating the funds to a 

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watch list or to terminate that fund as an option under the plan. The watch list may 

be based upon performance, three-year peer ranking below the medium for three 

consecutive quarters, three-year index under performance for three consecutive

quarters, violating risk guidelines, style drift for three quarters or loss of key 

investment people.

Sheldon M. Geller, Prudent Management of 401(k) Plan Fund Selection, 18 J. Compensation & 

Benefits (July/August 2002). Similarly, a treatise on retirement law and plan administration 

provides a model investment policy containing the following provision: 

“If at any time, any of the following criteria are triggered, the Investment Manager 

shall be notified of the Board's concerns or shall be terminated, in the discretion of 

the Board, in consultation with the Investment Performance Consultant: . . . Four 

consecutive quarters of performance below the ___th percentile in performance 

rankings for the Investment Manager's specified universe.”

Robert D. Klausner, State and Local Government Retirement Law: A Guide for Lawyers, 

Trustees, and Plan Administrators § 17:15 (2017) (blank underscore in original). 

Thus, it is clear that Dirks’ methodology in measuring a fund’s performance by quartile 

over a period of consecutive quarters is neither new nor exotic. The Court will not exclude his 

testimony under Rule 702. Safeway can address on cross-examination whether the particular 

number of quarters or the particular performance quartile Dirks selected were appropriate or 

optimal. 

Safeway also argues that Dirks’ opinion regarding the allegedly excessive nature of the 

Plan’s record-keeping expenses is unreasonable because he uses the Albertsons 401(k) Plan as a 

comparator. ECF No. 155 at 4. They contend that Dirks did not compare the services provided to 

the Safeway plan versus the services provided to the Albertsons plan; he does not know whether 

the services were the same; and he failed to take into account the difference in size between the 

two plans. ECF No. 155 at 7. 

The Court finds this argument unpersuasive also. As an initial matter, the Safeway 

Defendants overlook the additional bases for Dirks’ opinion regarding excessive record-keeping 

fees. There were four: (1) investment adviser Aon Hewitt Investment Consulting, Inc. advised

the Safeway Defendants that the “recordkeeping costs could be reduced by at least $9 per 

participant, based upon peer group recordkeeping comparisons”; (2) a comparison between 

recordkeeping fees of the Safeway Plan, the Albertsons LLC plan, and the New Albertsons plan;

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(3) the reduction in recordkeeping fees after the request for proposal (“RFP”) process after the 

Safeway and Albertsons plans were combined; and (4) the discovery of between $3.1 and 4.5 

million in accumulated plan assets available to pay recordkeeping fees about which the Safeway 

Plan was unaware until the transfer to Vanguard. ECF No. 152-5 at 5 n.5, 11 n.14. In the 

aggregate, these facts – if established – adequately support Dirks’ opinion that the Safeway Plan’s 

“recordkeeping fees were unreasonable compared to what was available in the market.” Troudt v. 

Oracle Corp., No. 16-CV-00175-REB-SKC, 2019 WL 1006019, at *8 (D. Colo. Mar. 1, 2019); 

see also George v. Kraft Foods Glob., Inc., 641 F.3d 786, 798-99 (7th Cir. 2011) (finding issue of 

disputed fact where expert opined that prudent fiduciaries would have solicited competitive bids 

before extending record-keeping contract). 

Moreover, even if Dirks’ opinion were based solely on comparisons to the Albertsons 

plans, the Court would admit the testimony. The Court has already found the New Albertsons 

plan to be a similar comparator. ECF No. 200 at 6. Any remaining criticisms would be bases for 

cross-examination, not grounds for exclusion. The Court denies this portion of the Safeway 

Defendants’ motion also. 

CONCLUSION

For the reasons set forth above, the Safeway Defendants’ motion to exclude the testimony 

of Martin Dirks is denied. 

IT IS SO ORDERED.

Dated: March 18, 2019

______________________________________

JON S. TIGAR

United States District Judge

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