Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_16-cv-04903/USCOURTS-cand-3_16-cv-04903-10/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1132 E.R.I.S.A.: Employee Benefits

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

DENNIS M. LORENZ,

Plaintiff,

v.

SAFEWAY, INC., et al.,

Defendants.

Case No. 16-cv-04903-JST 

ORDER DENYING PLAINTIFF’S 

MOTION FOR PARTIAL SUMMARY

JUDGMENT

UNDER SEAL1

Re: ECF No. 101

This case concerns the administration of Defendant Safeway, Inc.’s 401(k) plan (“Safeway 

Plan” or “Plan”). The Safeway Plan is an employee pension benefit plan within the meaning of 29 

U.S.C. § 1002(2)(A) that is covered by ERISA, and an individual account plan within the meaning 

of 29 U.S.C. § 1002(34). The Safeway Plan is an example of what is commonly called a “defined 

contribution” plan. In addition to Safeway, Plaintiff Dennis M. Lorenz names the Safeway 

Benefit Plans Committee (“BPC”) as a defendant.2 This case is related to another case concerning 

the same Plan. Terraza v. Safeway, Inc., Case No. 16-cv-3994-JST.3 

Now before the Court is Plaintiff Lorenz’s motion for partial summary judgment. He asks 

the Court to hold that Defendants violated their fiduciary duties of prudence and loyalty as a 

 

1 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 file a stipulated 

proposed 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 which the parties still 

request be sealed. The parties shall also email a PDF copy of the proposed redacted order, without 

any ECF headers, to jstpo@cand.uscourts.gov. The Court will review the parties’ proposal and 

issue a redacted version of the order. 

2 The Plaintiff originally named Great-West Financial RPS LLC as a defendant, but the Court 

granted a motion to dismiss that entity. ECF No. 58. 

3 The Terraza action also names the Plan’s investment advisor, Aon Hewitt Investment 

Consulting, Inc., and individual members of the BPC as defendants. 

Case 3:16-cv-04903-JST Document 143 Filed 04/17/19 Page 1 of 8
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matter of law when they selected the JPMorgan SmartRetirement Passive Blend funds (“JPM 

TDFs”) for inclusion in the Plan in 2010. Lorenz alleges that the decision to add the JPM TDFs 

was motivated by the BPC’s desire to avoid having Safeway pay the administrative costs of the 

Plan, and to shift those costs indirectly onto Plan participants. 

The Court will deny the motion.

I. FACTUAL BACKGROUND

The facts are well-known to the parties and the Court has summarized the relevant 

allegations in detail in two prior orders in the Terraza case, ECF Nos. 65, 109, and so the Court 

will not elaborate them here. Because Plaintiff’s motion focuses on the payment of administrative 

expenses, however, some background on that topic is useful. 

In 2009 Defendants retained J.P. Morgan Retirement Plan Services, LLC (“JPM RPS”), an 

affiliate of Safeway’s long-time banker, JPMorgan, to provide administrative services for the Plan. 

JPM RPS’s fee was $67 annually per participant, collected quarterly. Recordkeeping fees were a 

component of administrative costs. JPM RPS’s primary source of fees for these services was

asset-based fees taken as a percentage of the Plan assets. These asset-based fees included revenue 

sharing arrangements with the Plan’s investment managers, through which investment managers 

credited JPM RPS with a portion of the management fees they collected. The asset-based fees 

also included “wrappers” imposed on certain of the Plan’s investment options that allowed JPM 

RPS to collect a percentage of the assets in that option. To the extent JPM RPS’s asset-based fees 

in a quarter exceeded $16.75 (one quarterly assessment of the $67 fee), JPM RPS would credit the 

excess to a notional, non-cash plan expense account called the “Plan Expense Arrangement” or 

“PEA.” 

The Plan’s arrangement with JPM RPS also included a $1 per participant, per month flat 

fee that was withheld from each participant’s account and placed into a “Direct Participant Fee 

Account.” The Direct Participant Fee Account could, like the PEA, be used to pay Plan expenses, 

including JPM RPS’s fees. If both accounts were exhausted, then Safeway itself was responsible 

to pay the shortfall. 

For some period prior to September 2010, the revenue sharing from the Plan’s investment 

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funds was insufficient to offset the recordkeeping fees, creating the possibility that, in the future, 

Safeway would have had to make quarterly payments to JPMorgan to pay the shortfall amount. 

In the final quarter of 2010, JPM approached Safeway’s human resources department with 

a proposal to replace four of the Plan’s current funds: three with JPM funds, and the fourth with a 

Well Fargo fund. Lisa Montalvo, Safeway’s Benefits Director, referred the proposal to Aon

Hewitt Investment Consulting, Inc., the Plan’s investment advisor, which then made presentations 

to the BPC regarding the funds. One reason given to support the proposed change was that JPM 

proposed a lower annual pricing structure, assuming the Plan made the proposed fund changes. 

Among the changes JPM proposed was substituting its own funds for one or more Plan funds 

managed by other entities. The new funds promised lower administrative fees, thus decreasing the 

chance that Safeway would ever have to make up a shortfall – an eventuality an August 2010 Aon 

document called “highly likely.” 

The Committee ultimately adopted two of the four proposed fund changes: it changed 

from the BlackRock LifePath Index fund to the JPMorgan SmartRetirement Passive Blend, and it 

moved from the Chesapeake Core Growth fund to the Wells Fargo Strategic Growth fund. ECF 

No. 110-28 at 3. JPM also recommended moving from the Forward Emerald Growth fund to the 

JPMorgan Small Cap Growth fund, but Aon recommended against it, and the BPC did not approve 

that change. Id. 

Lorenz alleges that the lower administrative fees from the JPM TDFs were offset by higher 

management fees – the burden of which would fall on Plan participants rather than Safeway. 

Also, he alleges that the selection of the JPM TDFs was not supported by enough historical 

performance data. He alleges the BPC and Safeway disregarded these problems, failed to conduct 

an adequate investigation, and approved the selection of the JPM TDFs notwithstanding a conflict 

of interest – which was that the change benefitted Safeway at the expense of plan participants. 

This, he alleges, violated Defendants’ duties of loyalty and prudence. 

II. LEGAL STANDARD

Summary judgment is proper when a “movant shows that there is no genuine dispute as to 

any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). 

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A dispute is genuine only if there is sufficient evidence for a reasonable trier of fact to resolve the 

issue in the nonmovant’s favor, and a fact is material only if it might affect the outcome of the 

case. Fresno Motors, LLC v. Mercedes Benz USA, LLC, 771 F.3d 1119, 1125 (9th Cir. 2014) 

(citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986)). The court must draw all 

reasonable inferences in the light most favorable to the nonmoving party. Johnson v. Rancho 

Santiago Cmty. Coll. Dist., 623 F.3d 1011, 1018 (9th Cir. 2010).

Where the party moving for summary judgment would bear the burden of proof at trial, 

that party “has the initial burden of establishing the absence of a genuine issue of fact on each 

issue material to its case.” C.A.R. Transp. Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 

480 (9th Cir. 2000). Where the party moving for summary judgment would not bear the burden of

proof at trial, that party “must either produce evidence negating an essential element of the 

nonmoving party’s claim or defense or show that the nonmoving party does not have enough 

evidence of an essential element to carry its ultimate burden of persuasion at trial.” Nissan Fire & 

Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102 (9th Cir. 2000). If the moving party satisfies 

its initial burden of production, the nonmoving party must produce admissible evidence to show 

that a genuine issue of material fact exists. Id. at 1102-03. If the nonmoving party fails to make 

this showing, the moving party is entitled to summary judgment. Celotex Corp. v. Catrett, 477 

U.S. 317, 322-23 (1986). 

“Under ERISA, plan fiduciaries are charged with the duty of loyalty, the duty of prudence, 

the duty to diversify investments, and the duty to act in accordance with the documents and 

instruments governing the plan.” White v. Chevron Corp., No. 16-CV-0793-PJH, 2017 WL 

2352137, at *4 (N.D. Cal. May 31, 2017) (citing 29 U.S.C. § 1104(a)(1)). 

ERISA requires that a pension plan fiduciary act “with the care, skill, prudence, and 

diligence under the circumstances then prevailing that a prudent [person] acting in a like capacity 

and familiar with such matters would use in the conduct of an enterprise of a like character and 

with like aims.” 29 U.S.C. § 1104(a)(1)(B). Under this “prudent person” standard, courts must 

determine “whether the individual trustees, at the time they engaged in the challenged 

transactions, employed the appropriate methods to investigate the merits of the investment and to 

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structure the investment.” Donovan v. Mazzola, 716 F.2d 1226, 1232 (9th Cir. 1983). The 

prudence analysis “focus[es] on a fiduciary’s conduct in arriving at an investment decision, not on 

its results.” In re Unisys Sav. Plan Litig., 74 F.3d 420, 434 (3d Cir. 1996). This duty of prudence 

extends to both the initial selection of an investment and the continuous monitoring of investments 

to remove imprudent ones. Tibble v. Edison Int’l, 135 S. Ct. 1823, 1828˗29 (2015). 

“Because the content of the duty of prudence turns on ‘the circumstances . . . prevailing’ at 

the time the fiduciary acts, the appropriate inquiry will necessarily be context specific.” Fifth 

Third Bancorp v. Dudenhoeffer, 573 U.S. 409, 425 (2014) (quoting 29 U.S.C. § 1104(a)(1)(B)). 

Put differently, the prudence inquiry is “fact intensive.” Terraza v. Safeway Inc., 241 F. Supp. 3d 

1057, 1078 (N.D. Cal. 2017) (citing Tussey v. ABB, Inc., 746 F.3d 327, 336 (8th Cir. 2014)). 

“And, because it involves the application of a reasonableness standard, ‘[r]arely will such a 

determination be appropriate on a motion for summary judgment.’” Id. (quoting Bd. of Trs. of S. 

Cal. IBEW–NECA Defined Contribution Plan v. Bank of N.Y. Mellon Corp., No. 09 CIV. 6273 

RMB, 2011 WL 6130831, at *3 (S.D.N.Y. Dec. 9, 2011)).

III. ANALYSIS

The essence of Plaintiff’s argument is that Defendants violated their duties of loyalty and 

prudence as a matter of law because (1) the lowering of administrative costs was the only reason 

the BPC approved the JPM TDFs and (2) the investigation the BPC performed was deficient as a 

matter of law. 

There is a dispute of fact on these issues. Concerning the reason for selecting the JPM 

TDFs, for example, the Plan’s investment advisor recommended that Safeway select those funds 

“based on lower overall fees[,] simpler investment structure[,] and [the] exclu[sion of] illiquid 

strategies from the investment mix.” ECF No. 98-5 at 8; see also ECF No. 110-28 at 3 (“After 

reviewing data indicating that the performance of the JPMorgan fund compared favorably to that 

of the BlackRock fund and that the JPMorgan fund was the less costly of the two, the Committee 

members unanimously agreed to make the proposed Target Date Fund change.”); ECF No. 110-32 

at 23 (Aon Hewitt, which made recommendations to the BPC, “evaluated the funds proposed by 

JPMorgan based on, among other things, performance comparisons of the JPMorgan Target Date 

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Series to custom benchmarks, its corresponding S&P Target Date indexes, and peer universes, as 

well as assessments of the funds’ glide paths, portfolio management team and its investment 

process, and similar investment products provided by the same team.”). There also is evidence 

that the BPC’s decision was not merely a rubber-stamp of JPMorgan’s recommendations: “the 

Safeway BPC declined JPMorgan RPS’s proposal to replace the Forward Emerald Growth Funds 

with the JPMorgan Small Cap Growth Fund, as well as the three candidate funds Hewitt 

subsequently provided, and decided instead to retain the Forward Emerald Growth Fund based on 

interviews it conducted with the investment managers of the Forward Emerald Growth and a 

candidate fund.” ECF No. 110-32 at 10. 

The same is true of Plaintiff’s claim for breach of the duty of loyalty. That duty requires 

“a fiduciary [to] discharge his duties with respect to a plan solely in the interest of the participants 

and beneficiaries and . . . for the exclusive purpose of . . . providing benefits to participants and 

their beneficiaries[ ] and . . . defraying reasonable expenses of administering the plan.” 29 U.S.C.

§ 1104(a)(1)(A); White v. Chevron Corp., No. 16-CV-0793-PJH, 2016 WL 4502808, at *4 (N.D. 

Cal. Aug. 29, 2016). As defined in the Restatement (Third) of Trusts, which is helpful in 

“determining the contours of an ERISA fiduciary’s duty,” Tibble v. Edison Int’l, 135 S.Ct. 1823, 

1828 (2015), the duty of loyalty prohibits trustees from “engaging in transactions that involve selfdealing or that otherwise involve or create a conflict between the trustee’s fiduciary duties and 

personal interests.” Restatement (Third) of Trusts § 78 (2007). The Supreme Court has stated that 

the duty of loyalty requires fiduciaries to make decisions “with ‘an eye single’ toward 

beneficiaries’ interests.” Pegram v. Herdrich, 530 U.S. 211, 235 (2000).

With regard to the duty of loyalty, there is a disputed issue of fact as to whether, or to what 

extent, the potential for Safeway to pay recordkeeping expenses was a factor in Defendants’ 

decision to select the JPM TDFs. Defendants have introduced evidence that it was not. See, e.g.,

ECF No. 111 at 4 (Boylan Decl.) (“My decision to approve these fund changes, including the 

selection of the JPM TDFs, was not based on the possibility that Safeway may have been 

responsible to make payments for the Plan’s recordkeeping expenses if revenue sharing was not 

sufficient to offset the Plan’s recordkeeping costs. My decision to move forward with these 

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proposed changes, including the selection of the JPM TDFs, was based on my analysis of the cost 

and performance of the JPM TDFs compared to the existing BlackRock funds, the structure of the 

JPM TDFs’ funds, and additional information provided by Aon. Based on my analysis of the 

proposal and the replacement funds, I concluded that making these changes was in the best interest 

of the Plan's participants.”); ECF No. 112 at 4-5 (Montalvo Decl.) (“Having participated in the 

analysis and investigation of these proposed changes, it is my understanding and belief from direct 

observation that the Committee did not base its decision to select the JPMorgan Smartretirement 

Passiveblend funds on whether the funds in the Accounts Payable account would be extinguished, 

or whether Safeway would need to make payments for the Plan’s recordkeeping expenses, should 

any such shortfall occur (and no such shortfall did occur).”). 

Plaintiff’s motion asks the Court to credit his proffered evidence and disregard any 

contrary evidence. Indeed, Plaintiff’s reply brief admits as much, acknowledging that Defendant 

has submitted contradictory evidence, but labeling it “self-serving” and “conclusory.” ECF No. 

118-2 at 8. Notwithstanding Plaintiff’s use of pejorative labels, there is a dispute of material fact

that is fatal to Plaintiff’s motion. At the summary judgment stage, the court may not weigh the 

evidence or make credibility determinations, and is required to draw all inferences in the light 

most favorable to the non-moving party. K.H. v. Sec’y of the Dep’t of Homeland Sec., 263 F. 

Supp. 3d 788, 793 (N.D. Cal. 2017). 

Accordingly, these issues are not amenable to resolution on summary judgment, as 

Plaintiff probably discovered when he read the relevant cases; none of the cases he cites involves

the grant of summary judgment to an ERISA plaintiff. The closest he comes is Tibble v. Edison 

Int’l, in which the court found that the defendant’s decision to invest in retail-class shares instead 

of institutional-class shares of the same fund violated its duty of prudence – but that was after a 

trial. No. CV 07-5359-SVW (AGRx), 2017 WL 3523737, at *11 (C.D. Cal. Aug. 16, 2017). His 

other two cases on this point discuss the general legal principles appropriate to a motion to 

dismiss. Henderson v. Emory Univ., 252 F. Supp. 3d 1344, 1351 (N.D. Ga. May 10, 2017); 

Cunningham v. Cornell Univ., No. 16-CV-6525 (PKC), 2017 WL 4358769, at *8 (S.D.N.Y. Sept. 

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29, 2017). Like the Tibble court, this Court will resolve these issues after a contested proceeding 

on the merits. 

CONCLUSION

For the foregoing reasons, Plaintiff’s motion for summary judgment is DENIED.

IT IS SO ORDERED.

Dated: April 10, 2019

______________________________________

JON S. TIGAR

United States District Judge

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