Opinion ID: 214359
Heading Depth: 2
Heading Rank: 2

Heading: Recordkeeping Fees

Text: Plaintiffs' next claim is that the Plan fiduciaries acted imprudently in connection with the fees paid to the Plan's recordkeeper, Hewitt, which are paid out of Plan assets. Hewitt has been the Plan's recordkeeper since 1995, when the Plan hired Hewitt after requesting bids from various recordkeepers. Since then, the Plan has extended Hewitt's contract a number of times. During the negotiations leading up to these extensions, the Plan fiduciaries engaged various consultants for advice as to the reasonableness of Hewitt's fees. However, since initially hiring Hewitt in 1995, the fiduciaries have not solicited competitive bids from other recordkeepers. During this time, the fees paid to Hewitt ranged between $43 and $65 per participant per year. As we understand their claim, plaintiffs are arguing that prudent fiduciaries would have solicited competitive bids for recordkeeping services on a periodic basis about once every three yearsand that defendants' failure to solicit periodic bids after initially hiring Hewitt resulted in Hewitt receiving an excessive fee once its initial contract term expired. In support of this claim, plaintiffs offered the testimony of Lawrence R. Johnson, who has expertise in the area of retirement-plan recordkeeping services. Johnson reviewed the process that defendants followed when they extended Hewitt's contract and opined that defendants acted imprudently by extending the contract without first soliciting bids from other recordkeepers. Johnson further opined that a reasonable fee for the kind of recordkeeping services the Plan needed would have been between $20 and $27 per participant per year, rather than the $43 to $65 the Plan paid to Hewitt. In moving for summary judgment on this claim, defendants argued that prudence did not require them to solicit bids before extending Hewitt's contract. Defendants emphasized that they engaged several independent consultants for advice as to the reasonableness of Hewitt's fee and argued that in doing so they satisfied their duty to ensure that Hewitt's fees were reasonable. The district court, in granting summary judgment to defendants, determined that Johnson's opinions were of limited relevance because Johnson's experience involved working with the retirement plans of mid-sized companies rather than the plans of large companies such as Kraft. (App.64.) The court further determined that the Plan fiduciaries were told by their consultants that Hewitt's fees were reasonable, and that the Plan prudently relied on the advice of these consultants. Because we find that Johnson's opinions were relevant and admissible and that the fiduciaries were not necessarily prudent in relying on the advice of consultants in lieu of bids, we reverse the grant of summary judgment on this claim. Regarding Johnson's opinions, if they are admissible they create a genuine issue of material fact as to whether defendants acted prudently. As noted, Johnson opines that prudent fiduciaries would have solicited competitive bids before extending Hewitt's contract, and that defendants' failure to solicit bids caused them to overpay Hewitt by at least $16 per participant per year. A reasonable trier of fact could have credited Johnson's opinions and concluded that defendants' failure to solicit bids was imprudent. Moreover, defendants did not argue that Johnson's opinions were inadmissible under Federal Rule of Evidence 702, and the district court did not exclude his testimony on that basis. Rather, the district court determined that Johnson's opinions were of limited relevance due to his inexperience with large plans. (App.64.) We do not understand this statement to be a ruling that Johnson's opinions were irrelevant and thus inadmissible under Rule 402. [10] Instead, the district court decided that Johnson's opinions were entitled to less weight because of his inexperience with large plans. But, of course, a district court may not weigh the evidence at the summary judgment stage; it must view the evidence in the light most favorable to the non-movant. See, e.g., Payne v. Pauley, 337 F.3d 767, 770 (7th Cir.2003) ([O]n summary judgment a court may not make credibility determinations, weigh the evidence, or decide which inferences to draw from the facts). Thus, the district court erred by failing to assume that the trier of fact would have found Johnson's opinions credible. [11] The district court further erred by determining at the summary judgment stage that defendants satisfied their duty of prudence by relying on the advice of their consultants. Although the fact that defendants engaged consultants and relied on their advice with respect to Hewitt's fee is certainly evidence of prudence, it is not sufficient to entitle defendants to judgment as a matter of law. Keach v. U.S. Trust Co., 419 F.3d 626, 636-37 (7th Cir.2005) (stating that relying on advice from outside consultant is not a complete defense to a charge of imprudence); Howard v. Shay, 100 F.3d 1484, 1489 (9th Cir.1996) (same); Donovan v. Cunningham, 716 F.2d 1455, 1474 (5th Cir.1983) (stating that [a]n independent appraisal is not a magic wand that fiduciaries may simply waive over a transaction to ensure that their responsibilities are fulfilled); Donovan v. Bierwirth, 680 F.2d 263, 272 (2d Cir.1982) (stating that soliciting outside advice does not operate as a complete whitewash which, without more, satisfies ERISA's prudence requirement). Moreover, even if reliance on the advice of consultants were a complete defense, defendants' consultants did not unequivocally endorse the reasonableness of Hewitt's fee. In 2000, for example, one of the consultants, Buck, stated that Hewitt's fee seemed to be consistent with the standards of the industry and the prices of similar vendors. But Buck cautioned that without an actual fee quote comparisoni.e., a bid from another service providerit could not comment on the competitiveness of [Hewitt's] fee amount for the services provided. (Pls.' Stmt. of Add'l Facts ¶ 34.) Buck also opined that Hewitt should have offered a tiered pricing structure in which the per-participant cost went down as the number of participants went up. In this regard, Buck recommended that the cost per participant be $45 per year once the number of participants reached 30,000, and that the cost decline to $35 per participant per year once the number of participants exceeded 40,000. The contract that defendants entered into with Hewitt in 2000 did not contain such a tiered pricing structure or anything similar. Thus, after considering both the opinions of defendants' consultants and the opinions of plaintiffs' expert (along with any other admissible evidence), a trier of fact could reasonably conclude that defendants did not satisfy their duty to ensure that Hewitt's fees were reasonable. We therefore reverse the grant of summary judgment on this issue and remand for further proceedings.