Retirement ERISA Fiduciary status.


Byline: Mass. Lawyers Weekly Staff

Where a defendant was the investment advisor for the plaintiffs' 401(k) plan, a claim alleging breach of fiduciary duties under the Employee Retirement Income Security Act must be dismissed because the plaintiffs have failed to plead fiduciary status as to the challenged conduct, but the plaintiffs' other claims should not be dismissed.

"Plaintiffs Feeney Brothers Excavation LLC ('Feeney Brothers') and Feeney Brothers Excavation Corporation 401(k) Plan ('the Plan') first brought this action in the Suffolk County Superior Court of Massachusetts alleging various state law causes of action against defendants Morgan Stanley & Co. LLC, Morgan Stanley Private Bank, N.A., Morgan Stanley Smith Barney (together, 'Morgan Stanley'), and Brian F. Miller.

"In pitching his investment advisory services to Feeney Brothers, Miller stressed his expertise in assisting 401(k) plans, not just by providing investment advice but also by ensuring that the Plan's administrative and regulatory needs were met by capable third-party administrators (TPAs). ... In that context, Miller represented to Feeney Brothers that Qualified Pension Services, Inc. ('QPSI') had the aptitude, ability, and expertise to administer the Plan.

"In reliance on Miller's expertise and advice, Feeney Brothers hired QPSI as the Plan's TPA.

"Feeney Brothers first became aware of QPSI's inability to meet reasonable standards of professional diligence following audits of the Plan completed in mid-October 2015 and mid-October 2016. ... As a result of the errors caused by QPSI, Feeney Brothers incurred the following damages: $676,950 in additional Plan contributions required by the IRS; more than $175,000 in attorneys' fees to remedy Plan defects and work with the IRS to achieve compliance through the Voluntary Correction Program; approximately $100,000 in Feeney Brothers in-house staff time to prepare the Voluntary Correction Program submission and remedy Plan defects; $50,845 in successor TPA fees for time devoted to remedying the Plan defects; $12,000 to accountants to identify and address the Plan defects; and $7,500 in fees to the IRS for participation in the Voluntary Correction Program a total of more than $1 million in losses.

"Plaintiffs subsequently filed an amended complaint alleging six causes of action that fall into three categories: (a) state law claims of negligent misrepresentation and fraudulent inducement relating to Defendants' pre-retention...

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