No Quick Exit On 401(k) Class Action Alleging Imprudent Proprietary Fund Offerings

Seyfarth Synopsis: A district court recently denied a motion to dismiss a 401(k) proprietary fund class action, continuing an overwhelming trend of allowing these cases to survive pleading challenges. On the bright side, however, the Eighth Circuit recently affirmed a dismissal of such a case, and the first of these cases to be tried resulted in a defense victory, which is on appeal with the First Circuit.

The plaintiffs' bar sparked a new 401(k) class action trend a few years ago by targeting "proprietary" in- house investment products, alleging that fiduciaries were committing a breach by including their in-house proprietary funds in plans to the exclusion of less expensive, better-performing comparable options.