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In re G.E. Erisa Litigation

United States District Court, D. Massachusetts

December 14, 2018

IN RE G.E. ERISA LITIGATION

          MEMORANDUM & ORDER

          Indira Talwani United States District Judge

         This putative class action is brought by participants in a 401(k) plan[1] against institutional and individual defendants[2] alleging breaches of fiduciary duties and prohibited transactions in violation of the Employee Income Retirement Security Act of 1974 (“ERISA”). Second Consol. Am. Compl. (“Second Am. Compl.”) ¶ 1.[3] Pending before this court is Defendants' Motion to Dismiss the Second Consolidated Amended Complaint [#63]. After a hearing, the court denied the motion as to Counts I, II, V, VI, VII, and VIII, and took Counts III and IV under advisement. See Elec. Order [#93].

         For the following reasons, Defendants' motion is ALLOWED as to Count III and DENIED as to Count IV.

         I. FACTUAL ALLEGATIONS

         The following facts are relevant to Counts III and IV:

         Eligible employees of GE and participating affiliates can participate in GE's 401(k) Plan, a/k/a the GE Retirement Savings Plan (“the Plan”) by investing up to 30% of their eligible earnings in any of a number of investment options within the Plan. Second Am. Compl. ¶ 70. This action pertains to Plaintiffs' investments in five mutual funds among these options: the GE Institutional Strategic Investment Fund (“Strategic Investment Fund”), the GE Institutional Small Cap Equity Fund (“Small Cap Equity Fund”), the GE Institutional International Equity Fund (“International Equity Fund”), the GE RSP Income Fund (“Income Fund”), and the GE U.S. Equity Fund (“US Equity Fund”) (collectively, the “GE Funds”). Second Am. Compl. ¶¶ 1-2.

         The GE Funds are the only actively managed funds open to eligible employees of GE and participating affiliates. Id. ¶¶ 70-71. Employees and affiliates can also participate in the Plan by investing in the GE Stock Fund, six collective trust index funds, Target Date Funds, and/or a Money Market Fund. Id. ¶ 71. GE also required that certain proprietary investment options, the Income Fund and the U.S. Equity Fund, be offered to Plan participants. Id. ¶ 72.

         Plaintiffs allege that Defendants used the Plan participants to offset the investor exodus from the underperforming funds despite the fact that the Plan participants could have been better served by investment options from unaffiliated companies that were cheaper and better performing. Id. ¶ 5. As of December 31, 2015, the Plan owned the vast majority of assets in the five mutual funds; assets from Plan participants ranged from approximately 40% of all fund assets to approximately 96% of all fund assets, depending on the fund and the year. Id. ¶ 91.

         All of the Plan's actively managed funds were managed and sponsored by GE's wholly-owned subsidiary, GE Asset Management, until July 1, 2016, when GE sold the subsidiary to State Street for a reported $485 million dollars. Id. ¶¶ 75, 78. Plaintiffs allege that GE retained the poorly performing proprietary funds as a constant source of fees and to help inflate the market value of GE Asset Management prior to its sale to State Street. Id. ¶ 78. Of the total $28 billion-dollar value of the Plan, at the time of its sale, GE Asset Management managed $8 billion in assets. Id. ¶¶ 66, 78. Furthermore, from 2010 to 2016, GE earned more than $175 million in fees from the proprietary funds. Id. ¶ 7.

         II. DISCUSSION

         A. Statute of Limitations

         Defendants argue that Counts III and IV are barred because of the statute of limitations.

         Pursuant to 29 U.S.C. § 1113(2):

No action may be commenced under this subchapter with respect to a fiduciary's breach of any responsibility, duty, or obligation under this part, or with ...

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