United States District Court, D. Massachusetts
IN RE G.E. ERISA LITIGATION
AMENDED MEMORANDUM & ORDER
Talwani United States District Judge
putative class action is brought by participants in a 401(k)
against institutional and individual defendants alleging breaches
of fiduciary duties and prohibited transactions in violation
of the Employee Retirement Income Security Act of 1974
(“ERISA”). Second Consol. Am. Compl.
(“Second Am. Compl.”) ¶ 1
[#54]. Defendants filed a 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]. The court
subsequently issued a Memorandum and Order [#102]
allowing Defendants' motion as to Count III and denying
the motion as to Count IV. On Defendants' Motion for
Reconsideration [#105], the court has corrected portions
of the Memorandum and Order [#102] to address issues
of law raised by Defendants. However, for the reasons set
forth below, the court concludes that Defendants'
Motion to Dismiss the Second Consolidated Amended
Complaint [#63] as to Count IV must still be DENIED.
following facts are relevant to Counts III and IV:
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 [#54]. 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”). Id. at ¶¶ 1-2.
Funds are the only actively managed funds open to eligible
employees of GE and participating affiliates. Id. at
¶¶ 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. at ¶ 71. GE required
that certain proprietary investment options, the Income Fund
and the U.S. Equity Fund, be offered to Plan participants.
Id. at ¶ 72.
allege that Defendants used the Plan participants to offset
an investor exodus from the underperforming GE 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. at ¶ 5.
As of December 31, 2015, the Plan owned the vast majority of
assets in the GE 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. at ¶ 91.
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. Id. at
¶¶ 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. at
¶ 78. Of the total $28 billion value of the Plan, at the
time of its sale, GE Asset Management managed $8 billion in
Plan assets. Id. at ¶¶ 66, 78.
Furthermore, from 2010 to 2016, GE earned more than $175
million in fees from the proprietary funds. Id. at
Statute of Limitations
argue that Counts III and IV are barred because of the
statute of limitations.
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 respect to a violation of
this part . . .
(1) three years after the earliest date on which the
plaintiff had actual knowledge of the ...