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Judge recommends dropping most of $4.2 billion pension lawsuit against Nestlé

A federal magistrate judge of the United States District Court in the Eastern District of Wisconsin mostly sided with Nestlé USA Inc. on Monday in recommend dismissal of a class action lawsuit alleging fiduciary negligence and insider trading in Nestlé’s $4.2 billion 401(k) savings plan, but gave way to two charges to be amended and refiled .

A plan member filed the class action lawsuit complaint on October 9, 2020alleging that Nestlé and its board of directors breached their fiduciary duties through actions that include charging excessive fees for managed account and insider services in their administration of the plan.

Most of the plaintiff’s allegations against Nestlé did not meet the requirements to move the case forward, Judge Stephen C. Dries wrote in the recommendation. He, however, said two counts related to the level and quality of record-keeping services were founded, suggesting that the plaintiff amend them and refile them with the court.

The United States District Judge assigned to the case, William C. Griesbach, referred it to Dries for his recommendation. The parties now have fourteen days to object to Griesbach’s recommendation to review and make his decision.

The original lawsuit alleged in part that a managed account service offered by Voya Retirement Advisors included additional fees that added no more material value for participants than its cheaper target date fund option. Dries noted in the recommendation that the plaintiff had never participated in managed account services and had never been charged any fees related to those services.

The plaintiff’s complaint also alleged that Nestlé had paid itself to provide an administrative service that added no value to the plan, was not provided for the exclusive benefit of participants and did not justify the payment of fees. The plaintiff alleged that the services could have been provided by the plan accountant.

Dries argued that the complaint made no “non-speculative” claims as to why Nestlé received the payments for the services. He also found that the plaintiff failed to prove that the services added no value to the plan and failed to prove that Nestlé was acting as the plan’s fiduciary at the time.

The lawsuit also alleged that Nestlé failed to adequately monitor record keeping and administration costs and regularly solicit quotes or offers from suppliers. Dries said the plaintiff did not prove a so-called “breach of loyalty” to the participants, but that there was enough context to make the claim admissible if resubmitted.

“The gist of these new claims is that for very large plans like the Nestlé plan…the record keeping services are essentially fungible, meaning the services are essentially the same regardless of who provides them,” he wrote. “Thus, the proposed amendment – ​​which alleges that the fees were excessive in relation to the level and quality of recordkeeping services received… – provides the necessary context to make this claim plausible.”

Nestlé did not respond to request for comment.