An Arkansas federal judge has dismissed a proposed class action lawsuit against Tyson Foods Inc. alleging excessive 401(k) recordkeeping fees. The judge ruled that the plaintiffs failed to provide sufficient comparisons to better-managed plans, as required by the Eighth Circuit.

Tyson Foods Escapes 401(k) Recordkeeping Fee Suit : Judge Brooks Grants Tyson's Motion

In an order on Tuesday, U.S. District Judge Timothy L. Brooks granted Tyson's motion to dismiss the Employee Retirement Income Security Act (ERISA) suit without prejudice, citing a failure to state a claim. The judge noted that the plaintiffs’ flawed comparisons undermined their allegations of excessive recordkeeping and administration (RKA) fees, especially after Tyson argued that its higher "bundled" fees covered extra services.

"Plaintiffs' admission that the comparator plans were charged certain fees for basic bundled RKA services, but Tyson may have been charged higher fees for extra services means that plaintiffs have failed to state a plausible recordkeeping-fee claim," Judge Brooks said.

Tyson Foods Escapes 401(k) Recordkeeping Fee Suit: Background of the Case

The decision follows an in-person oral argument on the motion in July. The proposed class of Tyson employee 401(k) plan participants initially filed the suit in November 2023, accusing Tyson of breaching ERISA's fiduciary duties by paying excessive fees to Northwest Plan Services Inc. for recordkeeping services for its $3.2 billion employee 401(k) plan. The participants claimed that the $41 per-participant cost for a combination of RKA services in 2018 was excessive for a plan of its size, which included more than 63,000 participants. They argued that Tyson should have taken steps to reduce these costs.

Insufficient Comparisons and Eighth Circuit Standards

Judge Brooks concluded that the comparator plans cited by the plaintiffs were not sufficiently similar to Tyson’s plan in terms of the services provided by the recordkeepers and the sizes of the plans. This did not meet the Eighth Circuit pleading standard set in 2022 in Matousek v. Mid-American Energy Co., which requires plaintiffs alleging excessive recordkeeping fees to identify comparable, less expensive plans offering the same services.

In addition to the admission from the proposed class that extra services might justify higher costs, Judge Brooks pointed out that the comparator plans varied widely in total assets, further weakening the plaintiffs' case.

Next Steps for the Plaintiffs

Paul Secunda, an attorney for the plaintiffs, stated on Wednesday that an amended complaint would be filed soon to address the court's concerns comprehensively.

Legal Representation

The workers are represented by Randall K. Pulliam of Carney Bates & Pulliam PLLC and Paul M. Secunda of Walcheske & Luzi LLC. Tyson Foods is represented by Jeremy P. Blumenfeld, Sean McMahan, Christopher Diffee, and Mat McKenna of Morgan Lewis & Bockius LLP, as well as Karen P. Freeman and Colt D. Galloway of Mitchell Williams Selig Gates & Woodyard PLLC.