Pomerantz Wins Major Corporate Governance Victory against Douglas Elliman
In an important decision for ERISA (Employee Retirement Income Security Act) breach of fiduciary duty class litigation, the Southern District of New York reaffirmed that individuals who exercise discretionary authority over retirement plans cannot avoid legal liability by acting through a committee. On May 28, 2026, Judge Jennifer L. Rochon of the Southern District of New York granted Pomerantz’s motion to add the 16 individual members of the Mitsubishi Chemical America’s Retirement Plan Administrative Committee as defendants to the ERISA breach of fiduciary duty class action. The case is led by Partner Gustavo F. Bruckner and is captioned Humphries v. Mitsubishi Chemical America, Inc. et al., No. 1:23-cv-06214.
The Court clarified that fiduciary status is not dependent on a formal title or Plan documents, but more broadly on the actual authority that an individual exercises. By focusing on what fiduciaries do, and not the titles laid out in the Plan documents, the Court reaffirmed one of ERISA’s core principles.
Background
The lawsuit alleged that Plan fiduciaries breached their fiduciary duty to the Plan by failing to prudently monitor higher-cost share classes of the Plan’s investment options. Under ERISA, fiduciaries must act “solely in the interest of the participants and beneficiaries,” and exercise “care, skill, prudence, and diligence” in managing plan assets. ERISA also expressly requires a fiduciary to monitor investment options on an ongoing basis.
Plaintiffs alleged that Mitsubishi Chemical and the Plan fiduciaries defaulted in their duties by failing to monitor share class options for the Plan’s investment options. The difference between share classes is cost—they otherwise represent identical portfolios of underlying assets and are managed by the same investment professionals. Because large retirement plans can often qualify for institutional share classes with lower fees, prudent fiduciaries are expected to regularly evaluate whether participants are paying unnecessary investment expenses. These low-cost share classes often provide greater long-term returns for investors because they may allow investors to keep more of their money while performing as well as higher-cost share classes.
Plaintiffs alleged that Mitsubishi Chemical failed to use the Plan’s substantial bargaining power to obtain lower-cost share classes that were accessible to the Plan. Instead, the Plan allegedly continued to offer more expensive investment options. Defendants sought to dismiss Plaintiffs’ claim and argued that expensive share classes were more prudent for the Plan since they resulted in revenue sharing payments — an agreement whereby mutual funds return a portion of their share class fees to cover administrative costs. On August 19, 2025, the Court granted in part and denied in part Defendants’ motion to dismiss Plaintiffs’ amended complaint. In particular, the Court denied the motion to dismiss Plaintiffs’ claim that Defendants breached their fiduciary duty to the Plan “by offering more expensive mutual fund share classes when cheaper, identical share classes of the same fund were available as investment options for the Plan.”
The Court Grants Inclusion of Additional Individual Committee Members
Following that ruling, Plaintiffs sought leave to amend their complaint to add the sixteen individual members of the Administrative Committee. Plaintiffs alleged that these individuals were fiduciaries because they exercised discretionary authority and control over the administration of the Plan and the management of its assets, including the selection and monitoring of the Plan’s investment options and investment advisors.
Plaintiffs further alleged that, because the Administrative Committee had already been sustained as a defendant and its status as a fiduciary was undisputed, identifying the individuals who comprised the committee during the relevant period was both appropriate and necessary, particularly where, as here, a committee acts only through its members.
Mitsubishi Chemical argued that amendment would be futile because (1) the Plan documents vested fiduciary authority exclusively in the Administrative Committee itself, not in its individual members, and therefore the individual members could not be held liable for fiduciary decisions; and (2) Plaintiffs’ allegations did not sufficiently allege individual wrongdoing by each committee member. The Court rejected both claims.
The Court rejected Defendants’ first argument and explained that ERISA did not require, in every instance, that an individual be specifically imbued with fiduciary authority. The Court emphasized ERISA’s function-over-form definition of fiduciary and held that the statute is also concerned with those individuals who exercise fiduciary authority even when it is not specifically granted to them. Thus, even if the Plan documents did not expressly delegate fiduciary authority to the individual members, Plaintiffs plausibly alleged that they acted as functional fiduciaries through their service on the Administrative Committee. The Court therefore declined to adopt the bright-line rule urged by Defendants that the Administrative Committee’s fiduciary status shielded its individual members from ERISA liability and noted that several courts in the Second Circuit and beyond had rejected that proposition.
The Court also noted that additional equitable relief could be sought by adding individual members. As the Second Circuit recognized in Sacerdote, such equitable relief may include the removal of one or more of the individual members from the Plan’s administrative committee, and seeking such relief required naming the individual members as defendants.
The Court also rejected Defendants’ second contention and held that Plaintiffs adequately alleged that the individual members of the Administrative Committee were liable for breaching their fiduciary duties. The Court noted that Plaintiffs were not attempting to impose liability based merely on the defendants’ corporate or formal titles. Rather, Plaintiffs alleged that each individual member exercised discretionary authority over the administration of the Plan and the selection and monitoring of its investment options through service on the Plan’s Administrative Committee, a body that Defendants conceded was a Plan fiduciary and which was alleged to have committed those breaches. At the pleading stage, those allegations were sufficient to support amendment.
Furthermore, the Court also disagreed with Defendants that Plaintiffs’ allegations constituted impermissible group pleading. The Court explained that, as the Second Circuit has also made clear, Plaintiffs “do not always need to ‘separate out claims against individual defendants’ as long as those defendants have ‘notice of the substance of plaintiff’s claims’ against them. In particular, if a plaintiff alleged that multiple defendants engaged in the same conduct, the plaintiff may properly make ‘allegations against “Defendants” collectively.” Thus, the Court held that since it had sustained a claim against two defendants, it saw no reason to hold that allegations based on the same common set of facts would be insufficient for an additional set of fiduciary defendants. However, the Court clarified that if, during discovery, facts suggested that an individual member should not be subjected to liability, Plaintiffs should move expeditiously to voluntarily dismiss those individual members from this action.
The opinion is an important reminder that ERISA fiduciary status turns on function rather than form. Companies cannot necessarily avoid individual fiduciary liability simply by vesting decision-making authority in a committee or by relying on formal language in plan documents. If an individual exercises discretionary authority over a retirement plan or its investment options, they may themselves qualify as fiduciaries under ERISA.
In recent decades, employers have shifted from a pension-led retirement model, in which employees are guaranteed a stable income upon retirement, to a 401(k)-led retirement model, where employees directly invest their own funds for retirement and bear much of the financial risk associated with investing in financial markets. Though employees now have more agency in choosing where to invest and how much they want to invest, employers still have the authority to choose which funds their employees can invest in. This power makes it all the more imperative that employers fulfill their fiduciary duties to employees and help employees secure their own future. Pomerantz will continue to serve as an advocate for employees who now bear greater risks and deserve to reap more substantial rewards.