TRENTON, NJ – A federal judge has dismissed a proposed class action lawsuit accusing Novo Nordisk Inc. and its fiduciary boards of mismanaging a $1.2 billion employee retirement plan, marking a legal victory for the pharmaceutical giant in a closely watched ERISA case.
In an opinion issued Monday, U.S. District Judge Zahid N. Quraishi granted a motion to dismiss filed by Novo Nordisk, its Board of Directors, and the company’s Retirement Committee, finding that plaintiffs failed to sufficiently allege that the defendants breached their fiduciary duties under the Employee Retirement Income Security Act (ERISA).
The suit, filed in September by five named plaintiffs including John Fumich and Laura Mischley, claimed that Novo Nordisk failed to properly scrutinize investment options and inflated administrative fees in its 401(k) plan, which holds more than $1.2 billion in assets. The plaintiffs argued that plan participants were charged excessive fees while the company allegedly used participant funds to reduce its own contributions.
The proposed class would have included all non-defendant participants or beneficiaries of the plan from September 13, 2018, through the date of judgment.
But Judge Quraishi ruled that the plaintiffs didn’t meet the legal burden required under ERISA to establish that the investment selections or fee structures were imprudent. The court also noted that plaintiffs failed to demonstrate specific actions or omissions that crossed the threshold of fiduciary breach.
Court documents show that the plaintiffs had cited broad allegations that the plan fiduciaries did not adequately review investments or control costs, but failed to present concrete comparisons or facts that would show a violation of ERISA standards. The judge found the complaint to be conclusory and lacking the specificity required to proceed.
Novo Nordisk had argued that the plaintiffs relied on hindsight and speculative reasoning, which the court appeared to agree with in granting the dismissal.
While the case has been dismissed, plaintiffs may seek to amend their complaint or appeal the ruling. For now, however, Novo Nordisk and its fiduciary boards will not face trial over their handling of the company’s retirement savings plan.