April Hughes v. Northwestern University

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 18-2569
A PRIL HUGHES , et al.,
Plaintiffs-Appellants,
v.
NORTHWESTERN U NIVERSITY , et al.,
Defendants-Appellees.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:16-cv-08157 — Jorge L. Alonso, Judge.
____________________
A RGUED NOVEMBER 29, 2022 — DECIDED M ARCH 23, 2023
____________________
Before S YKES , Chief Judge, and H AMILTON and BRENNAN ,
Circuit Judges.
BRENNAN , Circuit Judge. On remand from Hughes v. North-
western University, 142 S. Ct. 737 (2022), we reexamine plain-
tiffs’ allegations that plan fiduciary Northwestern breached
its duty of prudence under the Employee Retirement Income
Security Act, 29 U.S.C. § 1104(a). Following Hughes, we dis-
cern three claims of breach that require reconsideration: that
Northwestern (1) failed to monitor and incurred excessive

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2 No. 18-2569
recordkeeping fees, (2) failed to swap out retail shares for
cheaper but otherwise identical institutional shares, and
(3) retained duplicative funds. We conclude that the first two
claims survive dismissal and remand them for further pro-
ceedings. For all other claims and issues, we reinstate this
court’s prior judgment in Divane v. Northwestern University,
953 F.3d 980 (7th Cir. 2020).
I. Background
A. Factual Background
Plaintiffs are individuals who participate in two defined-
contribution plans subject to ERISA: the Northwestern Uni-
versity Retirement Plan and the Northwestern University
Voluntary Savings Plan (the “Plans”). Subject to I.R.C.
§ 403(b), the Plans provide for tax-deferred contributions to
retirement accounts by employees of I.R.C. § 501(c)(3) non-
profits like defendant Northwestern University. As defined-
contribution plans, the Plans allow participants to direct the
investment of their contributions. But the investment options
included in the Plans are selected by the Plans’ fiduciary.
Northwestern University, as the employer, is the administra-
tor and fiduciary of the Plans. The university assigned some
of its fiduciary administrative duties to two Northwestern of-
ficers, the Northwestern University Retirement Investment
Committee, and its members. We refer to these fiduciary de-
fendants collectively as “Northwestern” or “the university.”
Northwestern selected various investment options offered
by the Teachers Insurance and Annuity Association of Amer-
ica and College Retirement Equities Fund (“TIAA”) and the
Fidelity Management Trust Company (“Fidelity”) to be in-
cluded in the Plans. Before October 2016, the Retirement Plan

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No. 18-2569 3
and the Savings Plan offered over 240 and 180 investment op-
tions, respectively, from TIAA and Fidelity. For example, the
TIAA Traditional Annuity, a fixed annuity contract that re-
turns a contractually specified minimum interest, is a popular
investment option in the Plans. This annuity has restrictions
and penalties for withdrawal, including a 2.5% surrender
charge if a participant withdraws the investment in a lump
sum sooner than 120 days after the termination of her employ-
ment. TIAA’s policy also requires any plan offering the
Traditional Annuity to use TIAA as a recordkeeper for its
products.
In October 2016, Northwestern streamlined its investment
options by greatly reducing the Plans’ offerings to 32 invest-
ment options spread across four tiers: target date mutual
funds, index funds, actively managed funds, and a self-di-
rected brokerage window. Leading up to this change, North-
western informed its plan participants that this new tiered
structure would “enable simpler decisionmaking,”
“[r]educe[] administration fees,” “increase[] participant re-
turns,” and provide “[a]ccess to lower cost share classes when
available.” Northwestern acknowledged that this restructur-
ing better aligned it with its peers who had reduced their in-
vestment line-ups.
B. Procedural Background
Plaintiffs filed suit alleging various ERISA violations. The
First Amended Complaint—the operative pleading—asserts
three violations of the duty of prudence under 29 U.S.C.
§ 1104(a)(1) (Counts I, III, & V), three counts of ERISA-
prohibited transactions under 29 U.S.C. § 1106(a)(1) (Counts
II, IV, & VI), and a claim against Northwestern University and
two officers for failure to monitor fiduciaries (Count VII).

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4 No. 18-2569
Count III alleges a breach of fiduciary duty by Northwest-
ern for incurring unreasonable recordkeeping fees. Among
other things, plaintiffs aver that Northwestern paid about
four to five times a reasonable per-participant recordkeeping
fee for the Plans in aggregate by paying for recordkeeping ser-
vices through uncapped revenue-sharing arrangements. Rev-
enue sharing allows fund providers to take a percentage of
the revenue from plan participants’ investments to defray the
participants’ recordkeeping and other administrative costs.
Per plaintiffs, Northwestern should have lowered its expenses
by consolidating from two recordkeepers to one, soliciting
bids from competing providers, and using the massive size
and correspondent bargaining power of the Plans to negotiate
for fee rebates.
Count V alleges a breach of fiduciary duty by Northwest-
ern’s failure to monitor the Plans’ investments and to remove
imprudent ones. As part of this claim, plaintiffs maintain that
the Plans contained too many funds and caused investor con-
fusion, and that Northwestern should have removed duplica-
tive funds that did nothing but add expenses to the Plans.
According to plaintiffs, Northwestern should have used its
size and bargaining power to replace retail-class shares of
funds with cheaper but otherwise identical institutional-class
shares of the same funds.
The district court granted Northwestern’s motion to dis-
miss plaintiffs’ First Amended Complaint. Relevant to this re-
mand, the court dismissed Count III (excessive recordkeeping
fees) finding that, under Seventh Circuit precedent, North-
western did not violate ERISA by using revenue sharing for
plan expenses. The court observed that it was not apparent
that the Plans could have arranged for lower fees. In any case,

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No. 18-2569 5
the court found that plan participants had options to keep
their expenses low by investing in low-expense funds that
were available in the Plans. The district court also dismissed
Count V (imprudent funds retention) because the Plans of-
fered the low-expense funds desired by plaintiffs and found
irrelevant that the Plans offered additional funds plaintiffs did
not want to choose. In the same order, the district court de-
nied plaintiffs’ April 2018 motion for leave to amend their
complaint, concluding that the proposed amendments were
untimely and futile.
Following this dismissal, the district court also denied
plaintiffs’ June 2018 motion to amend judgment and, in the
alternative, for leave to file a proposed Second Amended
Complaint. The proposed complaint largely mirrored the
First Amended Complaint, but it added certain alleged
admissions from Northwestern’s executives and an outside
consultant. These additions bolstered the plausibility of the
existing Counts III and V. The new Count VII repackaged
pleadings in Count V and claimed breach of fiduciary duty by
Northwestern’s failure to replace retail-class shares with in-
stitutional-class shares. Otherwise, Counts III and V remained
identical in the operative and proposed complaints.
This court affirmed the district court’s dismissal and
denial of leave to amend in Divane, 953 F.3d 980, largely
adopting its reasoning. The dismissal on Count III was af-
firmed because plaintiffs failed to support their claim that a
flat-fee structure—as opposed to revenue-sharing—is re-
quired by ERISA or would benefit plan participants. Id. at 989.
This court also held that ERISA does not require Northwest-
ern to use a single recordkeeper and observed that plaintiffs
had failed to allege that participants would have been better

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6 No. 18-2569
off in such an arrangement. Id. at 990. Plaintiffs had also failed
to identify an alternative low-cost recordkeeper who would
supply comparable recordkeeping services. Id. at 991.
Similarly, this court affirmed the dismissal on Count V
because the Plans offered some low-expense funds that “elim-
inat[ed] any claim that plan participants were forced to stom-
ach an unappetizing menu.” Id. Prior Seventh Circuit cases—
Loomis v. Exelon Corp., 658 F.3d 667, 673–74 (7th Cir. 2011), and
Hecker v. Deere & Co., 556 F.3d 575, 586 (7th Cir. 2009)—were
relied upon for the proposition that “plans may generally of-
fer a wide range of investment options and fees without
breaching any fiduciary duty.” Divane, 953 F.3d at 992. The
district court’s dismissal of other claims, denial of leave to
amend, and rejection of Plaintiffs’ jury demand were also af-
firmed. Id. at 993–94.
Plaintiffs petitioned for certiorari on only Counts III and V
of the First Amended Complaint.1 The certiorari petition did
not include plaintiffs’ other claims, the jury demand issue, or
the denial of leave to amend. Petition for Writ of Certiorari,
Hughes v. Nw. Univ., No. 19-1401. The Supreme Court granted
certiorari, vacated the judgment, and remanded the case for
reconsideration. Hughes, 142 S. Ct. 737. The Court rejected this
court’s reliance on a “categorical rule” that providing some
low-cost options eliminates concerns about other investment
options being imprudent. Id. at 740. We were directed to
reevaluate plaintiffs’ allegations based on the duty of pru-
dence articulated in Tibble v. Edison International, 575 U.S. 523
1 Laura Divane did not participate in this petition and is no longer
pursuing this appeal. So, April Hughes became the lead plaintiff and ap-
pellant, resulting in the changed caption.

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No. 18-2569 7
(2015), applying the pleading standard discussed in Ashcroft
v. Iqbal, 556 U.S. 662 (2009), and Bell Atlantic Corp. v. Twombly,
550 U.S. 544 (2007). Hughes, 142 S. Ct at 742.
II. Impact of Hughes
A. Scope of Remand
The Supreme Court identified three ways in which plain-
tiffs pleaded that Northwestern violated the duty of
prudence: (1) “respondents allegedly failed to monitor and
control the fees they paid for recordkeeping”; (2) “respond-
ents allegedly offered a number of mutual funds and annui-
ties in the form of ‘retail’ share classes that carried higher fees
than those charged by otherwise identical ‘institutional’ share
classes of the same investments”; and (3) “respondents alleg-
edly offered too many investment options … and thereby
caused participant confusion and poor investment decisions.”
Id. at 741. The first allegation relates to Count III, and the sec-
ond and third to Count V.
Plaintiffs acknowledge that they are not rearguing the jury
demand issue. In their briefs on remand, they ask to relitigate
only Counts III and V of the First Amended Complaint,
stating: “Northwestern imprudently incurred excessive
recordkeeping fees” (Count III); “Northwestern provided
higher-cost retail-class shares when identical lower-cost insti-
tutional-class shares of the same funds were available”
(Count V); and “Northwestern imprudently retained exces-
sively duplicative funds” (Count V).
Grounds not argued on appeal are waived. Bordelon v. Bd.
of Educ. of the City of Chi., 811 F.3d 984, 991 (7th Cir. 2016) (ci-
tation omitted). And generally, issues that were not argued
before the Supreme Court are not encompassed within a

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8 No. 18-2569
remand from the Court. See United States v. Husband, 312 F.3d
247, 250 (7th Cir. 2002) (citations omitted) (“[A]ny issue that
could have been but was not raised on appeal is waived and
thus not remanded.”); Buckley v. Fitzsimmons, 952 F.2d 965, 967
(7th Cir. 1992) (“But this topic was not raised in the Supreme
Court … and so is not encompassed within the remand.”),
rev’d on other grounds, 509 U.S. 259 (1993); 18B C HARLES A LAN
WRIGHT & A RTHUR R. M ILLER , F EDERAL PRACTICE AND
PROCEDURE § 4478.3 (3d ed. 2022) (explaining the “Law of the
Case—Mandate Rule”). But if the opinion on appeal identifies
an error that implicates and requires redetermination of other
issues not raised on appeal, we may consider them. See Hus-
band, 312 F.3d at 251.
Because plaintiffs did not petition for certiorari on and
have not reargued the following issues on remand, we do not
reconsider them: the TIAA products claim (Count I), the pro-
hibited transactions claims (Counts II, IV, and VI), and the
jury demand issue. Nothing in Hughes undercuts the bases on
which this court previously resolved these claims and issue,
so we reinstate this court’s prior decisions on them. See gener-
ally United States v. Romero, 528 F.3d 980, 981 (7th Cir. 2008)
(reinstating holdings not implicated by the Supreme Court’s
remand).
Plaintiffs do ask us to remand for reconsideration their re-
quest for leave to file their Second Amended Complaint.
While we agree that Hughes may strengthen the plausibility of
the recordkeeping, share-class, and duplicative funds claims
in the proposed Second Amended Complaint, ultimately, we
need not grant this request because we rule that the analogous
counts in the First Amended Complaint state plausible claims
for relief. The other counts in the proposed Second Amended

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No. 18-2569 9
Complaint2 are not implicated by Hughes, so we do not recon-
sider granting leave to amend for those claims. For those
counts, we reinstate this court’s former decision affirming the
district court’s denial of leave to amend.
B. Impact on Loomis and Hecker
Hughes abrogated a line of reasoning derived from Loomis,
658 F.3d 667, and Hecker, 556 F.3d 575. The Supreme Court
rejected this court’s reliance on a categorical rule that Count
V failed because plaintiffs’ “preferred type of low-cost invest-
ments were available as plan options.” Hughes, 142 S. Ct. at
740; see Divane, 953 F.3d at 991–92. Put another way, “ERISA
does not allow the soundness of investments A, B, and C to
excuse the unsoundness of investments D, E, and F.” Albert v.
Oshkosh Corp., 47 F.4th 570, 575 (7th Cir. 2022). The duty of
prudence requires a fiduciary to assess the prudence of each
investment both individually and relative to the entire plan.
Hughes negates some of the reasoning developed in Hecker
and Loomis and employed in Divane. See Forman v. TriHealth,
Inc., 40 F.4th 443, 452 (6th Cir. 2022) (“Hecker and Loomis dis-
missed imprudence claims in part because the retirement plan
under review offered a range of options, including some that
2 “Aside from … four new counts, the second amended complaint
mirrored the causes of action and claims in the amended complaint. The
four new counts alleged that Northwestern: (1) offered retail class funds
as investment options instead of using their bargaining power to offer in-
stitutional class shares at lower prices; (2) violated Northwestern’s Invest-
ment Policy Statement by failing to monitor investment performance and
recordkeeping costs; and (3) allowed TIAA to access and use participant
information to market its services to participants.” Divane, 953 F.3d at 985.
Hughes does not impact the district court’s findings of futility and undue
delay as to Counts VIII, IX, and X.

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10 No. 18-2569
were less expensive than the challenged retail mutual fund
shares. Hughes rejected that bright-line rule, precluding us
from evaluating these employees’ claims under it.”). Hecker
relied in part on the “wide range of expense ratios” in a plan
to dismiss a claim that a plan fiduciary provided investment
options with excessive fees. 556 F.3d at 586. Loomis, too, em-
ployed this reasoning to reject a share-class claim. 658 F.3d at
670. In Divane, this court also depended on the fact that North-
western had provided a “wide range of investment options”
in rejecting Count V. 953 F.3d at 992. As this court has recog-
nized in recent decisions, Hughes says providing a diverse
menu of investments alone is not dispositive that a plan fidu-
ciary has fulfilled the duty of prudence. Albert, 47 F.4th at
579-80; Dean v. Nat’l Prod. Workers Union Severance Tr. Plan, 46
F.4th 535, 548–49 n.4 (7th Cir. 2022).
Still, Hughes left untouched three principles from Loomis
and Hecker. The first is that the use of revenue sharing for plan
expenses does not amount to a per se violation of fiduciary
duty under ERISA. Hecker, 556 F.3d at 585. This goes to Count
III (excessive recordkeeping fees). But this principle does not
foreclose the possibility of violating a fiduciary duty by failing
to monitor and incur only reasonable expenses. Plan fiduciar-
ies have a continuing duty to monitor their expenses to make
sure that they are not excessive with respect to the services
received. See Tibble v. Edison Int’l, 843 F.3d 1187, 1197 (9th Cir.
2016) (“[A] trustee is to ‘incur only costs that are reasonable
in amount and appropriate to the investment responsibilities
of the trusteeship.’”(quoting R ESTATEMENT (THIRD) OF TRUSTS
§ 90(c)(3))); Tibble v. Edison Int’l, 575 U.S. 523, 525 (2015).3
3 The Tibble litigation has a lengthy procedural history. For our pur-
poses, its two most relevant opinions are the Supreme Court’s decision

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No. 18-2569 11
Switching from a revenue-sharing to a per capita expense
model may in some cases be a proper means of reining in ex-
cessive expenses. But Hughes does not state that revenue shar-
ing is an impermissible expense arrangement.
The second principle is that “nothing in ERISA requires
every fiduciary to scour the market to find and offer the
cheapest possible fund.” Hecker, 556 F.3d at 586; Loomis, 658
F.3d at 670. This primarily goes to Count V (imprudent fund
retention) but does not account for the share-class claim em-
bedded within Count V. This principle does not address the
duty of a fiduciary when it has access to a cheaper but other-
wise identical fund from the same fund provider. ERISA re-
quires a fiduciary to assess whether a given fund is prudent
in light of other investment options in a plan, comparable
funds, and the expenses charged, among other factors. See
Tibble, 575 U.S. at 529–30.
Also, the second principle accords with this court’s prior
conclusion about Count III that “Northwestern was not re-
quired to search for a recordkeeper willing to take $35 per
year per participant as plaintiffs would have liked.” Divane,
953 F.3d at 990–91. In Albert, this court read this portion of
Divane as “reject[ing] the notion that a failure to regularly so-
licit quotes or competitive bids from service providers
breaches the duty of prudence.” 47 F.4th at 579. Albert
vacating the judgment of the Ninth Circuit in Tibble v. Edison International,
575 U.S. 523 (2015), and the Ninth Circuit’s en banc decision following re-
mand from the Court in Tibble v. Edison International, 843 F.3d 1187 (9th
Cir. 2016). The former explained the continuing duty to monitor invest-
ments within the duty of prudence, and the latter expounded upon this
duty with regards to plan expenses. We distinguish the cases by their re-
porter designations.

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12 No. 18-2569
determined that Hughes left this portion of Divane untouched.
See id. at 579–80. While true, Hughes directed us to reconsider
plaintiffs’ allegations concerning excessive recordkeeping
fees in light of the continuing duty to monitor such fees stated
in Tibble, 575 U.S. 523. Hughes, 142 S. Ct at 742. We reaffirm
that a fiduciary need not constantly solicit quotes for record-
keeping services to comply with its duty of prudence. But fi-
duciaries who fail to monitor the reasonableness of plan fees
and fail to take action to mitigate excessive fees—such as by
adjusting fee arrangements, soliciting bids, consolidating
recordkeepers, negotiating for rebates with existing record-
keepers, or other means—may violate their duty of prudence.
The third principle is that plans may generally offer a wide
range of investment options and fees without breaching any
fiduciary duty. Loomis, 658 F.3d at 673–74; Hecker, 556 F.3d at
586. Nothing in Hughes undercuts this general proposition,
but as mentioned earlier, the Supreme Court rejected this
court’s reliance on a categorical rule that a plan fiduciary may
avoid liability by assembling a diverse menu of investment
options that includes the types of investments a plaintiff de-
sires. Hughes, 142 S. Ct. at 741–42.
III. Pleading Standard
Before evaluating whether plaintiffs have stated a claim in
Counts III and V, we must specify the correct pleading stand-
ard for a breach of the duty of prudence under ERISA. Hughes
offers some guidance but stops short of pronouncing a con-
crete standard. The Court directed us to “consider whether
petitioners have plausibly alleged a violation of the duty of
prudence as articulated in Tibble,” 575 U.S. 523, applying the
pleading standard from Iqbal and Twombly. Hughes, 142 S. Ct.
at 742. The Court then quoted Fifth Third Bancorp v.

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No. 18-2569 13
Dudenhoeffer, 573 U.S. 409, 425 (2014), stating that the inquiry
into the duty of prudence is “context specific.” Id. The Court
concluded with a sentence, the meaning of which the parties
debate. We first address the duty of prudence articulated in
Tibble, 575 U.S. 523, and then determine the pleading stand-
ard.
A. Duty of Prudence
Under the duty of prudence mandated in ERISA, a plan
fiduciary is required to “discharge his duties with respect to
a plan … with the care, skill, prudence, and diligence under
the circumstances then prevailing that a prudent man acting
in a like capacity and familiar with such matters would use in
the conduct of an enterprise of a like character and with like
aims.” 29 U.S.C. § 1104(a)(1). “In determining the contours of
an ERISA fiduciary’s duty, courts often must look to the law
of trusts.” Tibble, 575 U.S. at 528–29. The Supreme Court has
stated that “a trustee has a continuing duty to monitor trust
investments and remove imprudent ones … separate and
apart from the trustee’s duty to exercise prudence in selecting
investments at the outset.” Id. at 529. “If the fiduciaries fail to
remove an imprudent investment from the plan within a rea-
sonable time, they breach their duty.” Hughes, 142 S. Ct. at 742
(citing Tibble, 575 U.S. at 529–30). This continuing duty to
monitor is a subset of the duty of prudence, Tibble, 575 U.S. at
529–30, and includes two related components.
First, the duty of prudence requires a plan fiduciary to sys-
tematically review its funds both at the initial inclusion of a
particular fund in the plan and at regular intervals to deter-
mine whether each is a prudent investment. Id. at 529 (“[T]he
trustee must ‘systematic[ally] conside[r] all the investments
of the trust at regular intervals’ to ensure that they are

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14 No. 18-2569
appropriate.” (quoting A MY M ORRIS HESS, GEORGE G LEASON
BOGERT, & GEORGE TAYLOR BOGERT, BOGERT’ S LAW OF TRUSTS
AND TRUSTEES § 684, at 147–48 (3d ed. 2009) (“BOGERT’ S LAW
OF TRUSTS”)); A USTIN WAKEMAN SCOTT, M ARK L. A SCHER , &
WILLIAM F RANKLIN F RATCHER , SCOTT AND A SCHER ON TRUSTS
§§ 19.3, 19.4 (6th ed. 2022) (“S COTT ON TRUSTS ”). “‘Managing’
embraces monitoring, that is, the trustee’s continuing respon-
sibility for oversight of the suitability of investments already
made as well as the trustee’s decisions respecting new invest-
ments.” U NIF . PRUDENT I NVESTOR A CT § 2, cmt. (U NIF . L.
C OMM ’ N 1995); Tibble, 575 U.S. at 529. “When the trust estate
includes assets that are inappropriate as trust investments, the
trustee ordinarily has a duty to dispose of them within a rea-
sonable time.” SCOTT ON TRUSTS § 19.3.1; see also BOGERT’ S LAW
OF TRUSTS § 685; Tibble, 575 U.S. at 529–30.
Second, the duty of prudence requires a plan fiduciary to
“incur only costs that are reasonable in amount and appropri-
ate to the investment responsibilities of the trusteeship.” Tib-
ble, 843 F.3d at 1197 (quoting R ESTATEMENT (T HIRD) OF TRUSTS
§ 90(c)(3)); see also Sweda v. Univ. of Pa., 923 F.3d 320, 328 (3d
Cir. 2019) (“Fiduciaries must also understand and monitor
plan expenses.”); Davis v. Washington Univ. in St. Louis, 960
F.3d 478, 483 (8th Cir. 2020) (discussing a fiduciary’s duty to
keep plan expenses under control). “Expenses, such as man-
agement or administrative fees, can sometimes significantly
reduce the value of an account in a defined-contribution
plan.” Tibble, 575 U.S. at 525. So “cost-conscious management
is fundamental to prudence in the investment function,” and
should be applied “not only in making investments but also
in monitoring and reviewing investments.” R ESTATEMENT
(THIRD) OF TRUSTS § 90, cmt. B; see also id. § 88, cmt. A (“Im-
plicit in a trustee’s fiduciary duties is a duty to be cost-

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No. 18-2569 15
conscious.”). “Wasting beneficiaries’ money is imprudent.”
U NIF . PRUDENT I NVESTOR A CT § 7, cmt. (U NIF . L. C OMM ’ N
1995).
The duty to monitor stated in Tibble, 575 U.S. 523, will in-
form our analysis of Counts III and V. But Tibble “express[ed]
no view on the scope of … fiduciary duty” and identified no
pleading standard for a violation of that duty. Id. at 531. Tibble
involved summary judgment and findings following a bench
trial—not a motion to dismiss—so its relevance is limited in
determining what allegations survive a motion to dismiss. Id.
at 523.
B. Dudenhoeffer’s Reach
The parties dispute the meaning of the last sentence in
Hughes: “At times, the circumstances facing an ERISA fiduci-
ary will implicate difficult tradeoffs, and courts must give due
regard to the range of reasonable judgments a fiduciary may
make based on her experience and expertise.” 142 S. Ct. at 742.
This sentence is preceded by the citation to Dudenhoeffer, 573
U.S. at 425, quoting that the content of the duty of prudence
is “context specific.” Hughes, 142 S. Ct. at 742. Plaintiffs read
Hughes’s last sentence as dicta and not as a part of the stand-
ard to plead a violation of the duty of prudence. In contrast,
Northwestern reads the sentence as incorporating Dudenhoef-
fer’s heightened pleading standard, namely that “a plaintiff
must plausibly allege an alternative action that the defendant
could have taken … that a prudent fiduciary in the same cir-
cumstances would not have viewed as more likely to harm
the fund than to help it.” 573 U.S. at 428. For Northwestern,
that means plaintiffs must plead that an alternative prudent
action which the fiduciary should have taken was “actually

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16 No. 18-2569
available” and that plaintiffs must “rule out reasonable expla-
nations” for failure to take that action.
Dudenhoeffer involved an employee stock ownership plan
(ESOP) in which fiduciaries allegedly had negative inside in-
formation about the stock the plan contained. Id. at 412–13.
The duty of prudence there involved a conflict between the
fiduciary’s knowledge of negative inside information about
the stock versus the fiduciary’s adherence to insider trading
laws and a reasonable belief that halting stock purchases
“would do more harm than good to the fund by causing a
drop in the stock price.” Id. at 428–30. This unique tradeoff
caused the Supreme Court to set a heightened pleading stand-
ard for that case. The Court also limited the higher standard
to claims for breach of the duty of prudence based on inside
information by fiduciaries of an ESOP. 573 U.S. at 428. Since
Dudenhoeffer, the Court has reaffirmed that the case “set forth
the standards for stating a claim for breach of the duty of pru-
dence against fiduciaries who manage employee stock own-
ership plans (ESOPs).” Amgen Inc. v. Harris, 577 U.S. 308, 309
(2016).
Northwestern overreads the reference in Hughes to Duden-
hoeffer as adopting that case’s heightened pleading standard.
Rather, the citation in Hughes to Dudenhoeffer signals that the
duty of prudence inquiry is “context specific,” but no more.
Because this case does not involve an ESOP, Dudenhoeffer’s
standard does not apply. But the context specific inquiry is
key. It is in this light that we read the Supreme Court’s di-
rective to recognize the “difficult tradeoffs” that an ERISA fi-
duciary faces, and the “range of reasonable judgments” that
may be made, and to consider alternative explanations for the
fiduciary conduct complained of. But as we discuss next,

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No. 18-2569 17
these alternative explanations need not be conclusively ruled
out at the pleadings stage.
C. Contours of the Pleading Standard
Plausibility is the basic test for pleadings on a motion to
dismiss. A plaintiff’s “[f]actual allegations must be enough to
raise a right to relief above the speculative level on the as-
sumption that all allegations in the complaint are true.”
Twombly, 550 U.S. at 555 (citations and footnote omitted).
Plaintiffs must provide “some further factual enhancement”
to take a claim of fiduciary duty violation from the realm of
“possibility” to “plausibility.” Id. at 557. “A claim has facial
plausibility when the plaintiff pleads factual content that al-
lows the court to draw the reasonable inference that the de-
fendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at
678. So for Counts III and V, plaintiffs must have alleged
enough facts to show that a prudent fiduciary would have
taken steps to reduce fees and remove some imprudent in-
vestments.
A fiduciary’s actions may give rise to different infer-
ences—some that suggest a breach of fiduciary duty and oth-
ers that do not. While Hughes did not expressly address how
we are to resolve such varying inferences on a motion to dis-
miss, the Court directed us to apply the pleading standard
discussed in Iqbal and Twombly. Hughes, 142 S. Ct. at 742. The
alternative inference that can arise from fiduciary conduct is
analogous to the “obvious alternative explanation” that the
Court in Twombly accounted for when assessing telephone
carriers’ parallel conduct in an antitrust action. 550 U.S. at
567–68. There, the Court highlighted “[t]he inadequacy of
showing parallel conduct or interdependence,” which “with-
out more” would be equally “consistent with conspiracy” as

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18 No. 18-2569
it is with a “rational and competitive business strategy unilat-
erally prompted by common perceptions of the market.” Id.
at 554. This suggests that something “more,” id., is necessary
to survive dismissal when there is an obvious alternative ex-
planation that suggests an ERISA fiduciary’s conduct falls
within the range of reasonable judgments a fiduciary may
make based on her experience and expertise. Hughes, 142 S.
Ct. at 742.
In Iqbal, the Supreme Court reaffirmed that obvious
alternative explanations should be accounted for when con-
sidering constitutional claims alleging that federal officials
unlawfully discriminated against the plaintiff by detaining
him. 556 U.S. at 682. There, too, the Court ruled that the
Pakistani Muslim plaintiff had not overcome the obvious al-
ternative explanation that he had been arrested because of his
suspected link to the 9/11 attacks rather than because of “pur-
poseful, invidious discrimination.” Id. Twombly and Iqbal
establish that an obvious alternative explanation for a defend-
ant’s conduct that precludes liability can undermine the
claim’s plausibility. Id. at 682; Twombly, 550 U.S. at 567. But
neither do these cases say a plaintiff must conclusively rule
out every possible alternative explanation for a defendant’s
conduct, no matter how implausible. Only obvious alternative
explanations must be overcome at the pleadings stage, and
only by a plausible showing that such alternative explana-
tions may not account for the defendant’s conduct. Accord-
ingly, whether a claim survives dismissal necessarily depends
on the strength or obviousness of the alternative explanation
that the defendant provides.
Other circuits are in accord that every possible alternative
explanation for an ERISA fiduciary’s conduct need not be

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No. 18-2569 19
ruled out at the pleadings stage. Forman, 40 F.4th at 452–53
(“The theory merely provides a competing inference for why
TriHealth offered retail-class funds,” but “the facts of another
complaint might suggest an alternative explanation that ren-
ders implausible an inference of imprudence.”); Sacerdote v.
N.Y. Univ., 9 F.4th 95, 108 (2d Cir. 2021); Davis, 960 F.3d at 483
(“WashU has identified one plausible inference, but it is not
the only one.”); Sweda, 923 F.3d at 326; Braden v. Wal-Mart
Stores, Inc., 588 F.3d 585, 597 (8th Cir. 2009).
Northwestern contends that we should not rely on
Sacerdote and Sweda because in those cases the courts failed to
require the plaintiffs to rule out every possible alternative ex-
planation for an ERISA fiduciary’s conduct. See Sacerdote, 9
F.4th at 108; Sweda, 923 F.3d at 326 (citing Braden, 588 F.3d at
597). For this reason, Northwestern suggests those cases were
not decided under the Twombly pleading standard. But
Twombly and Iqbal provide that only obvious alternative ex-
planations should be accounted for at the dismissal stage. See
Twombly, 550 U.S. at 567; Iqbal, 556 U.S. at 682. These cases did
not hold that every possible alternative explanation must be
conclusively ruled out on the pleadings to state a claim. The
Third Circuit in Sweda and the Second Circuit in Sacerdote—as
well as the other circuits cited above—rejected the reading of
Twombly and Iqbal that Northwestern advances here. Sweda,
923 F.3d at 326; Sacerdote, 9 F.4th at 108.
Where alternative inferences are in equipoise—that is,
where they are all reasonable based on the facts—the plaintiff
is to prevail on a motion to dismiss. See Forman, 40 F.4th at 450
(“Equally reasonable inferences … could exonerate TriHealth
… [b]ut at the pleading stage, it is too early to make these
judgment calls.”). This is because, at the pleadings stage, we

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20 No. 18-2569
must accept all well-pleaded facts as true and draw reasona-
ble inferences in the plaintiff’s favor. Taha v. Int’l Bhd. of
Teamsters, Loc. 781, 947 F.3d 464, 469 (7th Cir. 2020) (citation
omitted); Davis, 960 F.3d at 483. A court’s role in evaluating
pleadings is to decide whether the plaintiff’s allegations are
plausible—not which side’s version is more probable. See
Twombly, 550 U.S. at 556. Thus, on a motion to dismiss, courts
must give due regard to alternative explanations for an ERISA
fiduciary’s conduct, Hughes, 142 S. Ct. at 742, but they need
not be overcome conclusively by the plaintiff.
Sometimes an alternative explanation for an ERISA fidu-
ciary’s conduct may be patently more reasonable and better
supported by the facts than any theory of fiduciary duty vio-
lation pleaded by a plaintiff. In such a scenario, courts should
not hesitate to dismiss an ERISA claim for breach of the duty
of prudence. This will often be the case where a plan fiduciary
has actually performed the requisite diligence in monitoring
plan expenses and fund prudence. If a plan fiduciary suffi-
ciently monitors funds and expenses, its informed course of
action is much more likely to be within “the range of reason-
able judgments a fiduciary may make based on her experience
and expertise.” Hughes, 142 S. Ct. 737 at 742.
To plead a breach of the duty of prudence under ERISA, a
plaintiff must plausibly allege fiduciary decisions outside a
range of reasonableness. See Hughes, 142 S. Ct. at 742. How
wide that range of reasonableness is will depend on “‘the cir-
cumstances ... prevailing’ at the time the fiduciary acts.”
Dudenhoeffer, 573 U.S. 409, 425 (citing 29 U.S.C.
§ 1104(a)(1)(B)). The discretion accorded to an ERISA fiduci-
ary “will necessarily be context specific.” Id.

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No. 18-2569 21
Often, as here, the ERISA fiduciary will defend against al-
legations of breach of duty by arguing that the course of ac-
tion the plaintiff says the fiduciary should have taken was not
available. Under this reasoning, Northwestern argues plain-
tiffs must plead that a prudent alternative action was “actu-
ally available.” This is a variant of the alternative explanation
defense. That a prudent alternative action was unavailable, of
course, can explain the fiduciary’s failure to take that action.
We see no reason to treat this alternative explanation dif-
ferently than any other. To the extent that the prudent course
of action was unavailable, that will foreclose the claim. But if
a course of action was only possibly unavailable, further fac-
tual development on the pleadings will be necessary to re-
solve the claim on that explanation. The actual availability
that Northwestern asks us to incorporate into the pleading
standard goes beyond the plausibility standard of Iqbal and
Twombly. “[A] well-pleaded complaint may proceed even if it
strikes a savvy judge that actual proof of those facts is improb-
able … .” Twombly, 550 U.S. at 556. At the pleadings stage, a
plaintiff must provide enough facts to show that a prudent
alternative action was plausibly available, rather than actually
available.
IV. Analysis
We now evaluate Counts III and V of the First Amended
Complaint under the pleading standard for the duty of pru-
dence.
A. Count III—Excessive Recordkeeping Fees
Plaintiffs pleaded that Northwestern incurred unreasona-
ble recordkeeping fees by failing to monitor and control those
expenses. Per plaintiffs, the university should have reduced

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22 No. 18-2569
its fees by soliciting bids from competing providers, negotiat-
ing with existing recordkeepers for fee reductions, and con-
solidating to a single recordkeeper.
This court previously affirmed dismissal on Count III be-
cause: (1) ERISA does not require a flat-fee structure;
(2) Northwestern explained that it retained TIAA as a sepa-
rate recordkeeper so it could continue offering TIAA’s popu-
lar Traditional Annuity; and (3) plan participants could keep
recordkeeping expenses low by selecting low-cost funds,
which were made available through the Plans. Divane, 953
F.3d at 989–90, 991 n.10. As discussed earlier, Hughes fore-
closes the third reason for the prior decision. 142 S. Ct. at 742
(rejecting this court’s reliance on plan participant control over
funds selection). As for the second, the desire to retain the Tra-
ditional Annuity among plan offerings is an alternative expla-
nation that we assess under our newly formulated pleading
standard. On the first, Hughes left untouched the holding in
Hecker that the use of revenue sharing for plan expenses does
not amount to a per se violation of fiduciary duty under
ERISA. Hecker, 556 F.3d at 585. But just because a revenue-
sharing fee arrangement does not amount to a per se ERISA
violation does not also mean that using such an arrangement
in every case fulfills the plan fiduciary’s duty of prudence.
Further analysis is warranted in light of the ERISA fiduciary’s
continuing duty to monitor plan expenses stated in Tibble, 575
U.S. 523.
Recall that the duty of prudence includes a continuing
duty to monitor plan expenses and “incur only costs that are
reasonable in amount and appropriate” with respect to the
services received. Tibble, 843 F.3d at 1197. So, Count III’s sur-
vival depends on whether plaintiffs have pleaded sufficient

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No. 18-2569 23
facts to render it plausible that Northwestern incurred unrea-
sonable recordkeeping fees and failed to take actions that
would have reduced such fees.
To begin, plaintiffs alleged that the Plans together paid be-
tween four to five million dollars a year in recordkeeping fees
when, based on a $35 flat fee per participant, a more reasona-
ble amount would have been about one million dollars. Plain-
tiffs assert that $35 was a reasonable per participant fee
“[b]ased on the Plans’ features, the nature of the administra-
tive services provided by the Plans’ recordkeepers, the num-
ber of participants in the Plans (approximately 30,000), and
the recordkeeping market.” In Albert, this court affirmed dis-
missal of a similar claim in which the plaintiff pleaded that
the relevant ERISA plan paid an average of $87 per participant
in recordkeeping fees despite a reasonable fee being $40 per
participant based on what comparator funds paid. 47 F.4th at
579. This court in Albert depended in large part on the previ-
ous holding in Divane that the defendant “was not required to
search for a recordkeeper willing to take $35 per year per par-
ticipant as plaintiffs would have liked.” Id. (citing Divane, 953
F.3d at 990–91). This holding remains correct, but Hughes di-
rects us to reconsider plaintiffs’ allegations concerning exces-
sive recordkeeping fees given the continuing duty to monitor
such fees stated in Tibble, 575 U.S. 523. We reaffirm that a fi-
duciary need not constantly solicit quotes for recordkeeping
to comply with his duty of prudence with respect to plan ex-
penses. See Hecker, 556 F.3d at 586; Loomis, 658 F.3d at 670. But
a fiduciary who fails to monitor the reasonableness of plan
fees and fails to take action to mitigate excessive fees may vi-
olate the duty of prudence.

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24 No. 18-2569
Further, Albert emphasized the lack of “allegations as to
the quality or type of recordkeeping services the comparator
plans provided.” Id. at 579. This court cited two Sixth Circuit
cases, Smith v. CommonSpirit Health, 37 F.4th 1160, 1169 (6th
Cir. 2022), and Forman, 40 F.4th at 449, for the rule that claims
alleging excessive recordkeeping fees fail when ERISA plain-
tiffs do not plead that the fees were excessive in relation to the
services provided. Albert, 47 F.4th at 580. But in affirming dis-
missal, Albert left open the possibility “that recordkeeping
claims in a future case could survive the ‘context-sensitive
scrutiny of a complaint’s allegations’ courts perform on a mo-
tion to dismiss.” Id. (citing Dudenhoeffer, 573 U.S. at 425). The
pleadings here lead us down that different path.
Unlike in Albert, plaintiffs here assert “[t]here are numer-
ous recordkeepers in the marketplace who are equally capable
of providing a high level of service to large defined contribu-
tion plans like the Plans.” So, plaintiffs maintain that the qual-
ity or type of recordkeeping services provided by competitor
providers are comparable to that provided by Fidelity and
TIAA. Plaintiffs also plead that because recordkeeping ser-
vices are “commoditized … recordkeepers primarily differen-
tiate themselves based on price, and will aggressively bid to
offer the best price in an effort to win the business, particu-
larly for jumbo plans like the Plans.” In short, plaintiffs allege
that recordkeeping services are fungible and that the market
for them is highly competitive. Plaintiffs also contend that $35
per participant was a reasonable recordkeeping fee based on
the services provided by existing recordkeepers and the
Plans’ features. Unlike the plaintiffs in CommonSpirit Health,
plaintiffs plead that the fees were excessive relative to the
recordkeeping services rendered. See 37 F.4th at 1169.

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No. 18-2569 25
Plaintiffs also provide examples of several other university
I.R.C. § 403(b) plans that successfully reduced recordkeeping
fees by soliciting competitive bids, consolidating to a single
recordkeeper,4 and negotiating rebates. Plans offered by
Loyola Marymount University, Pepperdine University, Pur-
due University, and California Institute of Technology suc-
cessfully lowered recordkeeping fees by consolidating
recordkeepers, according to plaintiffs. Purdue and CalTech
leveraged plan assets to lower fees by negotiating for a flat
administrative fee structure and revenue-sharing rebates, re-
spectively. Plaintiffs also cite industry experts who recom-
mended soliciting bids for recordkeeping and consolidating
to a single recordkeeper to reduce overall fees.
Per plaintiffs, despite these recognized benefits, North-
western neglected to monitor its recordkeeping fees under its
revenue-sharing fee arrangement. Instead, the university
continued to contract with TIAA and Fidelity instead of con-
solidating, did not conduct competitive bidding for record-
keeping services, and failed to use the Plans’ size to negotiate
rebates from existing providers. Plaintiffs also pleaded that
Northwestern successfully lowered the Plans’ administrative
fees (including recordkeeping fees) in the October 2016 re-
structuring, which suggests that Northwestern’s recordkeep-
ing fees were unreasonably high and that means to lower such
fees were available. Under the context-specific pleading
standard specified above, all these factual averments lead us
to conclude that plaintiffs have plausibly alleged that
4 Consolidation of recordkeepers was not at issue in Albert, 47 F.4th
570.

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26 No. 18-2569
Northwestern violated its duty of prudence by incurring un-
reasonable recordkeeping fees.
Northwestern responds that these pleadings fail to state a
claim because plaintiffs have not demonstrated that consoli-
dating to a single recordkeeper was an available alternative or
that an alternative recordkeeper would have accepted a lower
fee than that paid to Fidelity or TIAA. But under the pleading
standard, plaintiffs have sufficiently alleged that record-
keeper consolidation and soliciting an equally capable but
lower-cost recordkeeper were available options. Plaintiffs
point to other institutions that had successfully consolidated
and reduced fees. And they maintain that the market is com-
petitive with equally capable recordkeepers who can provide
comparable services for less.
Requiring plaintiffs to prove that another recordkeeper
would have offered a lower fee or that consolidation was
actually available would apply Dudenhoeffer’s heightened
pleading standard, rather than the lower Twombly and Iqbal
plausibility requirement. The Supreme Court in Hughes di-
rected us to examine the duty of prudence in light of context,
Hughes, 142 S. Ct. at 742 (citing Dudenhoeffer, 573 U.S. at 425),
but Dudenhoeffer’s pleading standard does not extend beyond
ESOPs. At the pleadings stage, plaintiffs were required to
plausibly allege that Northwestern’s failure to obtain compa-
rable recordkeeping services at a substantially lesser rate was
outside the range of reasonable actions that the university
could take as plan fiduciary. They have done so.
Northwestern offers alternative explanations for its failure
to consolidate recordkeepers and to switch to a per capita fee
arrangement. The university posits that dropping TIAA as a
recordkeeper would remove the popular Traditional Annuity

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No. 18-2569 27
from the Plans and that retaining TIAA as sole recordkeeper
would have compromised the Plans’ ability to offer Fidelity
investments. Northwestern also highlights that TIAA
imposes a penalty for withdrawing investments in the Tradi-
tional Annuity. Although these are reasonable alternative
explanations, they do not explain why the university did not
negotiate with TIAA and Fidelity to lower fees for plan par-
ticipants, whether through rebates or a modified fee arrange-
ment. Count III is not limited to a failure to consolidate
recordkeepers. It includes a claim that Northwestern failed to
mitigate excessive recordkeeping fees in several ways.
Northwestern also argues that plaintiffs failed to address
the fact that a per capita fee would discourage small investor
participation. But neither has the university shown why en-
couraging small participant investment is worth charging an
alleged four to five times in recordkeeping fees to plan partic-
ipants. An equally, if not more, plausible inference would be
that the university neglected to keep its recordkeeping fees
paid through revenue sharing at a reasonable level. North-
western’s alternative explanations are not strong enough to
justify dismissal of the recordkeeping claim on the pleadings.
See Forman, 40 F.4th at 450; Davis, 960 F.3d at 483. So, we hold
that plaintiffs have pleaded a plausible claim in Count III.
* * *
We are not alone in our conclusion on this type of claim.
Two circuits have ruled against dismissing similar claims that
alleged a failure to lower recordkeeping expenses. See Davis,
960 F.3d at 482–83; Sweda, 923 F.3d at 330–31. The Second Cir-
cuit also recognized that consolidating recordkeepers may re-
duce fees, but that court affirmed dismissal of a similar claim

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28 No. 18-2569
because the plan fiduciary consolidated recordkeepers within
a reasonable time. Sacerdote, 9 F.4th at 119–20.
In reaching this conclusion, we reiterate that the inquiry
into the duty of prudence is in all cases “context specific.”
Hughes, 142 S. Ct. at 742 (quoting Dudenhoeffer, 573 U.S. at
425). Claims for excessive recordkeeping fees in a future case
may or may not survive dismissal based on different plead-
ings and the specific circumstances facing the ERISA fiduci-
ary. But here, plaintiffs have pleaded enough to cross the line
from possibility to plausibility.
B. Count V—Imprudent Fund: Share-Class Claim
Plaintiffs also contend Northwestern “selected and re-
tained for years as the Plans’ investment options mutual
funds and insurance company variable annuities with high
expenses and poor performance relative to other investment
options that were readily available to the Plans at all relevant
times.” At bottom, Count V alleges imprudent fund retention.
As part of this claim, plaintiffs said Northwestern retained
multiple duplicative funds that caused plan participant con-
fusion and inaction. We address that contention separately in
Section IV.C. Plaintiffs also allege that the Plans included
“mutual funds and variable annuities with retail expense ra-
tios far in excess of other lower-cost options available to the
Plans.” To plaintiffs, this and other pleadings state a claim
that Northwestern breached its duty of prudence by failing to
replace retail-class shares of funds with cheaper but otherwise
identical institutional-class shares.
Northwestern disputes that Count V includes such a
share-class claim. But the university construes Count V too
narrowly and skips over many allegations in plaintiffs’ First

-- 28 of 35 --

No. 18-2569 29
Amended Complaint that support a share-class claim. In ad-
dition to the pleadings already cited, plaintiffs maintain that
institutional and retail shares differ only in that retail shares
have higher expenses. They allege that although institutional
shares have minimum investment thresholds, it is common
for large plans to obtain waivers for such requirements. Plain-
tiffs claim that jumbo defined-contribution plans like North-
western’s had “massive bargaining power” that enabled them
to obtain such a waiver from fund managers. In support,
plaintiffs state that other fiduciaries had successfully negoti-
ated for including institutional-class shares in their plans de-
spite not meeting the minimum investment requirements.
Importantly, in Hughes the Supreme Court identified a
share-class claim in Count V, namely that Northwestern had
“offered a number of mutual funds and annuities in the form
of ‘retail’ share classes that carried higher fees than those
charged by otherwise identical ‘institutional’ share classes of
the same investments.” 142 S. Ct. at 741. That share-class
claim is separate from the duplicative funds claim, also in
Count V, that we discuss later in Section IV.C. This court pre-
viously affirmed dismissal of Count V because Northwestern
provided some of the low-cost index funds that plaintiffs
sought. Divane, 953 F.3d at 991. The Supreme Court rejected
that reasoning, Hughes, 142 S. Ct. at 740, so we reexamine the
pleadings in light of the continuing duty to monitor plan in-
vestments outlined in Tibble, 575 U.S. 523. Under that stand-
ard, we conclude that the share-class claim survives.
Plaintiffs’ share-class pleadings are similar to those in
Tibble. Plaintiffs alleged that Northwestern retained more ex-
pensive retail-class shares of 129 mutual funds when, by us-
ing Northwestern’s size and correspondent bargaining

-- 29 of 35 --

30 No. 18-2569
power, less expensive but otherwise identical institutional-
class shares were available to the Plans. Similarly, in Tibble
petitioners “argued that respondents acted imprudently by
offering six higher priced retail-class mutual funds as Plan in-
vestments when materially identical lower priced institu-
tional-class mutual funds were available.” 575 U.S. at 525–26.
“[E]xpress[ing] no view on the scope of respondents’ fiduci-
ary duty,” the Court remanded the case. Id. at 531.
On remand, the Ninth Circuit restated much of the Su-
preme Court’s clarification on the continuing duty to monitor
and remanded for reconsideration of the district court’s bench
trial findings on the share-class claim. Tibble, 843 F.3d at 1199.
In turn, the district court found, for all mutual funds at issue,
that “no prudent fiduciary would purposefully invest in
higher cost retail shares” and granted judgment for the plain-
tiffs. Tibble v. Edison Int’l, No. CV 07-5359 SVW (AGRx), 2017
WL 3523737, at *12 (C.D. Cal. Aug. 16, 2017). It follows from
the similarity of the share-class claim in Tibble with the allega-
tions here that this claim should survive dismissal.
Northwestern argues plaintiffs have not pleaded that in-
stitutional-class shares were actually available to the Plans.
The university points out that access to institutional-class
shares often requires significant minimum investment by in-
vestors. To Northwestern, plaintiffs provide merely naked as-
sertions that the university could have obtained waivers of
these investment minimums. But as described above, under
Twombly and Iqbal, a plaintiff is required to show only that
such cheaper institutional shares were plausibly available.
Northwestern has contended that the institutional shares are
only possibly unavailable. We cannot determine on the plead-
ings, for example, whether the university had tried to bargain

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No. 18-2569 31
with existing fund providers for access to institutional-class
shares but failed. Nor can we discern whether Northwestern
ever considered the possibility of access to institutional shares
for its plan participants.
To the contrary, plaintiffs plausibly allege that waivers of
investment minimums were possible, and that Northwestern
could have negotiated for institutional-class shares. These al-
legations are substantiated by statements from industry ex-
perts that jumbo retirement plans like Northwestern’s have
massive bargaining power. Plaintiffs noted the district court’s
finding in the proceedings prior to Tibble, 575 U.S. 523, that it
is “common for investment advisors representing large 401(k)
plans to call mutual funds and request waivers of the invest-
ment minimums so as to secure the institutional shares.” Tib-
ble v. Edison Int’l, No. CV 07-5359 SVW(AGRx), 2010 WL
2757153, at *9 (C.D. Cal. July 8, 2010). They also highlighted
how other large I.R.C. § 403(b) plans had leveraged plan as-
sets to bargain for access to institutional-class shares and cited
one specific example of a plan doing so. These allegations ren-
der it plausible that institutional-class shares were available
to Northwestern.
Northwestern also contends that retail-class shares are su-
perior to institutional-class shares because their higher fees
allow plans, through revenue sharing, to pay for recordkeep-
ing and other administrative expenses—a feature, it argues,
that encourages small plan participants to invest. In Loomis,
this court considered a similar alternative explanation in fa-
vor of revenue sharing over per capita fee arrangements. See
658 F.3d at 672 (“[F]or … others with small investment bal-
ances, a capitation fee could work out to more, per dollar un-
der management … .”). This is just one possible explanation

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32 No. 18-2569
for why Northwestern chose to retain such a large number of
retail-class shares. But this explanation is not so much more
obvious than plaintiffs’ account that this issue can be resolved
on the pleadings. Plaintiffs allege that Northwestern failed to
consider bargaining for cheaper institutional-class shares
with existing fund providers to the detriment of plan partici-
pants. Plaintiffs’ version is especially plausible in light of their
allegation that the Plans collectively paid about four to five
times as much in recordkeeping fees as they should have.
In Loomis, this court also noted other advantages that re-
tail-class shares could offer in contrast to institutional-class
shares: Pooled investment in institutional shares “lacks the
mark-to-market benchmark provided by a retail mutual
fund” and so imposes greater difficulties in valuing the in-
vestment relative to market. Id. Further, institutional shares
are less liquid than retail shares, which allow daily transfers.
Id. Even more, this court observed that the average expense
ratio of institutional shares in equity funds was higher than
any of the retail shares offered to the plaintiff plan partici-
pants. Id. This was to show that the relevant plan in Loomis
had competitively priced retail shares compared to institu-
tional shares on average.
These other claimed advantages of retail shares appear no-
where in the pleadings or the parties’ briefs. Instead, plaintiffs
maintain that the institutional shares in question are identical
to corresponding retail shares in terms of investment and
management. The only difference, plaintiffs allege, is that re-
tail shares charge significantly higher fees.
In this respect, plaintiffs’ share-class claim is special in that
the comparator action that a prudent fiduciary should have
taken—replacing retail shares with institutional shares—is

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No. 18-2569 33
baked into the claim. See Forman, 40 F.4th at 451 (“Different
ERISA claims have different requirements, to be sure. But this
claim has a comparator embedded in it.”); Sacerdote, 9 F.4th at
108 (observing that the plaintiffs alleged that a “superior al-
ternative investment”—institutional shares—was apparent
by simply reviewing the fund prospectus); Davis, 960 F.3d at
483–87 (analyzing comparator benchmark funds for an alleg-
edly underperforming fund but not for a share-class claim on
the same fund).
Northwestern’s alternative explanations about the una-
vailability of institutional-class shares or the advantages of
using higher revenue-sharing payments in retail shares to de-
fray recordkeeping costs, could explain Northwestern’s fail-
ure to swap out its retail for institutional shares. But based on
the facts pleaded, these alternative inferences are not strong
enough to overcome the equally, if not more, reasonable in-
ference that Northwestern failed to use its size to bargain for
cheaper institutional shares. Drawing these reasonable infer-
ences in plaintiffs’ favor, they have plausibly alleged that
Northwestern’s failure to swap out retail-class for institu-
tional-class shares was outside the range of reasonable deci-
sions a fiduciary could take. So, we hold that plaintiffs have
stated a share-class claim in Count V.
* * *
Five other circuits—four since Divane—have joined in this
conclusion to uphold similar share-class claims against dis-
missal. See Forman, 40 F.4th at 450 (recognizing “[e]qually rea-
sonable inferences” from the facts on why a fiduciary would
choose retail over institutional shares, but acknowledging
that “at the pleading stage, it is too early to make these judg-
ment calls”); Kong v. Trader Joe’s Co., No. 20-56415, 2022 WL

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34 No. 18-2569
1125667, at *1 (9th Cir. Apr. 15, 2022); Sacerdote, 9 F.4th at 108;
Davis, 960 F.3d at 483 (observing that a failure to negotiate
aggressively enough or to negotiate at all for lower-cost alter-
natives is enough to state a claim for a breach of the duty of
prudence); Sweda, 923 F.3d at 331–32.
C. Count V—Imprudent Fund: Duplicative Funds Claim
As stated earlier, we see a separate claim in Count V that
Northwestern breached its duty of prudence by retaining
multiple duplicative funds. Plaintiffs claim that the excessive
options in the Plans caused “decision paralysis” and led to in-
vestor confusion.
To the extent investor confusion is the injury pleaded, the
First Amended Complaint does not identify how plaintiffs
were confused and personally injured by the multiplicity of
funds. This court’s prior opinion affirmed that plans may gen-
erally offer a wide range of investment options and fees with-
out breaching any fiduciary duty. Divane, 953 F.3d at 992
(citing Loomis, 658 F.3d at 673–74; Hecker, 556 F.3d at 586).
Hughes left this general principle untouched. Unspecific alle-
gations that a fiduciary provided too many funds, without
more, do not state a claim for breach of the duty of prudence.
So, we affirm dismissal of the duplicative funds claim in
Count V that is based on a theory of investor confusion.
Plaintiffs also maintained that consolidating duplicative
investments of the same style into a single investment option
would have allowed the Plans to obtain lower-cost invest-
ments—such as low-cost institutional shares of the fund. In-
deed, the pleadings on the October 2016 restructuring suggest
that Northwestern accomplished just that. To the extent the
allegations for the duplicative funds claim support the share-

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No. 18-2569 35
class claim, on remand the district court may consider them
on the Count V share-class claim.
V. Conclusion
For the reasons stated, we R EVERSE the district court’s dis-
missal of the excessive recordkeeping fees claim in Count III
and the share-class claim in Count V of the First Amended
Complaint, and R EMAND for further proceedings. For all other
claims and issues, we reinstate this court’s judgment in
Divane, 953 F.3d 980, and we A FFIRM the district court’s dis-
missal of Plaintiffs’ First Amended Complaint on all other
counts and A FFIRM the denial of Plaintiffs’ requests for leave
to further amend the complaint and for a jury trial.

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