In the world of ERISA litigation, process often trumps perfection. That was the story in Waldner v. Natixis, where a federal judge dismissed claims that Natixis and its plan committee acted disloyally and imprudently by loading up a $440 million retirement plan with proprietary funds.
The plaintiff, Brian Waldner, argued the plan’s committee—made up entirely of Natixis employees—filled the plan with high-fee, underperforming affiliated funds to benefit the company, not participants. He claimed a breach of loyalty, imprudent selection and monitoring, and excessive fees.
But after a full trial, Judge Leo T. Sorokin saw it differently. While he acknowledged the plan had a heavy dose of proprietary funds—18 out of 28 during the class period—he found no evidence of disloyal intent. ERISA doesn’t ban proprietary funds. It just requires fiduciaries to act solely in the interest of participants when choosing them.
What saved Natixis? Process. The committee relied on Mercer, an independent investment consultant, reviewed fund performance at regular meetings, and consulted experienced ERISA counsel. They even rejected some proprietary funds and considered alternatives. When they chose affiliated options, they were among the top-performing available—hardly a red flag.
Judge Sorokin made it clear: just having Natixis employees on the committee or favoring in-house funds doesn’t prove disloyalty. Plaintiffs needed evidence of self-dealing or undue influence—and they didn’t have it.
As for the prudence claim, the judge admitted the committee wasn’t a model of perfection. There were lapses, including delays in conducting a full investment structure review. But he noted that the committee still reviewed detailed performance reports and acted based on independent advice. No specific misstep tied to actual losses, and that’s what ERISA requires.
In short, the committee may have made mistakes, but they didn’t breach their fiduciary duties.
What This Means
This case is a reminder that ERISA litigation is about process. You don’t need to be perfect—you just need to be prudent and loyal. Get good advisors, follow a documented process, and make decisions in participants’ best interests. Even if you wear two hats, as an employer and a fiduciary, just make sure you’re wearing the right one at the right time.
In the end, Judge Sorokin said it best: “Neither shows the true colors of this case.” Not the plaintiff’s portrayal of a conflicted committee, nor the defense’s image of perfection. What won here wasn’t a rosy picture, it was reasonable, documented decision-making.
