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Published by Jake Leahy

After SCOTUS Remand, Seventh Circuit Revives Northwestern ERISA Case

In Hughes v. Northwestern, the Supreme Court reviewed the issue of whether respondents, who administered retirement plans on behalf of Northwestern University employees violated ERISA’s duty of prudence. The plaintiffs alleged that certain investment options were unreasonably expensive, and therefore, should not have been offered to employees.

Plaintiffs alleged that the duty or prudence was violated under ERISA as the Respondent allegedly: (1.) failed to monitor and control recordkeeping fees; (2.) offered mutual funds in retail share classes that had unreasonably high fees for an identical share class of investments; and (3.) offered options that were likely to confuse investors.

The Northern District of Illinois originally granted Northwestern’s Motion to Dismiss. The Seventh Circuit affirmed. The Seventh Circuit’s judgment was, in part, a result of the fact that the Plaintiffs had not actually selected certain investment options in question. The Supreme Court ultimately vacated the judgment, holding that the Seventh Circuit erred in relying on the ultimate choice that the participants made in regards to their investments. The Supreme Court ruled that the participants choosing other investment options was not grounds to excuse the alleged imprudent decisions.


The Seventh Circuit now had to concern each of the three breach claims. Those claims are: Northwestern (1.) failed to monitor and incurred excessive recordkeeping fees, (2.) failed to swap out retail shares for cheaper but otherwise identical institutional shares, and (3.) retained duplicative funds. On remand, the court concluded that the first two portions have survived dismissal and are remanded to District Judge Jorge Alonso for further consideration. To the third portion, the court’s prior judgment is reinstated, ultimately meaning that it is now dismissed.1

1 Divane v. Northwestern University, 953 F.3d 980 (7th Cir. 2020)