In a victory for Mr. Clayton’s clients, a federal court has denied two motions to dismiss their ERISA claim that were filed by a 401(k) plan’s outside administrator and custodian.

Mr. Clayton brought an ERISA suit in federal court on behalf of his clients – a law firm, its 401(k) plan, and one of the plan’s investors – after the investor was shocked to learn that his entire retirement account had been emptied without his knowledge.  As it turned out, the plan’s outside administrator and/or custodian had arranged to wire the investor’s life’s savings to a bank account held by cyber thieves in response to fraudulent withdrawal emails that falsely purported to have been sent by the investor.

The plan’s administrator and custodian both filed motions to dismiss, arguing that their contracts disclaimed any fiduciary status or responsibility, and that they could not be held liable for following written withdrawal instructions.

But the Court disagreed.  Instead, it found that defendants’ contractual disclaimers were superseded by ERISA, and that they were functioning as fiduciaries by virtue both of the plan’s documents as well as the defendants’ actual disposition of plan assets.  It further found that the scope of the defendants’ fiduciary duties extended to safeguarding plan assets from theft.  As a result, it denied both defendants’ motions to dismiss the plaintiffs’ core ERISA claims.

A copy of the court’s opinion is here.