Insights From Encore Fiduciary on Fiduciary Liability & Other Risk Exposures of Employee Benefit Plans


Insights From Encore Fiduciary on Fiduciary Liability & Other Risk Exposures of Employee Benefit Plans

Yale Fiduciary Breach Verdict: No Damages and Causation Standards

yale campus fall

By Daniel Aronowitz

The jury verdict for the defense in the Yale excess fee case, at least with respect to claims of excess recordkeeping fees, never made sense.  The jury found that the Yale fiduciaries breached their fiduciary duties in the process of monitoring plan recordkeeping fees, and checked the box on the jury verdict form that Yale participants suffered a loss, but found zero damages.  This paradox was always destined for an appeal.

Now that Plaintiff-Appellants have filed their appeal brief, their main argument is that confusing jury verdict is because the judge gave a wrong and overly lenient standard for loss causation that allowed the Yale fiduciaries to escape liability.  Specifically, the judge instructed the jury to find no liability if a hypothetical fiduciary “could have” made the same decision, as opposed to plaintiffs’ preferred instruction of whether a hypothetical fiduciary “would have” made the same decision.  The Department of Labor has filed a supporting amicus brief arguing that the lenient “could have” loss or causation standard used in the Yale trial “sets a dangerously low bar for breaching fiduciaries to clear that undermines ERISA’s protective purposes.”

The standard for loss causation is a key element that defines the fiduciary standard of liability for plan sponsors.  A “would have” causation standard will make it exponentially easier for plaintiff law firms to recover damages in fiduciary breach lawsuits when a factfinder finds a deficient fiduciary process.  A reversal on this jury instruction also makes it very likely that the Yale Plaintiffs would be granted a new trial to decide damages for the jury’s finding of a failure to follow a prudent fiduciary process for recordkeeping fees.  But there is an even more fundamental issue with respect to the causation analysis, as we do not believe that the burden of proof should have shifted to the defense in the first place.  This is the key issue in the pending Home Depot appeal in which the district court found material issues of fact on procedural prudence, but held that the evidence established objective prudence and thus loss causation was not established.  We believe that the judicial error was actually that plaintiffs – not defendants – had the burden to prove causation.

From our perspective, the Yale case should never have gone to a jury, because ERISA fiduciary liability is too complex for lay persons to evaluate.  The jury’s responses on the jury verdict form are hard to reconcile.  But believe that the jury nevertheless intended to find no liability, because it decided in the supplemental causation instruction that a prudent fiduciary could have made the same fiduciary decisions.  The question of whether a prudent fiduciary could have negotiated the same recordkeeping arrangement should be the liability standard – not the causation standard.  At a minimum, the jury verdict supports a finding of objective prudence.  We believe the jury was trying to communicate that the decision to remain with two recordkeepers and an asset-based recordkeeping arrangement until the 2014-15 plan changes should not be the basis for any liability or damages, because a prudent fiduciary could have made the same choice.  In other words, we believe the jury’s verdict is not a paradox if understood in the context of the facts of the case that the Yale Defendants consolidated to one recordkeeper and lower fees in 2014-15 before they were sued in 2016.  With this factual perspective, the jury likely intended to find no liability on the alleged imprudent process, even if they relied on the special damages interrogatory to voice their decision.

We discuss the complexities of fiduciary loss causation more fully below.

The Yale Excess Fee Jury Trial Verdict

In the four-week jury trial, plaintiffs pursued four claims for breach of fiduciary prudence, asserting that the Yale defendants:  (1) allowed unreasonable recordkeeping and administrative fees to be charged to participants in the Plan (“First Claim”); (2) failed to appropriately monitor investment options offered to participants in the Plan (“Second Claim”); (3) failed to select appropriate share classes for investment options in the plan (“Third Claim”); and (4) imprudently agreed to TIAA’s requirement that a plan offering the TIAA Traditional Annuity must also offer the CREF Stock Account (“Fourth Claim”).  On June 28, 2023, the jury entered a verdict for Defendants on each of these claims.  The main thrust of the appeal is on the First Claim regarding excess recordkeeping fees.

The excess recordkeeping claim was that Defendants failed to monitor and control the asset-based revenue sharing paid to TIAA and Vanguard, the two recordkeepers for the Yale $3.8B plan.  Plaintiffs argued that Yale fiduciaries did not have a process to monitor plan recordkeeping fees; that it failed to conduct an RFP for recordkeeping fees; that Yale fiduciaries failed to consolidate to one recordkeeper; and that the Yale defendants failed to change the asset-based recordkeeping fees to a fixed, per-participant fee.  As noted above, defendants gave evidence at trial that they consolidated to one recordkeeper in 2014-15 and reduced the recordkeeping fees by switching to a per-participant recordkeeping.  Defendants also adduced evidence that they were proactive in seeking changes during the entire time period before the significant plan changes.

The jury verdict read in part:

I. First Claim (Recordkeeping and Administrative Fees)

A .  Have the plaintiffs proven by a preponderance of the evidence that the defendants breached their duty of prudence by allowing unreasonable recordkeeping and administrative fees to be charged to participants in the Plan?   Yes

B. Have the plaintiffs proven by a preponderance of the evidence that the defendants’ breach of fiduciary duty resulted in a loss to the Plan? Yes

If you answer Yes, the loss proved by the plaintiffs is:  $0

The jury verdict asked a supplemental question as to whether other fiduciaries following a prudent process could have made the same recordkeeping fee decisions, and the answer was yes:

II. Special Interrogatories

A. Have the defendants proven by a preponderance of the evidence that a fiduciary following a prudent process could have made the same decisions as to recordkeeping and administrative fees as the defendants? (emphasis added by Euclid)  Yes

In their appeal, plaintiffs argue – and DOL concurs in its amicus brief – that the district court’s instructions and verdict form allowed Defendants “to avoid liability based on the mere possibility that a hypothetical fiduciary ‘could have’ made the same decisions.”  Plaintiffs argue that the court improperly rejected Plaintiff’s proposed instruction, which would have required Defendants to show that a hypothetical prudent fiduciary “would have” made the same decisions.

The Causation Standard

Appellant’s Principal brief and DOL’s supporting amicus brief both filed on December 14, 2023 argue that under ERISA, common law, and every circuit that has addressed the issue, the proper ERISA loss causation inquiry is what likely would have occurred in the absence of the breach, not what could have occurred.  The appellate court to address the issue in the most focused way is Tatum v. RJR Pension Inv. Comm., 761 F.3d 346, 363-65 (4th Cir. 2014) in which the Fourth Circuit rejected the “could have” standard in favor of the “would have” standard.  The Fourth Circuit reasoned that “[w]e would diminish ERISA’s enforcement provision to an empty shell if we permitted a breaching fiduciary to escape liability by showing nothing more than the mere possibility that a prudent fiduciary ‘could have’ made the same decision.”  Plaintiff-Appellants argue that the “goal of compensatory damages is to restore the victim to the position that it would have occupied had the misconduct not occurred, [and thus] the question of what could have happened but for the breach if simply irrelevant.”  Finally, citing the Fourth Circuit in Tatum, Plaintiff-Appellants argue that while “a fiduciary need only adhere to its ERISA duties to avoid liability,” ERISA “requires that” a fiduciary who has violated its duties “be held monetarily liable for the Plan’s loss.”[i]

This is a complex area of the law, but it is not as cut-and-dried as Plaintiff-Appellants articulate.  While we wait for the Yale Defendants to respond in the appeal, we think there are three key causation issues in this important appeal:  

  • (1) Whether the burden of proof should have shifted to defendants to disprove causation;
  • (2) Can the jury verdict be explained by a finding no procedural imprudence or of objective prudence?; and
  • (3) Why ERISA fiduciary breach cases should not be evaluated by a jury.


ISSUE #1:  The Burden of Proof On Causation Should Remain With the Party Asserting a Fiduciary Breach:

Plaintiff-Appellants argue “the practical effect of a “could have” standard is to put the burden on the plaintiff – the victim of the fiduciary breach – to prove not only that the defendant breached its duty and caused a loss to the plan, but that the ultimate decision is one that no prudent fiduciary could have made.”  They argue that such a rule would make it nearly impossible for plan participants to recover for a fiduciary breach, undermining ERISA’s explicit objectives of establishing meaningful standards of conduct and appropriate remedies for fiduciary violations.  DOL’s amicus brief supports this argument.  29 U.S.C. ¶ 409(a) provides that fiduciaries who breach their duties are personally liable for “any losses to the plan resulting from each such breach.”  Because section 409(a) does not otherwise describe how to allocate the burden to prove plan losses, the Department of Labor argues that, citing the Second Circuit in Sacerdote v. N.Y. Univ., 9 F.4th at 113 (citing Restatement (Third) of Trust ¶ 100 cmt. F (Am. L. Inst. 2012), the Court should look to trust law to do so.

Not so fast.  The Chamber of Commerce’s amicus brief in Pizarro v. Home Depot before the Eleventh Circuit Court of Appeals should be reprised for the Second Circuit in the Yale appeal, because it explains that plaintiffs should bear the burden of proving causation as a necessary element of their imprudence claim.  It also shows how the trust law relied upon by DOL and appellants is from after ERISA was enacted, and thus the statute, not trust law, should be dispositive.

The Chamber starts by walking through the elements of a fiduciary breach claim.  Under Section 409 of ERISA, a fiduciary who breaches its duties is personally liable for “any losses to the plan resulting from each such breach.”  Through that language, the statute imposes a requirement “that the breach of the fiduciary duty be the proximate cause of the losses claimed by” the plaintiff.[ii]  ERISA does not explicitly assign the burden of proof on loss causation, as DOL notes in its amicus brief, but the “ordinary default rule” is that “plaintiffs bear the burden of persuasion regarding the essential aspects of their claims.”[iii]  It is “the plaintiff who generally seeks to change the present state of affairs and who therefore naturally should be expected to bear the risk of failure of proof or persuasion.”[iv]

The key point raised in the Chamber’s amicus brief is that loss causation is a core element of a claim for breach of fiduciary duty under ERISA, and not an affirmative defense or exemption in which the defense would have the ordinary burden of proof.  Exceptions to the default rule are extremely rare and must be based in Congressional intent from the statute.

The other key point raised by the Chamber of Commerce is that the key source of deciding how to interpret ERISA is the statute itself.  Plaintiffs and DOL attempt to explain how the common law of trusts should inform ERISA fiduciary law.  But the starting point is the statute and what Congress intended, not the common law.  If Congress wanted fiduciary law to be defined by common law, then there was no need for an ERISA statute.  It is also not appropriate for plaintiffs or DOL to rely on trust law developed in the last fifty years after ERISA was enacted.  That is the source of some of the Restatement of Trusts that DOL relies upon.  But it is not the proper source of ERISA liability when the statute can answer the liability question.

The Chamber’s brief explains that other circuits have follow the default rule that plaintiffs bear the burden on causation, including the Second Circuit that will decide the Yale appeal.  The Second Circuit rejected burden-shifting to defendants on proof of causation in Silverman v. Mutual Benefit Life Insurance Co., 138 F.3d 98 (2d Cir. 1998).  In that case, the plaintiff and DOL as amicus relied on the same trust law principles to argue that ERISA plaintiffs need not prove causation.  But a two-judge majority noted that “the Supreme Court has cautioned that ‘the law of trust often will inform, but will not necessarily determine the outcome of, an effort to interpret ERISA’s fiduciary duties,’” and explained that “Congress has placed the burden of proving causation on the plaintiff by requiring him to prove that losses ‘result[ed] from’ the defendant’s” breach.”[v]

The Yale Plaintiff-Appellants and DOL rely on a more recent Second Circuit decision in the NYU excess fee case[vi] to support their causation argument.  The Chamber addressed this decision in the Home Depot amicus brief.  There DOL and plaintiffs claimed that the Second Circuit endorsed their preferred burden-shifting rule, but the Chamber’s amicus brief argues that “they overread the decision.”  The relevant discussion analyzes whether the district court’s erroneous dismissal of excessive fee claims was harmless.  According to the Chamber, the Second Circuit suggested that the defendants would have had the burden of proving that the quantum of damages was less than the difference between the imprudent fees and a prudent alternative shown by the plaintiffs – i.e., that the upper bound of the reasonable range was higher than the plaintiff’s number, though still lower than what the plan paid.  Sacerdote, according to the Chamber, thus endorses a distinct form of burden-shifting at the damages-calculation stage, rather than shifting the burden to the defendant to demonstrate that the asserted procedural breach caused no loss at all.

Before the Second Circuit can address Plaintiff-Appellants “would have” causation strategy, this analysis demonstrates that there is a threshold issue of whether plaintiffs, and not defendants, should have born the burden of proving loss causation.

ISSUE #2:  The Jury Verdict Could Be Explained By Finding No Breach of Fiduciary Duty or By a Finding of Objective Prudence

The key factor in the jury verdict form is that the jury answered affirmatively that the plan fiduciaries breached their fiduciary duties by allowing excess recordkeeping fees, and caused a loss to the plan.  Plaintiff-Appellants are seeking a new trial on damages alone – not on the prudence of the fiduciary process in managing recordkeeping fees.

Plaintiff-Appellants have argued that jury verdicts need to be reconciled when possible, and the only way to reconcile the inconsistent and paradoxical finding of a loss with no damages is that the jury instruction of whether a prudent fiduciary “could have” made the same decision confused the jury.  We believe there are two alternative ways to explain and reconcile the jury’s verdict without reversing the jury’s decision:  (1) first, that is was the jury’s intent to find no procedural imprudence because the causation jury instruction reads like a fiduciary prudence instruction; and (2) second, that their ruling is a finding of objective prudence.

First, we believe that the jury intended to indicate a verdict of no fiduciary breach, because they decided that a prudent fiduciary would have made the same decision to maintain two recordkeepers and a percentage-of-asset recordkeeping fee.  The reason is because the evidence showed that the Yale plan made all of the changes that plaintiffs wanted in the case – all before the lawsuit was filed.  Yale consolidated to one recordkeeper by removing Vanguard, and moved to a fixed, per-participant recordkeeping fee in late 2014-15.  The process took time, and this is proof of a deliberate and thoughtful process.  With this perspective, the jury found no damages because a prudent fiduciary could have done the same thing – stay with the current recordkeeping arrangement for two additional years while the plan was negotiating a significant change to the plan.

In this sense, the test of whether a prudent fiduciary “could have” made the same decisions should be the test for evaluating whether a plan acted prudently, or committed a fiduciary breach in the first instance.  We believe it is reasonable to assume this was how the jury found no liability against the Yale Defendants.

The second way to reconcile the jury’s verdict is based on a finding of objective prudence.  There cannot be a violation of ERISA if plan fiduciaries reach objectively prudent results.  This is the argument that the Chamber of Commerce made in the amicus brief filed in the Home Depot case in the Eleventh Circuit Court of Appeals.  A procedural shortcoming cannot have caused plan losses when fiduciaries employing a prudent process would choose the same service provider arrangements that were actually chosen for the plan.  That is so even if—as is invariably the case—the fiduciaries had other reasonable options available to them:  “under the ordinary loss causation principles incorporated into the statute, a ‘but for’ world should not be constructed with selections far afield of what the fiduciaries actually preferred for the plan if their choices were ones a prudent fiduciary in the same shoes could have made.”

The Chamber explains that “[w]hoever bears the burden of proof on loss causation, a fiduciary cannot be held liable for damages, if process aside, the results were objectively prudent.”  The Chamber quotes from Justice Scalia before he was appointed to the Supreme Court:  “I know of no case in which a trustee who has happened – through prayer, astrology or just blind luck – to make (or hold) objectively prudent investments (e.g., an investment in a highly regarded ‘blue chip’ stock) has been held liable for losses from those investments because of this failure to investigate and evaluate beforehand.”[vii]

The Chamber argues that:

“[I}t should make no difference whether the inquiry is framed as what a prudent fiduciary ‘could have’ done or what they ‘would have’ done.  An objectively prudent investment is one a prudent fiduciary would select, in the sense that Paris is a city that Rick Steves would recommend.  There may be other good investments out there, just as there may be other European destinations worth visiting, but so long as the fund actually chosen if reasonable – like Judge Scalia’s blue-chip stock – any fiduciary missteps along the way cannot have caused any harm.  While the Fourth Circuit panel in Tatum divided on the supposed materiality of this framing, other courts have followed a more commonsense approach:  a course of action is objectively prudent if it is among the options a prudent fiduciary would consider in light of the goals and objectives of the plan and the circumstances then prevailing. 

The Chamber brief cites to Ramos v. Banner Health, 461 F. Supp. 3d 1067, 1127 (D. Colo. 2020), in which the inquiry in the excess fee trial court was whether “no reasonable fiduciary would have maintained the investment and thus [the defendants] would have acted differently” absent a procedural breach.  The objective prudence inquiry is naturally informed by ERISA’s fiduciary standards, which accommodate the full “range of reasonable judgments a fiduciary may make based on her experience and expertise.”  Hughes v. Nw. Univ., 142 S.Ct. 737, 742 (2022).  The remainder of the Chamber’s argument bears a careful reading.  They argue that the market offers a broad assortment of administrative services and investment choices in evaluating those offerings, and fiduciaries can arrive at hundreds of different decisions.  The Chamber cautions that “[c]ourts should be particularly wary of indulging plaintiff’s proffer of alternative prudent actions that look materially different from what a plan’s fiduciaries reasonably preferred in reality – investments with different strategies and risk levels; vendors with different offerings and service levels.”  Consequently, “[u]nder straightforward causation principles, a court should strive to discern which features of the selected course, if any, were unreasonably preferred.”  The Chamber concludes that “[p]laintiffs cannot credibly claim to have been harmed by decisions that fall squarely within the reasonable range of alternatives.”

ISSUE #3:  Plaintiffs Assert that the jury got confused by the confusing jury instructions – but it should never have gone to a jury in the first place.

Complex ERISA cases should not be decided by juries.  We analyzed the right to a jury trial for excess fee and performance cases in this blog post  In general, there is a right to a jury trial for legal claims enforcing common law statutory rights, but no right to a jury trial for equitable claims.  As a starting point, ERISA does not provide an explicit jury trial right.  The question, therefore, is whether excess fee breach of fiduciary duty claims are enforcing common law legal rights (for which the right to a jury applies), or whether the relief sought is equitable (and must be tried before a judge).  Most courts have found no right to a jury trial in an ERISA case, but the District of Connecticut has allowed a right to the jury in two recent cases, including the Yale and Eversource excess fee cases.

The initial thought after the jury verdict was that the jury trial did not prejudice the Yale Defendants, but we will not know until after the appeal is decided.  Certainly the Eversource defendants were prejudiced with a $15m settlement involving the exact same Fidelity Freedom target-date funds that were dismissed in the high-profile CommonSpirit case in the Sixth Circuit.

Plaintiff-Appellants argue that the jury verdict form was “unnecessarily complex” and prejudiced the decision.  The real problem was that this case should never have gone to a jury in the first place, as confusion in a complex case was inevitable.  It seems unfair to complain about the jury confusion when plaintiffs wanted a jury.  This case proves that ERISA fiduciary breach cases are too complex for lay juries to decide.  It is not fair to plan sponsors to be judged by a jury of lay citizens.

The Encore Perspective

While our focus in this blogpost is on the causation standard, we would be remiss not to mention that Plaintiff-Appellants are seeking a new trial on all issues in the case based on purported prejudice from defense counsel’s “inflammatory” comments to the jury.  Plaintiff-Appellant have argued that the entire jury verdict was tainted due to prejudice from Defendants’ evidence and arguments regarding “accusations of lawyer-driven litigation” and Yale University’s purported “generosity” in its company match and role as a beneficent and “generous” pillar of the local community.   Throughout the trial, Plaintiff-Appellants complain that the district court allowed Defendants to argue and elicit testimony that Yale University made “extremely generous” contributions to participants’ account.

We have previously analyzed that the positive results in the 2023 Yale and E.B. Braun excess trials were based on defense counsel effectively demonstrating that the plan sponsors made affirmative changes over time, which demonstrates a prudent fiduciary process.  We also highlighted that it is important for defense counsel to place the case into the perspective of the manufactured nature of these cases, and it was likely influential to the jury result in the Yale case.  The Schlichter firm appears to agree with this assessment.

Plaintiffs’ counsel also claims to being attacked in closing argument when defense counsel disclosed that the case started from a newspaper advertisement.  The entire segment of the closing argument cited in the appellate brief is worth re-quoting, because lead defense lawyer Nancy Ross was very effective in placing the case into the proper perspective:

Why are Plaintiffs suing Yale . . when the named Plaintiffs themselves had no complaints about their own retirement benefits?  They are here, not because they believe Yale did anything wrong, but because they saw an ad in the local paper, the New Haven Register soliciting Yale Plan participants willing to lend their name so that these attorneys could file yet another lawsuit, this time against Yale, second-guessing members of the fiduciary committee.

This is not a case of aggrieved individuals who have been done wrong.  To the contrary, this is a lawyer-driven, manufactured, and packaged case where the same Plaintiffs’ lawyers use the same experts over and over and give them cherry-picked information and data that leads the experts to the conclusions the lawyers want you to hear and then demand hundreds of millions of dollars from these individuals and Yale, even though the Plan they manage is able to provide plan participants with about 90 percent of the income they had while working for Yale and often a better standard of living in retirement than they had while they were working.  Yale truly provided a generous and beloved plan with amazing services and options at relatively low cost. 

There should be nothing prejudicial about the so-call lawyer-driven “narrative” of which Plaintiff-Appellants complain.  It is just the truth.  Plaintiff-Appellants argue that “the average person would have no reason to believe that the administrator of his 401(k) plan was acting imprudently” before contacting counsel.  Maybe the so-called “average person” is not suing their benefit plan on their own initiative because most of the lawyer-driven cases have no merit.


[i] Tatum, 761 F.3d at 369 (citing 29 U.S.C. ¶ 1109(a)).
[ii] Willett v. Blue Cross & Blue Shield of Ala., 953 F.2d at 1343.
[iii] Schaffer v. Weast, 546 U.S. 49 , 56-57 (2005).
[iv] Id. at 56 (quoting 2 McCormick on Evid. ¶ 337 (5th ed. 1999).
[v] Id. at 106 (Jacobs, J., joined by Meskill, J. concurring) (citations omitted).
[vi] Sacerdote v. New York University, 9 F.4th 95 (2d Cir. 2021).
[vii] Fink v. Nat’l Sav. & Tr. Co., 772 F.2d 951, 962 (D.C. Cir. 1985) (Scalia, J. concurring in part and dissenting in part).

Disclaimer:  The Fid Guru Blog is intended to provide fiduciary thought leadership and advocacy for the plan sponsor community in areas of complex fiduciary litigation.   The views expressed on The Fid Guru Blog are exclusively those of the author, and all of the content has been created solely in the author’s individual capacity.  It is not affiliated with any other company, and is not intended to represent the views or positions of any policyholder of Euclid Fiduciary, or any insurance company to which Euclid Fiduciary is affiliated.  Quotations from this site should credit The Fid Guru Blog.  However, this site may not be quoted in any legal brief or any other document to be filed with any Court unless the author has given his written consent in advance.  This blog does not intend to provide legal advice.  You should consult your own attorney in connection with matters affecting your legal interests.

Disclaimer:  The Fid Guru Blog is intended to provide fiduciary thought leadership and advocacy for the plan sponsor community in areas of complex fiduciary litigation.   The views expressed on The Fid Guru Blog are exclusively those of the author, and all of the content has been created solely in the author’s individual capacity.  It is not affiliated with any other company, and is not intended to represent the views or positions of any policyholder of Encore Fiduciary, or any insurance company to which Encore Fiduciary is affiliated.  Quotations from this site should credit The Fid Guru Blog.  However, this site may not be quoted in any legal brief or any other document to be filed with any Court unless the author has given his written consent in advance.  This blog does not intend to provide legal advice.  You should consult your own attorney in connection with matters affecting your legal interests.

Subscribe To

The Fid Guru Blog

Keeping you up to date on trends, emerging exposures and other critical issues.

Encore Excessive Fees Litigation cover 1.8v7

Download the Euclid Fiduciary Excessive Fee White Paper

Encore Fiduciary Handbook Cover 1.8v5

Order your complimentary copy of our
Fiduciary Liability Insurance Handbook.


Talk to an Expert

An expert representative will contact you immediately.

Download Whitepaper

Download PDF of Handbook

Skip to content