General Publications May 26, 2023

“Revenue Sharing Argument Might Save Barrick in 401(k) Case,” Law360, May 26, 2023.

Extracted from Law360

On May 17, the U.S. Court of Appeals for the Tenth Circuit heard oral argument in Matney v. Barrick Gold of North America.[1]

This case presents the Tenth Circuit with its first opportunity to weigh in on the pleading standards for certain excessive fee claims since the U.S. Supreme Court's 2022 decision in Hughes v. Northwestern University.[2] The U.S. Courts of Appeal for the Sixth, Seventh, Eighth and Ninth Circuits have all recently expressed views on the plausibility of similar types of claims.[3]

The panel — U.S. Circuit Judges Timothy Tymkovich, Nancy Moritz and Veronica Rossman — was particularly focused on the plausibility of the plaintiffs' share class claim. The plaintiffs allege the plan's fiduciaries selected a more expensive share class of the plan's target date funds when an identical but supposedly less expensive share class of those funds was available.

The defendants — Barrick Gold of North America, its board of directors and its subsidiaries benefits committee — argued that the premise of the plaintiffs' share class claim was wrong.

Relying on documents the plaintiffs either referenced or cited in their complaint, the defendants demonstrated that the more expensive share class was actually cheaper than the plaintiffs' preferred share class after applying a revenue sharing credit.[4]

The Tenth Circuit panel is now poised to opine on a key issue — whether evidence of a revenue sharing credit can be used by a defendant to justify dismissal of a share class claim at the pleading stage, or presents a factual question that must be developed during discovery.


In 2020, participants in Barrick Gold's 401(k) plan brought a putative class action alleging the defendants breached their fiduciary duties under the Employee Retirement Income Security Act.

While the plaintiffs asserted several claims, their primary claim was that the defendants breached their fiduciary duties by offering higher-cost share classes of investments when lower-cost share classes of identical investments were available.[5]In dismissing the complaint, U.S. District Judge Tena Campbell of the U.S. District Court for the District of Utah determined that the plaintiffs' share class claim was problematic.[6] The court began by noting that merely alleging a plan offered a more expensive share class is not enough to state a breach of fiduciary duty claim.[7] But the bigger problem was with the plaintiffs' numbers.

Documents that the plaintiffs referenced or cited in their complaint revealed that each of the higher-cost share classes received a 0.15% revenue sharing credit while the lower-cost share class did not.[8] And when this 0.15% revenue sharing credit was applied, the higher-cost share class selected for these funds was cheaper than the plaintiffs' so-called less expensive funds.

Accepting the defendants' argument, and using the same sources the plaintiffs relied on throughout their complaint, the court held that the plaintiffs' share class claim was not plausible.[9]

The Tenth Circuit Argument

During oral argument, the Tenth Circuit panel quickly homed in on how the revenue sharing credit would negate the plaintiffs' claim of imprudence.

As Judge Tymkovich posited: "Once you eliminate the cost disparity [with revenue sharing], [the plaintiffs'] claim of imprudence evaporates." The plaintiffs' counsel argued that the defendants' reliance on revenue sharing is akin to an affirmative defense that cannot, and should not, be considered at the motion to dismiss stage.

Further, the plaintiffs' counsel argued that even accepting the notion that revenue sharing was used, participants should be entitled to discovery about why revenue sharing was used and whether it was used improperly.

Relying heavily on the U.S. Court of Appeals for the Ninth Circuit's 2022 decision in Davis v. Inc.,[10] the plaintiffs' counsel argued that every circuit to consider this issue has held that participants can simply allege that the plan fiduciaries selected a more expensive version of an identical fund and instructed the parties to figure it out in discovery.

The defendants' counsel argued that the plaintiffs' share class claim boils down to whether one share class is more expensive than the other and disagreed with the characterization that revenue sharing is a defense that cannot be considered on a motion to dismiss.

Rather, because the documents that were referenced in the plaintiffs' complaint contradict the plaintiffs' share class allegations, counsel argued that the defendants should be permitted to rely on them to demonstrate that the plaintiffs' allegations are not only implausible, but just plain wrong.[11]

The defendants' counsel distinguished this case from other cases in which plan fiduciaries raise a "speculative general argument" that revenue sharing may be the explanation for the selection of a more expensive share class.

Rather, the defendants' counsel noted that the critical difference in this case is that there is documentary proof of a revenue sharing credit, and the plaintiffs not only had these documents in their possession, but even referenced them in their own complaint.

The Tenth Circuit panel asked pointed questions on these issues, with Judge Moritz appearing the most skeptical of accepting Barrick Gold's revenue sharing argument: "Why is this case different than [the Seventh Circuit's recent decision in] Hughes [v. Northwestern]? … [That court was not] impressed with the idea that revenue sharing could explain the difference" between offering funds with a higher-cost share class at the pleading stage.

Judge Mortiz suggested that even if revenue sharing was the reason, the way it is applied is a fact question. However, Judge Tymkovich did not seem as skeptical, questioning why revenue sharing should not be considered when the "documents [cited in the plaintiffs' complaint] do require … the revenue sharing percentage."


As the defendants' counsel aptly argued, this case presents a clear scenario for the court to accept a defendants' revenue sharing argument at the pleading stage.

The plaintiffs cited documents in their own complaint that explained the revenue sharing credit percentage, and these documents demonstrated that when the revenue sharing credit is applied, the funds in the plan are less expensive than the funds the plaintiffs claim should have been used.

As with any claim — ERISA or not — courts routinely consider documents quoted, cited or referenced in a complaint when deciding motions to dismiss under Federal Rule of Civil Procedure Rule 12(b)(6).

For example, when a plaintiff brings a breach of contract claim, a defendant is allowed to attach and cite to the contract when arguing that the terms of the contract contradict the plaintiffs' allegations.[12] Otherwise, plaintiffs would always get the benefit of artful pleading and could simply omit facts from the complaint that do not fit their narrative.

In Hughes v. Northwestern University, the Supreme Court reiterated that district courts should consider whether participants have plausibly alleged a violation of ERISA's duty of prudence, applying the pleading standard discussed in the 2009 Ashcroft v. Iqbal decision[13] and the 2007 Bell Atlantic Corp. v. Twombly decision.[14]

The Supreme Court elaborated that the appropriate inquiry is context-specific and instructed lower courts to "give due regard to the range of reasonable judgments a fiduciary may make based on her experience and expertise."[15] Further, the Supreme Court recognized in Twombly that "an obvious alternative explanation" should be considered on a motion to dismiss.[16]

Indeed, on remand from the Supreme Court, the U.S. Court of Appeals for the Seventh Circuit explained in Hughes that

[s]ometimes an alternative explanation for an ERISA fiduciary's conduct may be patently more reasonable and better supported by the facts than any theory of fiduciary duty violation pleaded by a plaintiff.[17]

In such a scenario, the Seventh Circuit instructed that "courts should not hesitate to dismiss an ERISA claim for breach of the duty of prudence."[18] Though the Seventh Circuit held that Northwestern University's alternative explanation was not strong enough in that case, the court noted that "whether a claim survives dismissal necessarily depends on the strength or obviousness of the alternative explanation that the defendant provides."[19]

In Matney, the explanation of the fiduciaries' conduct is obvious and evidence of that conduct was referenced in the plaintiffs' complaint — the fiduciaries selected a share class that utilized revenue sharing, which made the chosen funds cheaper than the funds the plaintiffs allege should have been used. If there were ever a case to uphold dismissal of such a share class claim, Matney v. Barrick Gold is it.

Even without the ability to point to specific documents cited in a complaint as in Matney, courts can and should consider revenue sharing as an obvious alternative explanation when assessing the plausibility of share class claims — particularly when plaintiffs acknowledge the use of revenue sharing in their complaint.

Oftentimes plaintiff participants fault fiduciaries for using revenue sharing with a separate but related excessive record-keeping fee claim. They should not be able to acknowledge revenue sharing with regard to the record-keeping fee claim but then turn around and argue that revenue sharing is an issue of fact for their share class claim.

These types of generic more expensive share class claims are often implausible under the Supreme Court's Iqbal-Twombly pleading standard for a few other reasons.

The crux of these claims is that a plan offered a more expensive fund when an identical fund was available in a less expensive share class. The plaintiff-participants often allege that there is no good reason to select a more expensive share class, all other things being equal.

But therein lies the issue. These share classes are not an apples-to-apples comparison. One share class provides revenue sharing and the other does not. Again, this goes to the heart of the plausibility of the claim.

Additionally, the Supreme Court made clear in Iqbal and Twombly that "plausible" means more than merely "possible."[20] The focus of whether fiduciaries fulfilled their fiduciary duties depends on the process utilized, not the result.[21]

It is all too common in these cases for plaintiffs to allege they do not know or cannot know the fiduciaries' process for selecting, monitoring and removing plan investments or monitoring plan fees because such information is squarely in the hands of the defendants.

If a plaintiff does not know how or why plan fiduciaries selected certain share classes, then their allegations of wrongdoing are nothing more than possible, which is, by definition, not plausible under the Iqbal-Twombly standard.


On remand from the Supreme Court, the Seventh Circuit acknowledged that a "fiduciary's actions may give rise to different inferences — some that suggest a breach of fiduciary duty and others that do not."[22]

When an obvious alternative explanation exists that suggests an ERISA fiduciary's conduct falls within the range of reasonable judgments a fiduciary may make, something more is necessary to survive dismissal.[23]

The Barrick Gold defendants presented an obvious alternative explanation for the selection of higher-cost share classes — revenue sharing — and the plaintiffs have not offered anything more to survive dismissal.

For this reason, if the Tenth Circuit affirms dismissal of this share class claim, it would be consistent with the Supreme Court's decisions in Twombly, Iqbal and Hughes, and the Seventh Circuit's recent ruling in Hughes on remand.

[1] Matney v. Barrick Gold of N. Am., No. 22-4045 (10th Cir. May 20, 2022).

[2] 142 S. Ct. 737, 738 (2022).

[3] Hughes v. Northwestern Univ. , 63 F.4th 615 (7th Cir. 2023); Forman v. TriHealth, Inc. , 40 F.4th 443 (6th Cir. 2022); Smith v. CommonSpirit Health , 37 F.4th 1160 (6th Cir. 2022); Matousek v. MidAmerican Energy Co. , 51 F.4th 274 (8th Cir. 2022); Kong v. Trader Joe's Co. , No. 20-56415, 2022 U.S. App. LEXIS 10323 (9th Cir. Apr. 15, 2022); Davis v., Inc. , No. 21-15867, 2022 U.S. App. LEXIS 9527 (9th Cir. Apr. 8, 2022).

[4] "Revenue sharing" is a common and acceptable practice in the retirement plan industry. A portion of the fees charged in connection with specific funds are used to pay for recordkeeping and other administrative services provided to a plan.

[5] Matney, No. 22-4045, Appellants' Brief at 2 (10th Cir. Aug. 31, 2022).

[6] Matney v. Barrick Gold of N. Am., Inc. , No. 2:20-cv-275-TC-CMR, 2022 U.S. Dist. LEXIS 73479, at *18 (D. Utah Apr. 21, 2022).

[7] Id.

[8] The plaintiffs referenced the Master Trust Agreement between Barrick Gold and Fidelity Management Trust Company and the plan's Form 5500s in their complaint, both of which referenced the .15% revenue-sharing credit.

[9] Matney, 2022 U.S. Dist. LEXIS 73479, at *18.

[10] 2022 U.S. App. LEXIS 9527, at *2-4.

[11] See Matney, No. 22-4045, Appellees' Brief at 30 (10th Cir. Oct. 31, 2022) (quoting Spring Creek Expl. & Prod. Co., LLC v. Hess Bakken Inv., II, LLC, 887 F.3d 1003, 1018 (10th Cir. 2018) ("On a motion to dismiss, allegations in a complaint 'do not overcome contradictory statements in the text of [a document] attached to [the] complaint.'")).

[12] See, e.g., Spring Creek, 887 F.3d at 1018; see also Gonzalez v. Planned Parenthood of L.A. , 759 F.3d 1112, 1115 (9th Cir. 2014) ("Gonzalez did not plausibly state a claim under the FCA because his assertion that Planned Parenthood knowingly submitted false claims for reimbursement is compellingly contradicted by a series of letters he attached to his complaint."); Daniels-Hall v. Nat'l Educ. Ass'n. , 629 F.3d 992, 998 (9th Cir. 2010) ("We are not … required to accept as true allegations that contradict exhibits attached to the Complaint or matters properly subject to judicial notice…."); Kaempe v. Myers , 367 F.3d 958, 963 (D.C. Cir. 2004) ("Nor must we accept as true the complaint's factual allegations insofar as they contradict exhibits to the complaint or matters subject to judicial notice."); Demetry v. Lasko Prods. , 284 F. App'x 14, 15 (4th Cir. 2008) ("[T]he court is not required 'to accept as true … allegations that contradict matters properly subject to judicial notice or by exhibit.'" (citation omitted)).

[13] 556 U.S. 662 (2009).

[14] 550 U.S. 544 (2007).

[15] 142 S. Ct. at 742.

[16] Twombly, 550 U.S. at 567-68.

[17] Hughes, 63 F.4th at 630.

[18] Id.

[19] Id. at 629.

[20] See Iqbal, 556 U.S. at 678; Twombly, 550 U.S. at 557-58.

[21] See 29 U.S.C. § 1104(a)(1)(B).

[22] Hughes, 63 F.4th at 628.

[23] Id. at 629; see also Twombly, 550 U.S. at 567; Iqbal, 556 U.S. at 682.

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