Appeals Court Sides With Aon in Lowe's 401(k) Suit

Aon created a collective trust to serve the delegated fiduciary services clients. The trust held several funds managed by independent outside managers. One fund, a growth fund, increased in value and performed well in volatile markets, but it produced a lower overall growth rate than other, comparable funds, according to Richardson’s ruling.

“By some calculations, if plan assets had been invested in other funds, the class would have between $70 and $277 million more saved for retirement,” Richardson wrote.

Benjamin Reetz, a resident of Tacoma, Washington, sued Lowe’s and Aon Hewitt on behalf of a class of Lowe’s plan participants in 2018.

A judge at the U.S. District Court for the Western District of North Carolina ruled in favor of Lowe’s and Aon.

The 4th Circuit majority heard oral arguments on the case in Richmond, Virginia, in December 2022. The panel upheld the district court ruling.

“To start, Aon’s sales efforts to obtain the delegated fiduciary work were not investment advice, so Aon owed no duty of loyalty,” Richardson wrote. “The investment-menu recommendation was investment advice, but we agree with the district court that Aon’s recommendation was not motivated by self-interest.”

One member of the 4th Circuit panel, Circuit Judge Robert King, dissented in part. He found that Aon did not breach the ERISA duty of prudence through investment selection but did violate the duty of loyalty, by trying to sell delegated fiduciary services to the Lowe’s plan while serving as a plan investment consultant.

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