Experiential Wealth

A Reflection on the 8th Circuit Appeal Court’s Decision to Dismiss Fiduciary Claims Against American Century

Jan 30, 2019 | Institutions, Regulations

On June 30, 2016, a class action complaint  was filed by Steve Wadman, et al (Plaintiffs), against American Century (Defendants).  On January 23, 2019, Chief Judge Greg Kays, issued a finding of facts and conclusion of law and dismissed all counts in favor of Defendants.

This case has dispelled the common beliefs that lowest cost by the way of index investments is equivalent to a fiduciary safety net, a higher yielding stable value fund is a better fiduciary option, or an option on a Watch List for an extended period time is imprudent.  Meeting the fiduciary standard requires plan fiduciaries to inquire, collect, investigate, discuss, debate, and make informed decisions. The fiduciary decision is ex post and therefore is evaluated based on the circumstances then prevailing, and ex ante evidence should not be employed in judging fiduciary prudence.  Therefore, the ongoing process of monitoring affords fiduciaries the timeliness to make adjustment in order to maintain an adaptive process. Fiduciary duty is about a prudent process (ex post) and not optimal outcomes (ex ante).

Retirement fiduciaries owe American Century a debt of gratitude for staying the course until the court rendered its opinion and judgement.  Far too often, plan sponsors settle privately out of court and the industry is not afforded case law (and precedents) to better inform fiduciary conducts and dispel facts from fiction.

Click here to read our full commentary on this decision.