Identity Theft Alone Not Enough to Claim Breach of Fiduciary Duty

A U.S. district court dismissed a claim against retirement plan fiduciaries after account funds were stolen by an identity thief.

The dismissal comes at a time when identity theft and account security are a widespread consumer concern, in part due to the increasing digital interconnectivity.

Heide Bartnett, the plaintiff, had a large amount stolen from her retirement account. She sued Abbott, Abbott Labs and Marlon Sullivan (the plan’s fiduciaries) and Alight Solutions (the plan’s administrator) over the theft. At issue was whether the defendants breached their fiduciary duties of prudence and monitoring.

Under the duty of prudence, the court was not aware of a previous case with similar allegations. Bartnett presented evidence to allege that Abbott and Abbott Labs unreasonably concluded to renew their contract with Alight, showing a history of security issues. However, the court did not find that Abbott and Abbott Labs acted unreasonably.

Under the duty to monitor, the court found that the plan fiduciaries did not fail the plaintiff in their responsibility toward the retirement plan’s performance. It was noted that the performance of the retirement plan—a key part of fiduciary duty—was not impacted in this case. This made it hard to prove that Abbott and Abbott Labs acted unreasonably.

In fact, the court said that allegations against the duty to monitor focus on the actions of the plan administrator, Alight, not the plan fiduciaries.

Bartnett and Alight are now in a discovery period separately. Alight filed a motion for a dismissal against Bartnett but was denied by the court.

The plaintiff has recovered almost half of the stolen funds working with her former employer. She is also seeking to recoup what remains of her missing funds plus an additional amount to cover reasonable lost in-vestment gains and other expenses.

Part of Bartnett’s evidence against the defendants was the failure to alert the plaintiff to the changes that were being made to her retirement account. Bartnett’s case highlights the importance to check security and identity theft protections for retirement accounts. It also shows how complex it can be to try to recoup funds in a similar scenario.

It is a good idea to enable two-factor authentication where possible and work with companies that provide adequate levels of security.

Source: Bartnett v. Abbott Laboratories (February 2021).