The parties in yet another 401(k) excessive fee suit have come to terms after two years of litigation.
The suit in question involved the fiduciaries of the $5.2 billion L3Harris Retirement Savings Plan—a suit that in March 2022 claimed the participant-plaintiffs had exhausted their administrative remedies. Specifically, the plan had in place an administrative procedure to be followed if any participant or beneficiary believed they were entitled to a benefit beyond that which they received. It involved filing a claim with the plan’s Administrative Committee, in writing, that was to be reviewed within 90 days (unless an extension was granted).
Those claims were a precursor to the excessive fee suit that, as others in this class of litigation have, alleged that L3Harris violated its fiduciary duties by failing to negotiate lower record-keeping fees for workers—and for retaining expensive investment options in the $5.2 billion L3 Technologies Master Savings Plan. More specifically, the plaintiffs—represented here by lawyers from Capozzi Adler had argued that the plan’s “jumbo” size should have allowed them to negotiate a better price than the $68 to $80/participant the plan incurred compared to what they alleged similarly sized plans did ($20/participant).
For its part, L3Harris argued in the original summary judgment motion that the plaintiffs hadn’t presented evidence that the record-keeping fees and the funds in question weren't "objectively prudent," or that "no reasonable 401(k) plan fiduciary would have included them" on a list of choices. They also noted that it was “well-settled that, to show imprudence, a plaintiff has to offer a ‘meaningful benchmark,’”—and that “no court has held that a single fund satisfies this requirement. And, because it will always be possible to find at least one less expensive fund, such evidence does not provide the requisite meaningful comparison.” But, and perhaps significantly to its recent amendment to that motion, L3Harris pointed to the expert employed by the plaintiffs as having failed to identify a meaningful benchmark index or comparable peer group.
The Settlement
In exchange for releasing their claims, the Settlement (Stengl et al. v. L3Harris Technologies, Inc. et al., case number 6:22-cv-00572, in the U.S. District Court for the Middle District of Florida) provides that the L3Harris defendants will pay $650,000 to Class Members. The settlement notes that the Plaintiffs’ Counsel “evaluated numerous damages scenarios involving the claims in the case,” that the defendants “made strenuous arguments in their motions for summary judgment and to exclude Plaintiffs’ expert that there were no damages resulting from the investment funds claim,” and that “taking Defendants’ arguments into due consideration, Plaintiffs believed their most realistic viable claims related to the recordkeeping claim which Plaintiffs’ estimated to have a maximum potential value of just under $3 million.”
The agreement acknowledges that the defendants here “also strenuously argued Plaintiffs suffered no damages under the recordkeeping claim,” and that “based on these circumstances, Plaintiffs’ Counsel evaluated the risks of proceeding without a settlement.” Ultimately, and “given that the Settlement amount represents roughly 22% of the likely best-case outcome for Plaintiffs, Plaintiffs believe the Settlement Amount is fair and adequate.”
Fees and Expenses
The proposal explains that the Gross Settlement Amount is “inclusive of an attorney fees award not to exceed one third of the Gross Settlement Amount”—or a maximum of $216,645. It also includes reimbursement of “reasonable attorney expenses, which are currently estimated to be $80,000.”
The Path to Settlement
Reporting of these suits is generally limited to the filing, sometimes the motion to dismiss—and then, after the passage of time, either a trial or a settlement. However, the settlement agreements generally take pains to outline the process that brought the parties to that point—and, by way of reminding us that litigation incurs an expense of time and material—here’s what has happened here:
According to the settlement proposal, the plaintiffs filed their original suit on March 18, 2022, “following several months of pre-trial investigation and then exhausting the Plan’s administrative remedies,” which they say followed the engagement of “consulting experts” and the requesting of “numerous documents and information from Defendants….” They filed an amended suit on June 14 of that year, to which the defendants here filed a motion to dismiss later that month. In July 2022 the plaintiffs filed their reply to that motion—and then in March 2023 the court denied that motion to dismiss the suit.
Following that, the parties say they “engaged in fact and expert discovery, including the exchange of expert reports,” during which the defendants produced over 16,000 pages of documents and deposed seven of the original eight (one Plaintiff dropped out) Plaintiffs as well as Plaintiffs’ expert. The plaintiffs also deposed two committee members and Defendants’ three expert witnesses.
Defendants then filed a motion to exclude the testimony of Plaintiffs’ expert—and a motion for summary judgment, then participated in two mediation sessions on Sept. 18, 2023 and on Dec. 21, 2023, conducted by Jay M. Cohen, Esq. An agreement in principle was reached on that date, notified the court and then “over the course of the subsequent weeks, counsel prepared the settlement agreement and related papers to memorialize the precise terms of the Settlement and Plan of Allocation, which are incorporated into the Settlement Agreement presented to the Court today.”
Now we’ll see if the court approves.
