After having managed to fend off some, but not all, claims in an excessive fee suit, plan fiduciaries have struck a deal with the participant-plaintiffs that had challenged the plan’s use of Prudential’s GoalMaker offering.
The suit began in October 2021 when plaintiffs Jeffrey Parker, Donald B. Losey, and Shelley Weatherford filed[i] on behalf of participants and beneficiaries of retirement plans offered by the defendants (GKN North America Services, Inc., Board of Directors of GKN North America Services, Inc., and the Benefit Committee). In the suit, the plaintiffs claimed the plan cost "participants millions of dollars" and that the fiduciary defendants’ actions (or lack thereof) constituted a breach of the duties owed to participants under ERISA.
More specifically, the suit alleged that rather than investing assets into low-cost index funds, GoalMaker prioritized funds that made Prudential more money, resulting in millions of dollars in lost retirement savings for workers—also imposing excessive management fees. "GKN could have easily stopped these abuses at any time by replacing the unreasonably high-fee, underperforming GoalMaker funds with reliable, low-fee Vanguard index funds already in the plan's investment menu or with other less expensive target retirement date funds offered by numerous mutual fund families.”
Case History
The settlement motion—seeking court approval for the terms—outlined the case history as follows:
The GKN defendants moved to dismiss the Complaint on March 10, 2022, and roughly a month later the plaintiffs filed their First Amended Complaint (the “FAC”)—and a month after THAT, the GKN defendants moved to dismiss the FAC. After a full briefing thereon, the Court then issued a decision denying defendants’ motion to dismiss the suit, in part. Specifically, the court held that plaintiffs had stated a claim for violation of the duty of prudence for selecting and retaining excessively expensive and poorly performing investment options and that plaintiffs had stated a claim for a failure to monitor.
On Sept. 9, 2022, defendants filed a Motion for Reconsideration, requesting that the court:
(1) reconsider its Order to address the claim that Defendants breached the duty of prudence by allowing the Plan to offer Prudential’s GoalMaker, an asset allocation service;
(2) reconsider its holding that the plaintiffs sufficiently alleged imprudence based on underperformance because the FAC contained facts suggesting that plaintiffs’ selected comparator funds consistently outperformed the Plan funds and the FAC made more than bare accusations of better, cheaper funds in the market;
(3) reconsider its Order to state definitively that plaintiffs’ claims alleging breach of the duty of prudence as to recordkeeping fees and their claims alleging breach of the duty of loyalty were dismissed with prejudice; and
(4) reconsider whether to dismiss the FAC with prejudice.
On Oct. 26, 2022, the Court denied the motion for reconsideration in its entirety. In particular, the court stated: “Other theories of a breach of the duty of prudence are not being dismissed. Rather, the plaintiffs’ claim survives the motion to dismiss. Finding that one theory of fiduciary duty survives and another does not is not equivalent to denying one claim and granting another. Because the court is not granting any portion of the motion to dismiss, there is no claim to be dismissed—with or without prejudice.”
At that point, the parties completed fact discovery on Oct. 17, 2023—but prior to that agreed to pursue mediation prior to the commencement of expert discovery, and not only attended a mediation with Robert A. Meyer of JAMS on Nov. 16, 2023, but reached an agreement in principle on the material terms of the settlement.
The Settlement
The GKN defendants will contribute $2,950,000, the gross settlement amount, to a qualified settlement fund.
Separately, the agreement notes that—prior to the fairness hearing—class counsel will seek an award of attorneys’ fees, expenses and case contribution awards for the named plaintiffs. More specifically, they plan to seek:
- an award of $983,333.33 for attorneys’ fees;
- up to $100,000 for reimbursement of litigation expenses; and
- a $10,000 case contribution award for each of the named plaintiffs, all to be paid from the gross settlement amount.
We’ll see what the court has to say about it.
