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Excessive Fee Lawsuit Settled for $30 Million

The Beesly v. International Papers lawsuit — whose plaintiffs were represented by Jerry Schlichter’s law firm — has been settled for $30 million. The same judge who recently ruled on the Spano v. Boeing case, which was allowed to go forward after an amended complaint about class action certification was filed, presided over the IP case.

Allegations in the IP case included:

• excessive admin fees, which were lowered from $112 per participant to $52
• imprudent use of company stock used for the match, with restrictions on divestiture reaching 57% of assets even as the DB plan divested
• imprudent large cap fund
• denial of revenue from securities lending
• excessive management fees, with the company allegedly not using leverage by having multiple funds for various asset classes
• delayed contributions
• fraudulent performance reporting

As a result of the settlement, the parties agreed:

• no company stock
• no retail mutual funds
• no asset-based record keeping fees
• IP will not profit from the plans
• competitive bidding for record keeping services
• sharing in revenue from securities lending
• inclusion of a passive large cap fund

Schlichter, Borgard and Denton, the plaintiff’s law firm, received one-third of the settlement and $1.7 million in costs.

On his FRATools blog, Thomas Clark comments that the pendulum seems to have swung in favor of plaintiffs in excessive fee cases; previously providers had seemed to be winning, with the 2009 Hecker v. Deere case a possible high water mark for the corporate bar. (Read more from Stephen D. Rosenberg here.) While the IP case is not precedential, it does highlight prudent practices for plans of all sizes.

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