Excessive Fee Suit Falls Short in Court

Participant-plaintiffs have had their excessive fee claims against Delta Air Lines rejected in federal court.

The case, Johnson v. Delta Air Lines, Inc. (N.D. Ga., No. 1:17-cv-02608-TCB, order granting defendant’s motion to dismiss 12/12/17), had, as many had previously, challenged the use of revenue-sharing, a bloated fund menu with duplicative funds, and a failure of plan fiduciaries to leverage the plan’s size to get a better deal.

The suit was filed almost exactly a year ago by Crystal Johnson and Corissa L. Banks, two participants in one of the 401(k) plans offered by Delta Air Lines, against Delta as the sponsor of that plan and against the plan’s administrators. As many of these suits have done, it charges that the $7.5 billion plan ($5.6 billion in 2012) offered its approximately 83,000 participants (as of 2012) “higher-cost options, duplicative options, and underperforming options to Plan participants,” that they “failed to leverage the Plan’s massive bargaining power to obtain lower costs and fees for Plan participants,” and that, “as a direct result of these failures, Defendants drained millions of dollars in fees, expenses, and underperformance from Plan participants’ retirement savings.”

However, Judge Timothy C. Batten Sr. of the U.S. District Court for the Northern District of Georgia found that these particular participant-plaintiffs didn’t suffer a “concrete and particularized” injury because they failed to allege that they invested in the “criticized investment funds or paid the recordkeeping fees they contend were excessive.”

Batten noted that the plaintiffs, “relying upon out-of-circuit law, contend that they may sue on behalf of the plan even if they were not personally injured,” but discarded that argument because he said the 11th Circuit is “clear that personal injury is a prerequisite to standing.”

And thus, lacking standing to bring the suit, Judge Batten closed the case.

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