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Fidelity Cleared in Tussey v. ABB Case

In a decision that exonerates Fidelity from liability, the 8th U.S. Circuit Court of Appeals upheld parts of a lower court’s ruling in Tussey v. ABB but reversed other parts — including the $13.5 million in attorney’s fees and costs awarded to Jerome Schlichter’ s firm.

The 8th Circuit upheld the $13.4 million decision against ABB by its plan participants regarding record keeping fees paid to Fidelity, but reversed the $21.8 million award based on losses due to mapping from Vanguard’s Welling fund to Fidelity’s Freedom Funds in 2001, as well as $1.7 million based on float income. The ABB case was filed in 2006; the district court issued its ruling in 2012.

One of the central issues addressed in the case is whether a plan fiduciary has discretion in exercising their fiduciary responsibilities. Since ERISA is not explicit on this issue, it will be played out in the courts, according to FRA PlanTools legal blogger Tom Clark. Though the plan sponsor was found liable for not investigating, monitoring or negotiating record keeping fees paid to Fidelity, as well as using these costs to subsidize other corporate services, there was no wrongdoing by Fidelity. Nor was Fidelity found liable for keeping float revenue since it was not considered a plan asset. The $21.8 million award for mapping assets to the Fidelity fund was found to be speculative and “hindsight influenced,” according to the 8th Circuit.

Clark speculates that the case may be appealed to the 8th Circuit “en banc” and might even end up before the U.S. Supreme Court.

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