Having been “vigorously litigated for over three years,” and “after almost one year of arm’s length negotiations with the assistance of a national mediator,” the parties in an excessive fee suit have come to terms.
The settlement – between BB&T and a potential class of as many as 67,000 current and former workers – was announced just over a month ago after a pretrial telephone conference before U.S. District Judge Catherine C. Eagles just two weeks before the suit was scheduled to go to trial.
The settlement (Sims v. BB&T Corp., M.D.N.C., No. 1:15-cv-00732-CCE-JEP, motion for preliminary settlement approval 11/30/18) provides for a $24 million Settlement Fund, which will be used to pay the participants’ recoveries as well as Class Counsel’s Attorneys’ Fees and Costs, Administrative Expenses of the Settlement, and Class Representatives’ Compensation. Most participants will have the recovery posted directly into their 401(k) account. Those who no longer have an account will be given the option to receive their distributions in the form of a check “made out to them individually or as a roll-over into another tax-deferred account.”
In addition to the monetary settlement, the BB&T plan fiduciaries have agreed to:
- engage a consulting firm to conduct a Request for Proposal for investment consulting firms that are unaffiliated with BB&T and engage an Investment Consultant to provide independent consulting services to the Plan;
- the Investment Consultant will evaluate the plan’s investment options and provide the Plan fiduciaries with an objective evaluation of the options in the plan;
- within two years after the entering of the Final Order, the plan fiduciaries agreed to participate in a training session regarding ERISA’s fiduciary duties;
- during the two year period following entry of the Final Order, BB&T will rebate to the plan participants “any 12b-1 fees, sub-ta fees, or other monetary compensation that any mutual fund company pays or extends to the Plan’s recordkeeper based on the Plan’s investments"; and
- if, during a two-year time period following the entry of the Final Order, BB&T decides to charge Plan participants a periodic fee for recordkeeping services, the plan fiduciaries will conduct a Request for Proposal for the provision of recordkeeping and administrative services.
The plaintiffs who brought the class action will receive $20,000 each under the terms of the settlement, while the plaintiffs’ attorneys will request fees (to be paid from the gross settlement) “in an amount not more than one-third of the Gross Settlement Amount, or $8,000,000, as well as reimbursement for costs incurred of no more than $1,100,000.” The plaintiffs are represented by Nichols Kaster PLLP, Schlichter Bogard & Denton LLP, and Puryear & Lingle PLLC.
The case – actually two cases that were consolidated in November 2015 – alleged that fiduciary responsibilities were breached both in causing the plan to pay BB&T excessive administrative fees and providing imprudent and unreasonably expensive investment options – that the defendants used a BB&T company to provide plan trustee and recordkeeping services without any competitive bidding process and allowed that company to take excessive compensation (via revenue-sharing) from the plan at the expense of plan participants – and that the defendants failed to monitor the amount of revenue sharing that was paid or have BB&T return to the plan such amounts as exceeded a reasonable administrative fee…“…millions of dollars in excessive recordkeeping fees,” according to the suit.
In making the case for the settlement, the parties noted that it “provides meaningful monetary and significant non-monetary relief to each settlement class member,” and that – “in light of the litigation risks further prosecution of this action would inevitably entail, it is proper for the Court to: (1) preliminarily approve the proposed Settlement; (2) approve the proposed form and method of notice to the Class; and (3) schedule a hearing at which the Court will consider final approval of the Settlement.”