After years of hard-fought litigation, the parties in an excessive fee suit have come to terms—including cash and “other non-monetary relief.”
Participant-plaintiffs Jillyn Peterson, Gabe Hare, Robert Heynen, and Adam Krajewski—on behalf of the ISO[i] 401(k) Savings and Employee Stock Ownership Plan—have submitted an Unopposed Motion for Preliminary Approval of Class Action Settlement for the court’s approval.
The suit was initially filed on Sept. 24, 2020, alleging violations of fiduciary duties imposed by ERISA § 404(a), 29 U.S.C. § 1104(a). More specifically, by “(1) the selection and retention of investment options in the Plan despite the availability of lower cost share classes and lower cost comparable investments; (2) failing to monitor and evaluate the performance of the Committee; and (3) failure to control the recordkeeping expenses of the Plan.” And, despite concurrence with the terms of the settlement proposal, the fiduciary defendants here “deny each of these claims and deny that they ever engaged in any wrongful conduct.
According to the submission, the parties agreed to the proposed Settlement only after vigorous arms-length negotiations[ii] between counsel experienced in ERISA class actions and under the auspices of Robert Meyer, Esq., an experienced mediator.” For their part, the plaintiffs here (represented by Capozzi Adler P.C.) “believe the Settlement is an excellent result, providing a substantial, immediate payment to Settlement Class members and eliminating the risks and cost of trial”—which they say could result in a reduced recovery or no recovery at all.
The Settlement
As for that settlement (Peterson et al. v. Insurance Services Office Inc. et al., case number 2:20-cv-13223, in the U.S. District Court for the District of New Jersey)—it consists of a cash payment of $4 million, in addition to other non-monetary relief for preliminary approval for approximately 6,000 participants in the plan. The non-monetary provisions? “Within five years after the Settlement Effective Date, if the Plan’s fiduciaries have not already done so, the Plan’s fiduciaries will conduct or cause to be conducted a request for proposal relating to the Plan’s recordkeeping services.” The proposed settlement explains that “this provision addresses the allegations at the heart of this litigation, thereby adding significant value to the settlement.”
The proposal also calls for plaintiff attorney’s fees of no more than a third of the total settlement, reimbursement of their expenses not to exceed $100,000.00, and “service awards” of $10,000 each for the named plaintiffs.
Regarding the reasonableness of the settlement, the proposal notes that the plaintiffs’ expert Veronica Bray opined total maximum losses from Plaintiffs’ claims related to the alleged imprudence of investment options to be between $39,301,195 to $44,801,195—and that on the assumption that all of plaintiffs’ claims would be sustained, “including claims that Defendants retained underperforming funds and Defendants caused the Plan to overcharge participants for fees related to investment options.” Plaintiffs’ expert Eric Dyson estimated losses to the Plan from the allegedly overpriced recordkeeping fees to be $1,046,543.
The proposal explains that the defendants disputed the validity of these calculations, and “given Defendants’ vigorous rejection of Plaintiffs’ damages analysis, if any of their arguments were credited by the Court, it would reduce Plaintiffs’ damages considerably, if not totally”—and argues that the settlement at 10% of that total is “in accord with the typical percentage district courts have approved.”
We’ll see what the court makes of it.
[i] Insurance Services Office Inc.
[ii] There was a lot more to this case than that—according to the settlement, “on January 11, 2021, Defendants filed a Notice of Defendants’ Motion to Dismiss the Complaint for Failure to State a Claim Pursuant to FED. R. CIV. P. 12(b)(6) (ECF 11).” Then on Feb. 16, 2021, Plaintiffs filed an opposition to Defendants’ motion to dismiss, and on Feb. 23, 2021, Defendants filed a reply. On April 13, 2021, this Court issued an Order granting the motion to dismiss in part and denying the motion in part, dismissing plaintiffs’ allegation that Defendants breached their duty of loyalty, but denied dismissal of all other claims. On April 27, 2021, Defendants filed their Answer to the Class Action Complaint, and then on May 21, 2021, the Parties filed a Stipulated Partial Dismissal of Individual Claims Asserted by Plaintiffs Jillyn Peterson and Gabe Hare, which the Court signed on May 21, 2021 (did not affect Plaintiff Peterson and Hare’s ability to be class representatives). Then in Nov. 2022, the Parties jointly wrote to request a stay of litigation pending participation in private mediation.
