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$500k Settlement Struck in Excessive Fee Case

The parties in an excessive fee suit, unusual for both the relatively small size of the plan, and the background of the counsel representing the plaintiffs, have come to terms.

The suit (Barrett v. Pioneer Natural Resources USA, Inc., D. Colo., No. 1:17-cv-01579-WJM, complaint filed 6/28/17 ) was brought by plaintiff William Barrett, a participant in the Pioneer Natural Resources USA, Inc. 401(k) and Matching Plan which, on Dec. 31, 2015, had $500,187,123 in assets and 4,410 participants.

The suit, as many others have, alleged that the plan’s size gave it “tremendous bargaining power to demand low-cost administrative and investment management services and well-performing, low cost investment funds” – but that rather than “…leveraging the Plan’s bargaining power to benefit participants and beneficiaries, the Pioneer Defendants chose inappropriate, higher cost mutual fund share classes and caused the Plan to pay unreasonable and excessive fees for recordkeeping and other administrative services.”

However, the suit stood out on two fronts: The plan was smaller than most of the excessive fee suits brought to date – and the lawyers representing the plaintiffs – Franklin D. Azar & Associates P.C., – were new to this type of litigation. The firm had held itself out as a personal injury law firm that specializes in motor vehicle accidents, defective products and slip-and-fall accidents.

The Settlement

According to the settlement agreement (Barrett v. Pioneer Natural Resources USA, Inc., D. Colo., No. 1:17-cv-01579-WJM-NYW, motion for settlement approval 12/10/18), the plan fiduciary-defendants will deposit $500,000.00 in an interest-bearing settlement account from which the participants’ recoveries, Class Counsel’s Costs, Administrative costs of the Settlement, and Class Representative Service Awards (not to exceed $10,000 in aggregate) will be paid. The Class Representatives, who “assisted Class Counsel with the investigation of the Class claims by, among other things, providing documents, participating in meetings and telephone conferences to discuss the litigation, responded to discovery, prepared for depositions, and in the case of Barrett, attended a five-hour deposition” will receive (pending settlement approval) $1,500 each, and Barret $4,000.

As for allocating the settlement to participants, the agreement states that the Settlement Administrator will calculate “pro rata shares of the Distributable Settlement Amount in proportion to each Settlement Class Member’s average year-ending Plan account balance over the Class Period, starting with December 31, 2011 and ending with December 31, 2018.” Those still in the plan won’t need to do anything – those who no longer have an active account will need to “provide a basic claim form confirming their address in order to receive payment.” Class Members are anticipated to receive an average of $30 per person ($240,000/8,000 Class members) after attorney’s costs, participant awards and administrative expenses are deducted.

As for the attorney fees, the settlement agreement notes that the Class Counsel will apply to the Court for reimbursement of out-of-pocket litigation costs incurred in the action not to exceed $200,000 – and in a footnote it’s noted that this represents approximately 70% of costs advanced by Class Counsel. Specifically, the settlement agreement explains that “Class Counsel spent over 1,000 hours and advanced nearly $300,000 in costs to retain experts, conduct depositions, and manage electronic document production.”

Speaking of which, the settlement agreement notes that the plaintiffs conducted depositions of two past and present chairmen of the Plan Committee and a Rule 30(b)(6) deposition of the Committee. Plaintiffs also requested and received approximately 15,500 pages of documents from Defendants, 9,600 pages of documents from the Plan investment advisor Lockton Companies, LLC and 11,450 pages of documents from Vanguard, the plan recordkeeper.

While the Azar law firm may be a relative newcomer to ERISA litigation, the firm has pending ERISA cases against Nationwide Life Insurance Co., Voya Financial, CenturyLink Inc. and the trustees of a $922 million union retirement plan.