A four-year old case in which participants accused plan fiduciaries of “stuffing cash into a mattress” while at the same time forcing participants “to play the fool’s game” by offering only “high-cost actively managed funds” has come to terms.
Back in 2019, plaintiffs Gloria G. Ferguson and Cassandra McClinton “individually and as representative of a class of participants in and beneficiaries of the Compass SmartInvestor 401(k) Plan” brought suit (Ferguson v. BBVA Compass, N.D. Ala., No. 2:19-cv-01135-SGC, complaint 7/18/19) against the BBVA plan fiduciaries for breach of fiduciary duty under the Employee Retirement Income Security Act of 1974. More specifically, that “mismanaging a $100 million money market fund that was the investment equivalent of stuffing cash into a mattress”—invoking a quote from the case Brotherston v. Putnam Investments, LLC, which might have found its way to the Supreme Court, that said: “…a trustee who decides to stuff cash in a mattress cannot assure that there is no loss merely by holding onto the mattress.”
The suit against the plan ($1.1 billion in assets and at least 15,000 participants in 2019) claimed that the missteps caused participants to overpay by some $47 million.
That said, in the interim, PNC completed its acquisition of BBVA as of June 2021, “thereby becoming the successor in interest to BBVA and the sole remaining Defendant in this Action.” Then, in conjunction with that acquisition, the Plan was terminated on Oct. 9, 2021, and “certain participants in the Plan became participants in the PNC Financial Services, Group, Inc. Incentive Savings Plan (the “PNC Plan”).
Following what was described as an “intense litigation process,” in April 2022, the parties conducted an in-person mediation with Robert Meyer of JAMS Mediation Group in Los Angeles, followed by an information-sharing session in June, and a virtual second mediation session with Meyer in July of that year. “While these original sessions were unsuccessful, they did lay the groundwork for future discussions,” according to the settlement proposal—which they said was achieved with the help of Meyer on Aug. 17, 2023.
The Settlement
According to the settlement proposal (it still must be approved by the court), in exchange for releases and for the dismissal of the action, “PNC will make a substantial monetary payment of $6,100,000 to pay recoveries to Class members.” That “Settlement Fund” will be used to compensate Class members for their alleged losses, as well as to pay Class Counsel’s attorneys’ fees and expenses, Administrative Expenses of the Settlement, and the Class Representatives’ incentive awards if ordered by the Court.
As for those other fees, the settlement proposal (Ferguson et al. v. PNC Financial Services Group Inc., case number 2:19-cv-01135, in U.S. District Court for the Northern District of Alabama) says that plaintiffs intend to seek incentive awards for the Named Plaintiffs in an amount approved by the Court, but the settlement agreement recommends $10,000 each, “consistent with prior precedent recognizing the value of individuals stepping forward to represent a class, particularly in contested litigation like this where the potential benefit to any individual does not outweigh the cost of prosecuting class-wide claims and there are significant risks of no recovery and the risk of alienation from the employers and peers.”
With regard to attorneys’ fees, the proposal says that plaintiffs’ counsel will request attorneys’ fees to be paid out of the Settlement Fund in an amount not more than one-third of the Settlement Fund, or $2,013,000, as well as reimbursement for costs incurred to prosecute this lawsuit.
One other interesting note; the settlement agreement the plaintiffs originally requested included non-monetary relief from the Court. “However, the non-monetary relief has been satisfied by both changes to the Plan prior to its termination, as well as the termination of the Plan itself in 2021.” The proposal comments that “these voluntary changes provided substantial [relief] to the Class members,” and “because the non-monetary relief advocated by Plaintiffs has been effectively satisfied, it was not necessary (or possible due to the termination) for Plaintiffs to demand additional non-monetary terms as part of the settlement with PNC.”
Now we’ll see what the court has to say.
