In what is said to be “the largest ever in an ERISA case alleging a retirement plan improperly offered proprietary funds,” the parties have struck a settlement.
The suit—filed back in 2017—was brought on behalf of participants[i] in the GE Retirement Savings Plan (f/k/a General Electric Savings and Security Program), as well as participants whose accounts were transferred from the GE Retirement Savings Plan and merged into a successor plan created in connection with the spinoff of a GE company who invested in any of the five GE Funds from Sept. 26, 2011 through and including Aug. 3, 2023.
The Suit
The plaintiffs alleged that the GE Funds, managed by GEAM, were the only actively managed options available to Plan participants, and that those funds “substantially underperformed other comparable investment options during the Class Period.” They also alleged that the GE defendants[ii] “refused to consider replacing those funds or their managers and thereby breached their duties of loyalty and prudence by failing to adequately monitor Plan investment options.”
Worsening matters, at least according to the plaintiffs, was that around the same time, GE explored the sale of GEAM and ultimately sold GEAM to State Street for $485 million in 2016. The plaintiffs further alleged that the defendants “retained the underperforming funds to keep GEAM’s assets under management elevated and to collect fees, inflated the sale price of GEAM, and used the proceeds to pay-down debt GE owed to its underfunded defined benefit pension plan, thereby breaching the duty of loyalty to Plan participants.”
In between the original suit, and the settlement, there was, as you might expect, lots of activity; motions to dismiss, a partial denial of that motion, discovery (during which Plaintiffs obtained and reviewed over 139,000 pages of relevant documents and conducted 23 depositions), motions to compel production of certain documents (resulting in the additional production of another 7,700 pages), expert depositions (two by the plaintiffs and 5 for the defendants), filing for summary judgement (by both parties, separately), a full-day mediation session, further discussions between the parties, and then on Aug. 3, 2023, “just eight days before oral argument on the pending summary judgment and Daubert motions, the parties reached an agreement in principle to settle the action in response to a mediator’s proposal by Mr. Meyer and notified the Court.”
The Settlement
The settlement “culminated from nearly six years of litigation after full fact and expert discovery involving seven experts, and was only reached due to a mediator’s proposal shortly before summary judgment and Daubert arguments,” according to the proposal. It calls for a cash settlement of $61 million—and if that seems an extraordinarily large sum (and it is for these type suits), the proposal notes that Plaintiffs’ damages expert calculated reasonable recoverable damages to be approximately $283,000,000. That makes it about 21.5% of such damages, which the proposal notes “is at the higher end of the range of settlement recoveries approved in other ERISA class action settlements.” More than that, they note that settling “also avoids the risk of an unfavorable ruling on summary judgment or at trial and provides an immediate recovery to the Class.” Under the terms of the agreement (In re: GE ERISA Litigation, case number 1:17-cv-12123, in the U.S. District Court for the District of Massachusetts), General Electric will continue to maintain that it is not liable for any wrongdoing.
Attorneys’ Fees
The proposal states that Class Counsel will “apply for reasonable attorneys’ fees of up to one-third of the $61,000,000 Settlement Amount.” It also states that they will also apply for an award of their litigation expenses in an amount not to exceed $1.7 million.
They also intend to petition the Court for incentive awards of $25,000 for each of the named plaintiffs in the case “in recognition of their service as Class Representatives.” The proposal comments that “Public policy strongly supports incentive awards as recognition for plaintiffs’ important service of participating in the suit and promoting class action settlements. Such awards compensate plaintiffs for the efforts and risks they have undertaken, without which no settlement would be possible. And, they provide an incentive for other employees to bring successful cases that vindicate the public’s interest in having retirement funds prudently managed.”
The settlement will also need to be “approved by an Independent Fiduciary prior to submission to the Court for final approval. GE will select and retain an Independent Fiduciary on behalf of the Plan to review the Settlement to determine whether it satisfies the conditions under Prohibited Transaction Exemption 2003-39, 68 Fed. Reg. 75632, as amended, 75 Fed. Reg. 33830 (‘PTE 2003-39’)”. The proposal notes that the Independent Fiduciary will issue its report 50 calendar days before the Fairness Hearing, and that “all reasonable costs and expenses of the Independent Fiduciary shall be borne by the Settlement Fund.”
We’ll see what the court has to say about it.
[i][i] The suit involves a commensurately large number of named plaintiffs, including Maria LaTorre, Robyn Berger, Brian Sullivan, Frank Magliocca, Melinda Stubblefield, Kristi Haskins, Laura Scully, Donald J. Janak, John Slatner, and Chip Knight.
[ii] Similarly, the list of defendants is pretty lengthy as well; General Electric Company (“GE” or the “Company”), GE Asset Management (“GEAM”), Benefit Plans Investment Committee (“BPIC”), GEAM Committee, Carol Anderson, Jeffrey Bornstein, Matthew Cribbins, John Flannery, Puneet Mahajan, Trevor Schauenberg, Keith Sherin, Brian Worrell, Dmitri Stockton, George Bicher, Paul Colonna, Michael J. Cosgrove, Gregory Hartch, Jessica Holscott, Ralph Layman, Matthew J. Simpson, Donald W. Torey, John Walker, David Wiederecht, Tracie Winbigler, Matthew Zakrzewski, Jeanne M. LaPorta, the GE Pension Board, the GE Board of Directors, and nominal defendant GE Retirement Savings Plan (collectively, “Defendants”), by and through their counsel of record in the Action.
