For the second time in about as many weeks, an excessive fee suit against the fiduciaries of a university 403(b) plan has been dropped.
The original suit had been filed by two participants on behalf of some 4,000 participants in the 403(b) plan of Long Island University. The plaintiffs claimed that over the past six years the plan had paid “more than two million per year in recordkeeping, distribution, and mortality risk fees (a.k.a. ‘administrative fees’)” that the suit claims were “roughly ten times what they should be” – and, perhaps needless to say, “grossly excessive.”
‘Tethered’ Call?
The plaintiffs took issue with the fact that the administrative fees paid to TIAA by the plan “are tethered not to any actual services it provides to the Plan, but rather to a percentage of assets in the Plan.” In colorful language in the May 2018 suit, the plaintiffs quoted a commentator who “likened this fee arrangement to hiring a plumber to fix a leaky gasket, but paying the plumber not on actual work provided but based on the amount of water that flows through the pipe.”
The suit connected itself to “18 separate lawsuits pending in federal district courts around the country,” though acknowledged that this one was “narrower in scope.” Still, the plaintiffs alleged that TIAA “exploited its rich heritage of being a non-profit, low-cost financial services provider and duped universities into excessive fee arrangements.” But then, they noted that “it appears TIAA is willing to meaningfully reduce its fees if universities will just ask.” However, “ask” in this case apparently meaning sue, since by reference they cited the $6.5 million settlementin just such a case by the University of Chicago about the time that this suit had been filed.
Now – just like the case against the University of Rochester, this suit was also voluntarily dropped by the plaintiffs with prejudice, “with each party to bear its own fees and costs.”
The attorneys for the defendants in this case (Mulligan v. Long Island Univ., E.D.N.Y., No. 1:18-cv-02885-ERK-SJB, notice of voluntary dismissal 2/8/19) were Mayer Brown LLP – as they were in the University of Rochester case. The plaintiffs here were represented by Sweet Law Firm PC, Stull Stull & Brody, Zaremba Brownell & Brown PLLC, and Carlson Lynch Sweet Kilpela & Carpenter LLP. The latter also represented the plaintiffs in the University of Rochester suit (and incorporated some of the same language in their suit here).
Nearly two dozen institutions of higher learning have been hit with class suits alleging breach of fiduciary duty/excessive fees since August 2016. St. Louis-based Washington University, New York University, the University of Pennsylvania and Northwestern University have prevailed in making their cases in court. This case is the second to be voluntarily dismissed by the plaintiff. In addition to The University of Chicago, Duke Universityalso settled their suit rather than go to trial, while New York University took their case to court and won.
