Skip to main content

You are here

Advertisement

Big University 403(b) Suit Settles with Schlichter

Litigation

One of the first university 403(b) suits—one in which plan fiduciaries prevailed at the lower court, lost on appeal, and failed to gain a review by the Supreme Court—has settled.

The suit was filed in 2016—brought by participants in the $3.8 billion University of Pennsylvania Matching Plan against the University of Pennsylvania and its Vice President of Human Resources. The plaintiffs—Jennifer Sweda, Benjamin A. Wiggins, Robert L. Young, Faith Pickering, Pushkar Sohoni and Rebecca N. Toner—were represented by Schlichter, Bogard & Denton LLP and Promisloff Law PC. 

The suit alleged that the University of Pennsylvania defendants breached their fiduciary duty by “locking in” plan investment options into two investment companies, that the administrative services and fees were unreasonably high due to the defendants’ failure to seek competitive bids to decrease administrative costs, and that the fiduciaries charged unnecessary fees while the portfolio underperformed.

Summary, Judgment

In September 2017, the district court ruled in favor of the University of Pennsylvania defendants, dismissing the suit. However, on appeal in May 2019, U.S. Court of Appeals for the 3rd Circuit revived the employees’ proposed class action, partially reversing (by a 2-1 vote) the 2017 dismissal of the suit. They did so by considering whether the plaintiff in this case (Sweda) “…stated a claim that should survive termination at the earliest stage in litigation,” noting that when a court dismisses a complaint without trial (as the district court did in this case), “it deprives a plaintiff of the benefit of the court’s adjudication of the merits of its claim before the court considers any evidence,” going on to explain that they considered this appeal construing the complaint “in the light most favorable to the plaintiff.”

A subsequent motion by the University of Pennsylvania defendants for a full court (“en banc”) reconsideration of the ruling was rejected

The Settlement

At the moment, the terms of the settlement (Sweda v. Heuer, E.D. Pa., No. 2:16-cv-04329, order staying case 12/1/20) are undisclosed. All we know is that they “have reached an agreement to settle,” and have requested—and been granted a stay in the proceedings… until Jan. 14, 2021. 

Why it (Still) Matters

The suit was not only one of the first of the university 403(b) excessive fee suits to be filed, the district court decision, in favor of the fiduciary defendants for the University of Pennsylvania Matching Plan, had been cited in a number of these cases, including those that had been settled. While at least 20 universities have been sued over the fees and investment options in their retirement plans since 2016, settlements have been struck with Brown UniversityVanderbilt University and the University of Chicago, though St. Louis-based Washington UniversityNew York University and Northwestern University have prevailed in making their cases in court, following the University of Pennsylvania decision. It is a decision (both the district court’s decision dismissing the suit, as well as the appellate court’s subsequent determination that a sufficient case had been presented on several issues to proceed) that has been widely cited.

How the settlement impacts its precedential value going forward—and what the terms of the settlement turn out to be—remain to be seen.

Stay tuned.

Advertisement