After nearly a year of negotiations (though that’s a pretty short turnaound by some measures), the parties in an excessive fee suit have asked for the court’s approval on a settlement agreement struck by the parties.
The plan in question—more specifically the plan fiduciaries—involved are those of Nextep, Inc., a professional employer organization (PEO), as well as the firm’s board of directors, the investment committee, and members of that committee. The plaintiffs here—Brian Loomis, Jason Boyer and Daniel W. Kilday—were represented by the law firm of Capozzi Adler, a firm that has been quite active in this space in recent months.
The Allegations
The plan itself is smaller than most targeted in such actions—at the end of 2018 and 2019, $204 million and $283 million, respectively, for the benefit of some 5,000 participants. At a high level, the suit alleged that the defendants breached their fiduciary duties by:
- failing to objectively and adequately review the Plan’s investment portfolio with due care to ensure that each investment option was prudent, in terms of cost;
- maintaining certain funds in the Plan despite the availability of identical or similar investment options with lower costs and/or better performance histories; and
- failing to control the Plan’s administrative and recordkeeping costs.
The Terms
The settlement was announced in May—and now we know the terms. Specifically, the parties have agreed (Loomis v. Nextep, Inc., W.D. Okla., No. 5:21-cv-00199, motion for settlement approval 7/8/22) to a settlement of $1,100,000, as well as:
- Fees for the plaintiffs’ counsel not to exceed 33-1/3% of the Gross Settlement Amount (a maximum amount of $366,630)
- Recovery of litigation costs and expenses “advanced and carried by Class Counsel for the duration of this litigation,” not to exceed $50,000
- Class Representatives’ Case Contribution Awards in an amount not to exceed $5,000 each for plaintiffs Loomis, Boyer and Kilday
As is customary in such cases, the settlement explains that the defendants here also intend to retain an Independent Fiduciary to approve and authorize the settlement on behalf of the Plan—the fees and expenses of which will not exceed $15,000, and will be paid as an Administrative Expense from the Settlement Fund.
In conclusion, the agreement proposes that a Fairness Hearing be scheduled at least 120 days after entry of the Preliminary Approval Order from the court—in order to give the “settlement class” (the participants that would stand to benefit from the suit) “fair notice and the opportunity to be heard.”
What This Means
Capozzi Adler has, by my count, been the busiest excessive fee litigant over the past two years, filing lots of suits that largely make the same allegations with slight shifts in fact patterns and fund names. They’ve also been able to settle many of these in remarkably short fashion, many, like this one, within a year of the original filing (see Capozzi Adler Strikes Another Relatively Quick Settlement, Capozzi Adler Captures an Excessive Fee Settlement, Settlement Struck in Suit Involving Fidelity Freedom Funds). And if the settlement amounts are somewhat smaller than that commanded by larger plans—the (relatively) quick settlement cycle—particularly in view of the large number of such suits filed by Capozzi Adler—surely just keeps pouring fuel on the fire of future litigation.
