The law firm of Capozzi Adler PC has filed yet another excessive fee suit—with a familiar template—including the assertion that the fees paid by the plan were…”astronomical.”
This time Malika Riley and Takeeya S. Reliford, by and through their attorneys—Carey & Danis, Edelson Lechtzin LLP, and, of course, Capozzi Adler PC—on behalf of the $930 million Olin Corporation Contributing Employee Ownership Plan, themselves and all others similarly situated, against the plan’s fiduciaries (which include Olin Corporation and the Board of Directors of Olin Corporation during the Class Period and the Olin Corporation Investment Committee and its members[i]) for breaches of their fiduciary duties during the Class Period.
More specifically, that they failed (1) “to adequately monitor and control the Plan’s recordkeeping costs; (2) 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 and performance; and (3) maintaining funds in the Plan despite the availability of similar investment options with lower costs and/or superior performance.”
The suit (Riley v. Olin Corp., E.D. Mo., No. 4:21-cv-01328, complaint 11/9/21) takes no more than the 35-pages we’ve come to expect from Capozzi Adler—mostly a regurgitation of the basic requirements of ERISA with regard to fiduciary responsibilities, a recitation of the plan’s status as a “jumbo” plan with “substantial bargaining power regarding the fees and expenses”—oh, and that the fiduciaries’ actions (or lack thereof) cost the plan participants millions of dollars.
Fees ‘Sense’
The point of comparison here on the fees—as it has been in other cases—NEPC’s 2019 Defined Contribution Progress Report, in which the suit claims that “no plans with between 5,000 and 10,000 participants paid more than $100 in per participant recordkeeping, trust and custody fees,” though it also states as fact that “some authorities have recognized that reasonable rates for large plans typically average around $35 per participant, with costs coming down every day.” And yes, once again in characterizing the fees paid by the Olin plan, the suit describes them as “astronomical.”[ii]
The plaintiffs here presumed that the plan fiduciaries had not conducted any kind of request for proposal to assess the reasonableness of fees/services because they had: (a) stayed with the same recordkeeper (Voya) over the course of the class period; and (b) “paid the same relative amount in recordkeeping fees.” Moreover, they took issue with the investment options in the plan—and inferred a lack of proper fiduciary oversight based on the outcomes. “Here, the Defendants could not have engaged in a prudent process as it relates to evaluating investment management fees. The Plan would have qualified for the collective trust versions of these funds (which were available since 2012) at all times during the class period, but it wasn’t until 2019 that they moved the investments to the CIT versions of the T. Rowe Price funds,” the suit states.
The plaintiffs go on to cite a couple of examples (“the PIMCO All Asset Fund Institutional, its expense ratio was 119.42% above the ICI median for its fund category,” “the GMO Benchmark-Free Allocation Fund, had an expense ratio that was 111.81% above the ICI median for its category,” and “the Eaton Vance Small/Mid Cap Fund and the Artisan International Value Fund had expense ratios that, respectively, were 75.63% and 67.55% above the ICI medians for their fund categories.”
Oh—and all of the shortcomings alleged above were further laid at the feet of the Board and Olin, which the suit refers to as “the Monitoring Defendants,” although they should probably have labeled them the Non-Monitoring Defendants, since the suit alleges that they failed to:
- “monitor and evaluate the performance of the Committee or have a system in place for doing so, standing idly by as the Plan suffered significant losses as a result of the Committee’s imprudent actions and omissions”;
- “monitor the processes by which the Plan’s investments were evaluated”; and
- “remove the Committee as a fiduciary whose performance was inadequate in that it continued to maintain imprudent, excessively costly, and poorly performing investments within the Plan, and caused the Plan to pay excessive recordkeeping fees, all to the detriment of the Plan and the retirement savings of the Plan’s participants.”
Will these simplistic assertions be sufficient to get the case past the inevitable motion for summary judgment? We shall see…
NOTE: In litigation there are always (at least) two sides to every story. However factual it may turn out to be, the initial lawsuit in any action is only one side, and one generally crafted toward a particular result. In our coverage you'll see descriptions of events qualified with statements such as “the suit says,” or “the plaintiffs allege”—and qualifiers should serve as a reminder of that reality.
[i] As always, it’s worth remembering that—as the suit states—“…the Board and each of its members during the Class Period is or was a fiduciary of the Plan within the meaning of ERISA Section 3(21)(A), 29 U.S.C. § 1002(21)(A), because each exercised discretionary authority over management or disposition of Plan assets and because each exercised discretionary authority to appoint and/or monitor the other fiduciaries, which had control over Plan management and/or authority or control over management or disposition of Plan assets.”
[ii] Beyond these cases, it’s not the first time the Capozzi Adler firm has affixed the “astronomical” label to 401(k) fees—having previously done so in suits involving the $1.5 billion Baptist Health South Florida, Inc. 403(b) Employee Retirement Plan, the $1.2 billion 401(k) plan of the American Red Cross, the $700 million Pharmaceutical Product Development, LLC Retirement Savings Plan, the $2 billion plan of Cerner Corp and more recently the $6 billion 401(k) plan of KPMG. And it’s not the only litigation firm to do so.
