The plaintiffs in an excessive fee suit are pressing for consideration of a settlement, arguing that recent decisions against claims similar to theirs don’t bode well for their case.
Now, in fairness, that’s not precisely their argument[i]. But these plaintiffs (Reichert et al. v. Juniper Networks Inc. et al., case number 3:21-cv-06213, in the U.S. District Court for the Northern District of California) are at least willing to acknowledge that recent court decisions regarding comparisons similar to their allegations in this case render their chances of prevailing less certain.
The suit in question had alleged that “…many managed account services merely mimic the asset allocations available through a target date fund while charging additional unnecessary fees for their services.” The $3 million cash settlement had been announced back in September by the parties, following an August 2021 filing of the original suit that targeted the fiduciaries of the $1.4 billion 401(k) plan, claiming they “breached the duties they owed to the Plan, to Plaintiff, and to the other Participants of the Plan (there were 6,860 in 2019, according to the suit).
That said, the settlement’s terms (Reichert v. Juniper Networks Inc., N.D. Cal., No. 3:21-cv-06213, motion for preliminary settlement approval 11/11/22) were basically a relatively straightforward $3 million in cash—according to the settlement agreement more than 11% of the plan participants’ total estimated damages of $26 million—an amount that the plaintiffs said was “on par” with settlements approved in similar ERISA lawsuits. But, as it turns out, things have changed—things that, in the plaintiffs’ views make that settlement even more satisfying.
Pivoting to arguments designed to persuade the court to approve the proposed settlement, the motion outlines the plaintiffs’ assessment of injury as attributable to the following:
1) Excessive RKA fee claim: $2,993,655
2) Failure to Select Prudent Share Class claim: $1,894,833
3) Excessive Managed Account fees claim: $2,031,129
4) Failure to Consider Passive Funds claim: $21,607,734
“Thus, around March 2022, Plaintiffs total estimated loss was $28,527,351,” they write—going on to comment that in their Amended Complaint the estimated losses were estimated to be approximately $26,000,000. Now, you’ll recall that the original estimate had the settlement pegged as being about 11% of the injury—which, arguably, might be seen by the court reviewing the agreement as a pretty modest recovery percentage, despite the inherent uncertainties involved in litigation, and the timing delays in terms of achieving a recovery.
What’s new? Well, the motion notes that “Plaintiffs’ estimated losses declined significantly in the Ninth Circuit for this type of ERISA excessive fee case in April 2022, when the Ninth Circuit held that plaintiffs do not state a plausible claim for breach of ‘the duty of prudence by failing to adequately consider passively managed mutual fund alternatives to the actively managed funds offered by the plan.’” Here they are referring to the case of Davis v. Salesforce.com, Inc, where these plaintiffs note that THOSE plaintiffs “had pled a materially identical active versus passive investment claim to that in Davis in this case,” and that “without the prudent investment claim after Davis, Plaintiffs’ potential losses were reduced significantly to $6,859,617 for the remaining RKA, share class, and managed account claims.”
In other words, assuming that THIS court were to view the facts similar to the conclusions in the Salesforce decision, the bulk of the damages alleged—$21,607,734—would be dismissed. And then that $3,000,000 settlement represents not a mere 11% of the damages alleged, but a “substantial 44% of the total estimated losses.” Indeed, the motion notes that this result would be “better than most similarly settled ERISA class actions alleging similar claims.”
More Settlement Terms
In a Memorandum of Law in Support of Plaintiffs’ Revised Motion for Preliminary Approval of Class Action Settlement, the plaintiffs in the case (Brian Reichert, a former employee of Juniper and Derek Deviny, a current employee), after reciting the claims and the flow of filings to this point, and the terms of the settlement, went on to outline other terms of the proposed settlement—specifically that, “Under the Settlement, the requested fees may not exceed one-third of the Gross Settlement Amount and costs may not exceed $50,000,” and that “attorneys’ fee requests will not be approved until the final approval hearing, class counsel has attached information about the fees and costs they intend to request, their lodestar calculation (including total hours), and resulting multiplier” estimated at $155,350.80 through the current date, with an additional $32,500 expected additional work. It also notes that the settlement provides for “a combined case contribution award for the two class representatives of up to $15,000,[ii] at the Court’s discretion.”
And thus, “For the foregoing reasons, Plaintiffs respectfully request that the Court: (1) preliminarily approve the parties’ Class Action Settlement Agreement; (2) approve the proposed Settlement Notices and authorize distribution of the Notices to the Settlement Class; (3) preliminarily certify the Settlement Class for settlement purposes; (4) schedule a final approval hearing; and (5) enter the accompanying Preliminary Approval Order.”
Will the court be persuaded? We shall see…
[i] Joseph Creitz and Lisa Serebin of Creitz & Serebin LLP and Paul M. Secunda and James A. Walcheske of Walcheske & Luzi LLC represent the plaintiffs here.
[ii] By way of justification for this sum—$7,500 each—the suit explains that they “have expended significant time and effort in assisting the prosecution of the litigation, including assisting their Counsel in helping to respond to discovery requests, have incurred the risks of becoming and continuing as a litigant, and have assumed the risk that future employers may look unfavorably upon them because they filed suit against their employer.”