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Court Seeks Clarifications on Proposed Excessive Fee Settlement

A proposed settlement in an excessive fee suit has been sent back to the parties for some clarifications.

The suit (Barrett v. Pioneer Natural Resources USA, Inc., D. Colo., No. 1:17-cv-01579-WJM, complaint filed 6/28/17) was brought by plaintiff William Barrett, a participant in the Pioneer Natural Resources USA, Inc. 401(k) and Matching Plan which, on Dec. 31, 2015, had $500,187,123 in assets and 4,410 participants.

The suit, as many others have, alleged that the plan’s size gave it “tremendous bargaining power to demand low-cost administrative and investment management services and well-performing, low cost investment funds” – but that rather than “…leveraging the Plan’s bargaining power to benefit participants and beneficiaries, the Pioneer Defendants chose inappropriate, higher cost mutual fund share classes and caused the Plan to pay unreasonable and excessive fees for recordkeeping and other administrative services.”

However, the suit stood out on two fronts: The plan was smaller than most of the excessive fee suits brought to date – and the lawyers representing the plaintiffs – Franklin D. Azar & Associates P.C. – were new to this type of litigation. The firm had previously held itself out primarily as a personal injury law firm that specializes in motor vehicle accidents, defective products and slip-and-fall accidents.

Settlement ‘Sticking’ Points

Neither appeared to be an issue for the court in reviewing the proposed $500,000 settlement proposed by the parties earlier this month. Rather, Judge William J. Martinez of the U.S. District Court for the District of Colorado said that it first needs to address certain issues related to class notification, and cross-references between the settlement agreement and the release of claims, according to Bloomberg Law, citing a minute entry in the case docket. According to the report, Judge Martinez was inclined to grant the unopposed motion for preliminary approval, but noted that they needed to first clarify certain matters, including the deadline that should be imposed for mailing certain forms to the settlement administrator, according to the report, which notes that the plaintiffs have until Jan. 11 to comply.

The report notes that Judge Martinez also expressed concern with the settlement proposal’s requirement that former participants return forms by mail, at their own expense, which he felt might be a barrier to full participation in the settlement.

Settlement ‘Splits’

The participant class (approximately 8,000, according to the settlement agreement) is anticipated to receive an average of $30 per person ($240,000/8,000 Class members) after attorney’s costs, participant awards and administrative expenses are deducted. Not that the lawyers in this case are looking to collect the customary 30%. However, the settlement does call for a reimbursement of out-of-pocket litigation costs incurred in the action not to exceed $200,000 – and in a footnote in the settlement it’s noted that this represents approximately 70% of costs advanced by Class Counsel. Specifically, the settlement agreement explains that “Class Counsel spent over 1,000 hours and advanced nearly $300,000 in costs to retain experts, conduct depositions, and manage electronic document production.”

While the Azar law firm representing the plaintiffs may be a relative newcomer to ERISA litigation, the firm has pending ERISA cases against Nationwide Life Insurance Co., Voya Financial, CenturyLink Inc. and the trustees of a $922 million union retirement plan.

The case is Barrett v. Pioneer Natural Res. USA, Inc., D. Colo., No. 1:17-cv-01579, docket entry 12/20/18.