The parties in a suit brought against Eaton Vance by a participant in its $434 million plan for loading up its 401(k) plan with relatively expensive proprietary investment options that allegedly performed poorly have announced the terms of their settlement.
The suit, filed in October 2018 in the U.S. District Court for the District of Massachusetts, noted that of the 42 non-money market investments strategies in the $434 million plan, 35 were managed by Eaton Vance, and that approximately 80% of the plan’s assets were invested in Eaton Vance funds. “This monopolistic, ‘buy from the company store’ arrangement is indicative of a process that is tainted by a failure of effort, competence, or loyalty,” according to the suit, which represented the interests of some 2,600 participants. The named plaintiff in the suit is Shannon Price, Director of Marketing for Eaton Vance Investment Counsel from June 2015 through May 2018 – filing suit in October 2018.
Term ‘Limits’
Under the terms of the proposed Settlement (Price v. Eaton Vance Corp., D. Mass., No. 1:18-cv-12098-WGY, motion for preliminary settlement approval 5/6/19), Eaton Vance will pay $3,450,000 into a settlement fund that will, net of attorneys’ fees, expenses and a class representative service award, be allocated pro-rata among members of the class. The settlement notes that the $3.45 million is approximately 23% of the total damages alleged, “well within the range found reasonable in other class action settlements.”
As for those other fees, the settlement agreement says they will petition the court to award:
- $1.15 million as “reasonable attorney’s fees and reimbursement of their out-of-pocket costs in a combined amount (a third of the total settlement, as is customary in these cases); and
- $5,000 to the plaintiff as an incentive award.
What it does not include are any provisions with regard to plan design modifications, agreements to modify or expand the existing plan menu, or any changes in conducting RFPs. As for recovery – net of those other fees, it looks to add up to not quite $900 per participant.
Eaton Vance is the latest financial company to agree to settle such claims, joining Franklin Templeton ($4.3 million), BB&T ($24 million), Jackson National ($4.5 million), Deutsche Bank ($21.9 million), American Airlines Group Inc. ($22 million), Allianz SE ($12 million) and TIAA ($5 million).
