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Excessive Fee Settlement Approved—Despite Objection


A $14 million excessive fee settlement has been approved by a federal judge, though there was an objection raised by one of the members of the participant class.

U.S. District Judge Charles R. Norgle signed off on the deal presented by the parties (plaintiffs Chandra V. Brown-Davis, Yolanda Brown, Ronald Dinkel, Siobhan E. Fannin, Daphne G. Jacob, Kristie Kolacny, Dianna J. Martin, Sherri Nelson, Becky S. Ray, Timothy M. Renaud, Lisa Smith and Susan Weeks) who sued on behalf of a class of some 200,000 participants and beneficiaries of the $10 billion Walgreen Profit-Sharing Retirement Plan. 

The suit claimed that, “in 2013, they loaded the plan with a suite of poorly performing funds called the Northern Trust Focus Target Retirement Trusts,” and that they “kept these Funds throughout the Class Period despite their continued underperformance”—allegedly these investment options “…performed worse than 70 to 90 percent of peer funds.” Worse, according to the plaintiffs—who are represented by Sanford Heisler Sharp LLP and Maddox Hargett & Caruso PC—Walgreen “selected the Northern Trust Funds as the Plan’s default investment options.” The settlement agreement (which included both monetary compensation and an agreement to keep the target-date funds in question off the plan menu for at least three years, and to use an investment advisor to monitor the investments going forward) was announced last October.

While all such settlements provide for members of the class represented to be told, and potentially object to, the terms, most seem to pass without objection. That was not the case here, as Judge Norgle cited the objection of one participant among the 195,000 participant class. That came from a Mr. Paul Adams who “generally argues that the Settlement fund is too low and the attorneys’ fees are too high.” 

However, Judge Norgle commented that Adams’ objection was “based on incorrect estimates of the Class’s damages, a misinterpretation of the Plan of Allocation; and an incorrect account of Class Counsel's efforts in this case”—and concluded that “in light of the record as a whole, the objection does not alter this Court’s conclusion” that the settlement and its terms were “fair and reasonable.” 

Judge Norgle also acknowledged that the terms had been reviewed and approved by an independent fiduciary. 

What This Means

The suit involved a big plan, but a (relatively) modest settlement amount (unless it’s coming out of your pocket, of course). The target-date funds in question have been the subject of several suits—alleging both poor (relative) performance, but also the lack of a track record. Neither has yet been fully adjudicated, and so once again we’re likely dealing with a cost/benefit analysis—a determination that it’s ultimately “cheaper” to settle than to pursue the action in court (though, in fairness, Walgreens did at least challenge the allegations).  

As for the plan participants in the class—well, it looks like they’ll get about $46 each once all of the attorney fees and class representatives’ compensation are netted out.