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Excessive Fee Settlement Hits Snag

Litigation

A hard-fought settlement in a long-standing 401(k) excessive fee suit has been challenged—by participants involved in another suit against the firm.

These participant-plaintiffs—Alan Carlson, Peter DeLuca, and Robert Stolte—are not only members of the $12.4 million class action settlement struck with Northrup-Grumman late last year with plaintiffs represented by the law firm of Schlichter Bogard & Denton—they (Carlson and DeLuca) also happen to be the plaintiffs and court-appointed class representatives in another suit involving their employer (Stotle is a member of the class there as well), and claims regarding a severance plan. The latter suit—which received partial class status in 2019—alleged that Northrup-Grumman changed the interpretation of its severance plan so that they could avoid large payments to long-tenured laid-off workers.

Their issue objected (Marshall v. Northrop Grumman Corp., C.D. Cal., No. 2:16-cv-06794, objection to settlement 5/5/20) to with the 401(k) settlement is that “the scope of the release in the Settlement Agreement in this case is impermissibly broad”—more specifically, they argue that the scope of the of the release in that settlement “appears to release at least some of the claims” in the severance plan litigation. Moreover, they argue that since participation in the 401(k) suit class is mandatory, they—and the other members of the severance plan class action—are unable to opt out of participation in the 401(k) settlement. And while the petitioners here are aware of this potential “catch,” they also complain that there is nothing in the notice of the 401(k) settlement that tells those who are members of the classes in both suits about the potential implication to their claims.

Though the petitioners here acknowledge that “the claims of the certified class in Carlson are based on a set of allegations distinct from the factual basis of the claims in the Savings Plan Case,” the filing with Judge André Birotte Jr. notes that Article 8 of the Agreement provides that “Class Members” will be deemed to have released “the Released Parties from the Released Claims” and cannot “sue or seek to institute, maintain, prosecute, argue, or assert in any action or proceeding” any known or unknown claim “on the basis of, connected with, or arising out of any of the Released Claims.”

And, since the class certified in the Savings Plan litigation includes both current and former employees “who are or were participants or beneficiaries of the Northrop Grumman Savings Plan at any time between September 9, 2010 and the date of judgment, and were affected by the conduct set forth in this complaint,” they argue “there is likely a significant number of member of the Carlson class who are also members of the class in this case.[i]

“Accordingly, Carlson, DeLuca and Stole request that final approval of the Settlement Agreement be denied without prejudice until and unless the release provisions are modified to limit the released claims to those arising out of the facts alleged in the operative complaint.” 


[i]Interestingly enough, they also note that “Nancy Ross is counsel for the defendants in both the Severance Plan Case and the Savings Plan Case,” and that since the Settlement Agreement in this case was not executed until January 13, 2020, “…Northrop and its counsel were aware of the class certification decision in the Severance Plan Case and the likelihood of overlap of the classes.”

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