The parties in an excessive fee suit have now “licked” the concerns of a federal judge concerning terms of the $500,000 settlement with a simple, yet potentially significant modification.
While excessive fee litigation is hardly uncommon these days (though it involves an incredibly small number of plans), this particular litigation (Barrett v. Pioneer Natural Resources USA, Inc., D. Colo., No. 1:17-cv-01579-WJM, complaint filed 6/28/17) 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 not only new to this type of litigation, they 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. In fairness, they are not the only law firm to have “transcended” humbler roots to aspire to ERISA class action litigation.
The suit 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.”
Settlement ‘Sticking’ Points
Neither appeared to be an issue for the court in reviewing the proposed $500,000 settlement proposed by the parties. Rather, Judge William J. Martinez of the U.S. District Court for the District of Colorado had in December said that it needed to address certain issues related to class notification, specifically the deadline that should be imposed for mailing certain forms to the settlement administrator and the settlement proposal’s requirement that former participants return forms by mail, at their own expense, which Martinez felt might be a barrier to full participation in the settlement.
Those issues have apparently now been resolved to Judge Martinez’ satisfaction (having found it to be “without obvious deficiencies,” resulting from “extensive arms-length negotiations,” and after “counsel for the Parties had conducted adequate investigation,” with terms that he deemed were “fair, reasonable, adequate and in the best interests of the Settlement Class.”
The settlement proposal (Barrett v. Pioneer Nat. Res. USA, Inc., D. Colo., No. 1:17-cv-01579-WJM-NYW, order granting preliminary settlement approval 2/21/19) now provides for stamped envelopes to be sent along with the claim forms mailed to members of the class.
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 currently has pending ERISA cases against Nationwide Life Insurance Co., Voya Financial, CenturyLink Inc. and the trustees of a $922 million union retirement plan. They now also have a page of their website dedicated to “401(k) mismanagement.”
