The parties in an excessive fee suit that had been dismissed by a federal court—have now come to terms.
Indeed, it was only just over a month ago that the suit, filed last fall by Carl Martin against CareerBuilder, his former employer, claiming that the plan fiduciaries (and unnamed “monitoring defendants” who appointed those members) caused the plan to invest millions in imprudent investment options, motivated by revenue sharing payments back to ADP and Morgan Stanley.
This, he had claimed, meant that the plan overpaid for administrative and advisory services by at least $1.1 million from September 2013 to September 2017. Oh, and the suit had also claimed that the plan fiduciaries were “standing idly by” as the plan suffered significant losses due to the excessive fees, and failed to properly evaluate the plan’s investments, including removing those with poor performance that could harm participants’ retirement savings.
We’re not talking about a mega-plan here; as of 2017, 2,600 employees participated in the CareerBuilder Plan, which reportedly had some $180 million in assets.
The Dismissal
The allegations were ultimately deemed to be insufficient for U.S. District Judge Robert M. Dow, Jr., who not only evidenced a fair amount of skepticism regarding the plaintiff’s arguments, the decision focused on the realities that “the factual allegations in the complaint must be sufficient to raise the possibility of relief above the ‘speculative level,’” citing precedent that “a pleading that offers ‘labels and conclusions’ or a ‘formulaic recitation of the elements of a cause of action will not do.’” He also relied heavily on a case also decided in favor of the plan fiduciaries earlier this year, Divane v. Northwestern University, now on appeal to the Supreme Court.
Judge Dow did, however, gave the plaintiff until July 28, 2020 to file an amended complaint “consistent with this opinion,” noting that if they failed to do so, the court will convert the dismissal to “with prejudice” and "enter a final judgment under Federal Rule of Civil Procedure 58.”
The Settlement
What we have now is what is called a “minute entry” in which the parties say they have “agreed in principle to an individual non-class settlement and are in the process of papering up the necessary documents.” It goes on to note that “once these documents are finalized, the parties will file a stipulation of dismissal with prejudice,” the latter meaning that the case is over and done with, and can’t be appealed. It is a status that the defendants in the case had requested, but as noted above, Judge Dow had resisted, pending an opportunity to the plaintiffs to address the shortfalls in their pleadings.
What This Means
At the time, I commented that “a dismissal without a full adjudication generally tells us more about the quality of the arguments (at least as viewed by the judge) than the merits of the case.” It’s similarly hard to draw much in the way of conclusions from a settlement, much less the mere announcement of a settlement.
Except that it’s often less expensive (in time and “treasure”) to settle than to keep fighting.
