A federal judge has given preliminary approval to a $3.45 million settlement of a suit brought against Eaton Vance by a participant in its $434 million plan for allegedly loading up its 401(k) plan with relatively expensive proprietary investment options that performed poorly.
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.
Having determined that “the Settlement Agreement is fair, reasonable, and adequate, and within the range of possible approval,” that was “negotiated in good faith at arms-length between experienced attorneys familiar with the legal and factual issues of this case,” incorporates an appropriate form of notice of settlement and fairness hearing, and “meets all applicable requirements of law,” U.S. District Judge William G. Young preliminarily approved the $3.45 million settlement announced earlier this month.
And while that settlement agreement estimated it would provide about $1,350 per participant, net of a $1.15 million “cut” for the plaintiff’s attorneys (Sanford Heisler Sharp, LLP), and a $5,000 “service award” for plaintiff and former Director of Marketing for Eaton Vance Investment Counsel Shannon Price (certified as class representative in the settlement), the 2,600 members in the class (current and former participants in the plan who carried a positive account balance at any time from Oct. 5, 2012 to the date of the final approval of the settlement, excluding Eaton Vance Corp., Eaton Vance Management, Eaton Vance Investment Committee, and the members of the Eaton Vance Investment Committee) will probably see about $900 each.
Young set a tentative date of September 23 for a final fairness hearing on the settlement and attorney fees.
Eaton Vance is, of course, just the latest financial company to agree to settle such claims, joining SEI (terms not yet disclosed), MFS (settlement amount not yet disclosed), 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).
The case is Price v. Eaton Vance Corp. et al., case number 1:18-cv-12098, in the U.S. District Court for the District of Massachusetts.
