After “…substantial discovery, the exchange and review of key documents, and arm’s-length negotiations between experienced ERISA class-action counsel directed by a seasoned and respected mediator,” the parties in a suit involving proprietary fund investments have come to terms.
The cash settlement of $6.7 million was struck between the fiduciaries at Mutual of Omaha in a suit filed in 2018 in the U.S. District Court for the District of Nebraska by Berger & Montague and Schneider Wallace Cottrell Konecky Wotkyns LLP on behalf of Tamera S. Lechner, a participant in the plan, which had approximately 6,000 participants and some $500 million in assets.
Lechner had alleged that the plan’s fiduciaries selected United of Omaha-branded investment funds “when each of these Omaha-branded funds invested all of its assets in another publicly available investment fund managed by an unrelated third party—causing the Plan to pay a fee to United of Omaha in addition to the fee charged by the underlying fund’s manager when the Plan could simply have offered the underlying fund and avoided paying any additional fee to United of Omaha.”
The $6.7 million Gross Settlement Amount will also cover the administrative costs associated with implementing the Settlement; any applicable taxes or tax-related costs, any Case Contribution Award for Plaintiffs approved by the Court (they’re asking for $10,000 each), the cost of an independent fiduciary retained to approve the terms of the Settlement on behalf of the Plans and the release by the Plans of claims made against Defendants; and “any attorneys’ fees and costs approved by the Court”—“not to exceed one-third of the Gross Settlement Amount or $2,233,333.”
During the course of the proceedings, the defendants produced to the plaintiffs “roughly 4,000 documents, spanning approximately 30,000 pages, including, among other things, governing Plan documents, minutes and materials from meetings of the Plans’ fiduciary committees and the IMOC, Plan-related disclosures to participants, and performance data for the Plans’ investment options.” After approximately eight months of discovery, the Class Representatives and Defendants “agreed to participate in a private mediation in an effort to resolve all claims that were raised or could have been raised in the Action”—bringing this action to the aforementioned conclusion.
As is customary in such agreements, the parties not only state (Lechner v. Mutual of Omaha Ins. Co., D. Neb., No. 8:18-cv-00022, motion for preliminary settlement approval 9/18/20) that the terms represent a “substantial recovery,” particularly “…in light of the risks posed by continued litigation, including the possibility of the Court ultimately finding no liability or the inability to prove damages.” Here the parties note that “substantiating Plaintiffs’ claims regarding excessive administrative fees would have required detailed and expert examination of United’s operations and financial records supporting the cost of those operations.”
Moreover, the settlement agreement acknowledges that “proving Plaintiffs’ claims regarding the Guaranteed Account would have been even more complex and time-consuming.” They explain that “whether an insurance company general account investment contract constitutes a 'guaranteed benefit policy' as defined in ERISA § 401(b)(2) depends on whether the contract transfers investment risk to the insurer”—and issue they state “would require expert analysis of the assets and investment returns of United’s general account over a period of years, requiring expertise in both financial planning and insurance company accounting”—and that “even after the lengthy and expensive analysis, an adverse finding would effectively foreclose any recovery on that claim.”
