A new excessive fee suit has been filed – this time against a hospital’s retirement plan – and from a different direction.
The suit (Disselkamp v. Norton Healthcare, Inc., W.D. Ky., No. 3:18-cv-00048, complaint filed 1/22/18) was filed in the U.S. District Court for the Western District of Kentucky by participants in the Norton Healthcare Retirement Plan. The suit, which seeks class action status to represent more than 13,000 participants in the hospital’s $714 million 403(b) retirement plan, accuses the plan’s fiduciaries of committing what the defendants claims is “one of the most common and well-known examples of an imprudent investment” – purchasing a more expensive share class of a mutual fund when a less expensive share class is available. “A prudent fiduciary does not make such an elementary mistake,” the plaintiffs state.
Indeed, unlike other suits that argued that there were less expensive fund families, or less expensive fund types (such as CITs), or even less expensive types of funds (say, passively managed rather than active), most of the 38-page complaint is comprised of comparisons of the cost of the share class(es) of the various funds in the plan side-by-side with alternate and less expensive share classes of the very same funds that ostensibly were available to the plan. All told, the plaintiffs claim that by virtue of having chosen these share classes, plan participants paid “unnecessary, excessive fees in the amount of approximately two million dollars.” Moreover, they claims that not only did participants lose the amounts “unnecessarily wasted on fees, but also the investment returns they would have earned had these amounts remained invested in the Plan” – a variance that, according to plaintiffs, over a six-year period, resulted in an additional $500,000 loss to the plan.
But perhaps what is most interesting about this particular litigation is that the plaintiffs are represented by counsel that doesn’t appear to have a track record in ERISA litigation. According to Bloomberg BNA, Bishop Korus Friend is a Kentucky-based general practice law firm that, according to its website, represents clients in employment, consumer and personal injury disputes. The other three law firms, Tomlinson Law, James White Firm and Johnston Law Firm, are based in Birmingham, AL. The lawsuit against Norton is also the first class action under ERISA filed by each of the three law firms, according to Bloomberg Law dockets.
They are not the first firms that appear to be cutting their ERISA litigation teeth in this line. Last year Franklin D. Azar & Associates P.C., which held itself out as a personal injury law firm that specializes in motor vehicle accidents, defective products and slip-and-fall accidents, filed a couple of cases which, while smaller than the multibillion-dollar plans that have characterized most plaintiffs over the past decade, are nonetheless constitute several hundred thousand dollars in plan assets.