Less than a year after being sued for the standard series of alleged missteps, the parties in an excessive fee suit have struck a “deal.”
The plaintiff bringing suit just a year ago (September 2022) was Grace Angelo (she was later joined in the action by Kerstin Thompson as a second class representative)—the targeted plan, the NCLC 401(k) Plan, as well as NCL Corporation LTD, and the Plan’s administrator, NCL (BAHAMAS) LTD, a Bermuda Company (Norwegian Cruise Lines) for breaching their fiduciary duties in violation of the Employee Retirement Income Security Act (ERISA).
The plan in question was relatively small for such actions—$218,255,089 in assets and 2,357 participants at year-end 2020. That said, the allegations in the case are all too familiar—that rather than “leveraging the Plan’s tremendous bargaining power to benefit participants and beneficiaries, Defendants chose poorly performing investments, inappropriate, high-cost mutual fund share classes, and caused the Plan to pay unreasonable and excessive fees for recordkeeping and other administrative services.” The plaintiffs were represented in this matter by Wenzel Fenton Cabassa PA (who had filed similar retirement plan suits against Gerdau Ameristeel US Inc. and Laboratory Corp. of America Holdings in the same time period).
That said, there’s been a lot of activity between the parties in the intervening year. There was a request for documents by the plaintiff(s)—that was denied, appealed, and then denied again. However, the settlement agreement noted that “during the course of the administrative process, NCL produced over 3,800 pages of documents relevant to Plaintiffs’ claims”—which included: (1) the Plan’s governing documents and trust agreements, (2) the Plan’s mandatory fee-related disclosures, (3) a full set of the Committee’s minutes dating back to 2016, along with presentations and reports shared with the Committee at those meetings, (4) the Plan’s contracts with Prudential, (5) all versions of the Plan’s Investment Policy Statement during the putative class period, (6) documents relating to the Plan’s recordkeeper requests for proposal in 2018 and 2022, and (7) Ms. Angelo’s quarterly account statements.
Then, on Jan. 9, 2023, the NCL defendants moved to dismiss the Complaint for failure to state a claim under Rule 12(b)(6) and for lack of standing pursuant Rule 12(b)(1)—arguing that the suit “failed to allege plausibly that Defendants breached their duty of loyalty, that the Plan paid excessive administrative/recordkeeping fees, or that the Defendants’ process for evaluating investment options was deficient.” That was challenged by plaintiff Angelo, who not only provided supporting documentation, but filed a Motion to Strike Extrinsic Evidence Attached to Defendants' Motion to Dismiss.
NCL responded with a Reply in support of its Motion to Dismiss, followed three weeks later by both parties to put things on hold pending completion of class-wide mediation. That led to a full-day video teleconference on April 3, 2023 with Robert Meyer, Esq. of JAMS. Then—“after extensive arms-length negotiations—which lasted into evening—the they reached an agreement in principle, which led to the Settlement Agreement….”
The settlement itself (Angelo v. NCL Corp. Ltd., S.D. Fla., No. 1:22-cv-22962, settlement motion 9/1/23) is a straightforward monetary payment of $615,000.00—an amount that the agreement says will cover the independent fiduciary fees; settlement administration fees and costs; and any Class Counsel fees and costs approved by the Court. With regard to the latter, the settlement agreement states that “Class Counsel will petition the Court for an award of attorneys’ fees not to exceed one-third[i] (33.3%) of the Gross Settlement Amount, plus reasonable expenses”—but notes that the settlement itself is not contingent on those fees. “Thus, if the Court denies the petition for Attorneys’ Fees and Costs, in whole or part, such denial will have no impact on the validity or enforceability of the Settlement.”
An interesting addition here is the acknowledgement that “both Plaintiffs have also agreed to provide Defendants general releases of all possible claims they have, or ever had, against Defendants in exchange for a nominal amount,” which is being paid outside of the Settlement Fund. The agreement notes that “Ms. Angelo (in her individual capacity) made a demand asserting FMLA and FLSA claims, while Ms. Thompson had separately filed an earlier EEOC Charge against Defendants on her own behalf. Defendants wanted general releases from Plaintiffs to ensure closure with them.”
A Bird in the Hand?
As is often the case in presenting such settlements for approval from the court, this one holds out that the amount of the proposed cash recovery “falls well within the range of reasonableness in this case, as it is a substantial percentage of the estimated recovery Plaintiffs’ counsel estimated could be recovered if successful in litigating the case through trial (exclusive of attorneys’ fees and costs).”
The agreement also concedes that “absent this Settlement, continued litigation would be complex and would require the investment of considerable resources by both parties and the Court. Liability is heavily contested, and both sides would face considerable risks should the litigation proceed. In contrast to the complexity, delay, risk, and expense of continued litigation, the proposed Settlement will produce certain, and substantial recovery for Settlement Class Members.”
The proposal notes that “these results are particularly beneficial to the Settlement Class 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.” The agreement also states that “the only similar case to be tried resulted in a verdict for defendants on all claims. Sacerdote v. New York Univ., 328 F. Supp. 3d 273, 317 (S.D.N.Y. 2018). Following appeal, the Second Circuit affirmed the trial judgment in its entirety. As the case against NYU clearly illustrates, Plaintiffs faced a substantial risk that they could litigate this case for years, at significant expense, only to lose at trial and on appeal, recovering nothing for the class.”
We’ll see if the court approves.