The $35 million settlement brought by the Schlichter law firm in the Nolte v. Cigna case was officially approved by a federal court in Illinois earlier this week. The move follows a recent $30 million settlement in a case brought by the same law firm.
The Cigna case — brought on behalf of Cigna employees after the sale of the firm’s retirement business to Prudential — had alleged excessive fees, improper plan management and unlawful benefit from the sale of the business, among other things. Along with the monetary settlement, the defendant agreed to enhance the plan by not including proprietary funds, not using retail share classes and hiring an independent consultant.
Recent settlements, as well as victories by plaintiffs in excessive fee cases (like the $50 million ABB case) seem to indicate a sea change in this type of litigation. Not only are plaintiffs’ lawyers getting smarter about how to frame the cases — especially when it comes to obtaining class action status, like in the recent Lockheed Martin case — but courts seem more open to hearing them. (There’s a joke among U.S. Supreme Court Justices: If you want to incur the Justices' wrath, just assign them an ERISA case.)
With the stakes getting higher (namely the retirement security of American workers) and the cause getting more popular, expect more class action suits. But don’t expect plan sponsors to fold their tents either; for example, the defendants in the Lockheed Martin have asked the U.S. Supreme Court to review a lower court’s grant of class action status.
