The parties in an excessive fee suit have struck a deal—approximately three years after being filed, and despite making changes that arguably mitigated at least some of the claims.
Plaintiffs Shane Tepper, Surfina Adams, Michael Mensack and Daniel Dise—represented by Miller & Shah—sued on behalf of the $2.4 billion Omnicom Group Retirement Savings Plan the plan fiduciaries (and those who appointed them) who were alleged to have breached their duties by “(1) failing to objectively and adequately review the Plan’s investment portfolio with due care to ensure that each investment option was prudent, in terms of cost; and (2) maintaining certain funds in the Plan despite the availability of identical or materially similar investment options with lower costs and/or better performance histories.” The suit goes on to say that, “to make matters worse, Defendants failed to consider lower cost collective trusts that were available to the Plan as alternatives to certain mutual funds in the Plan.”
Oh, and despite the fact that in 2019, “wholesale changes were made to the Plan wherein certain Plan investment options, some of which are the subject of this lawsuit, were converted to lower cost investments”—well, the suit says that “these changes were far too little and too late as the damages suffered by Plan participants to that point had already been baked in.” Beyond that, the suit continues to note that “these changes may not have cured the Company’s fiduciary breaches because the circumstances under which changes were made have not been disclosed to Plaintiffs.”
More specifically, the suit claims that in 2018, a majority of the funds in the Plan—“at least 16 out of the Plan’s 27 funds (not including the Company stock fund) were much more expensive than comparable funds found in similarly-sized plans (plans having over a billion dollars in assets).” Moreover, they assert that the expense ratios for funds in the Plan in some cases were up to 233% (in the case of the William Blair Small-mid Cap Growth C1 I fund) above the median expense ratios in the same category.
The Settlement
The settlement motion (In re Omnicom Group. Inc. ERISA Litigation, case number 1:20-cv-04141, in the U.S. District Court for the Southern District of New York) acknowledges that, “following several years of vigorous litigation in this complex ERISA action, including numerous dispositive and procedural motions, full discovery, and preparation for a trial originally scheduled for February 2023, the Parties negotiated a proposed settlement (‘Settlement’) that would provide total relief of $2,450,000.00 to the Settlement Class.” In what often seems to be the case, this settlement “…was reached just days before the trial was scheduled to begin.”
The motion notes that plaintiffs and their experts have “estimated realistically achievable damages as ranging from an average of $4,841,354 to $5,302,136, with a midpoint of $5,071,745, based upon the comparator used and interest rate applied, and offsetting any potentially duplicative losses suffered by the Plan.” So, this settlement—“just over 48% of midpoint of average of realistically recoverable damages calculations of Plaintiffs and their experts”—was characterized by the plaintiffs as “quite significant.”
Efforts Made
Indeed, settlement proposals are designed to persuade the court that the parties have been hard at work both making their (legitimate) arguments, and that, ultimately, the settlement proposed is fair to the interests of the parties—and an efficient use of the court’s time. Part of that is also found in assurances that the court’s time to date has not been frivolous. To that end, this particular proposal takes pains to note that the Parties “engaged in significant discovery efforts in this action, including the exchange of document requests and interrogatories and the production of tens of thousands of pages of documents and communications related to the administration of the Plan, relationships between and among fiduciaries, and the Plan’s investment and recordkeeping monitoring processes.”
Moreover, that the plaintiffs “deposed a corporate representative of Omnicom and numerous members of the Committee and others charged with aspects of Plan management and administration, and Defendants deposed Plaintiffs.” And more than that, they “also disclosed expert reports bearing on issues of fiduciary process standards, the retirement plan recordkeeping marketplace and recordkeeping fee rates, fiduciary investment principles, and damages”—and deposed the experts anticipated to testify at trial.” All that before a mediation session on Jan. 25, 2023, with Mark E. Segall, Esquire, of JAMS.
"Resolving the case at this juncture allows the parties to avoid continued and costly litigation that would deplete resources which could otherwise be used for the resolution of this action, and which might result in a recovery of less than that provided by the settlement," the proposal concludes.
The proposal also notes that Class Counsel “anticipates making a request for Attorneys’ Fees and Costs, Administrative Expenses, and Case Contribution Awards collectively in an amount not to exceed one-third of the Gross Settlement Amount ($816,666.67).”
What will the court have to say about it? Stay tuned.
