A settlement has been struck in an excessive fee suit—a little more than a year after the suit was filed.
The Background
The suit—filed in the U.S. District Court for the Western District of California on behalf of plaintiffs by Whitfield Bryson LLP, Shepherd Finkelman Miller & Shah LLP, and Capozzi Adler PC in December 2020—largely, though not exclusively, focused on the Coca-Cola Consolidated 401(k) plan’s choice of the Fidelity Freedom funds—more specifically the “active” version of that target-date fund.
The plaintiffs here—Cheyenne Jones and Sara J. Gast, former employees of independent bottler Coca-Cola Consolidated Inc. and current participants in the Coca-Cola Consolidated, Inc. 401(k) plan, charged that the defendants breached their fiduciary duties to the plan by failing to fully disclose the expenses and risk of the Plan’s investment options to participants; allowing unreasonable expenses to be charged to participants; and selecting, retaining, and/or otherwise ratifying “high-cost and poorly-performing investments, instead of offering more prudent alternative investments when such prudent investments were readily available at the time that they were chosen for inclusion within the Plan and throughout the Class Period.”
As of Dec. 31, 2019, the plan had 10,170 participants with account balances and assets totaling approximately $784 million.
The Settlement
In what was described as “the bottom line up front,” the settlement (Jones v. Coca-Cola Consolidated, Inc., W.D.N.C., No. 3:20-cv-00654, settlement approval motion 2/22/22) calls for “total relief of $3,500,000.00, as well as certain non-monetary terms,” which it claims “will provide a substantial recovery to members of the Settlement Class.” As is customary in these type filings, it was noted that, “in light of the substantial Settlement recovery and the risks of continued litigation, Class Counsel believe the Settlement is fair, reasonable, adequate, and in the best interests of the Settlement Class.”
After reciting a brief history of the filings, discovery, and motions made (and refuted) in this case (all by way of establishing that both parties had been actively pursuing legitimate claims), the settlement provides a schedule for proceeding/reviewing/approving the settlement, as well as a recitation of the legal standards in support of the adequacy of these plaintiffs to represent a class of injured participants (as well as the need for a class in this case). Or—as the settlement outlines —“In sum, the Settlement is the product of vigorous litigation and arm’s-length negotiation by experienced and well-informed counsel, and provides significant relief to the Settlement Class.”
With regard to the adequacy of the settlement, plaintiffs’ counsel notes that their expert has calculated the Plan’s losses as ranging from approximately $11.5 million to $22.25 million (“after brought to present value by applying a reasonable interest rate”), going on to note that “while figures in this range are defensible, the likelihood of establishing the higher figure faces more challenges than the lower figure.” All of which, they state, means that the settlement provides monetary relief ranging from approximately 16% to 30.5% of possible recoverable losses, “even before considering the value of the non-monetary relief.”
Non-monetary Relief
As for that “non-monetary relief”:
- “The Corporate Benefits Committee of Coca-Cola Consolidated, Inc. will conduct a request for information regarding the provision of recordkeeping services for the Plan provider no later than December 31, 2024”; and
- “The Corporate Benefits Committee of Coca-Cola Consolidated, Inc will evaluate its process for replacing investment funds in the Plan within one (1) year of the Effective Date.”
The agreement also states that they intend to seek a “Case Contribution Award not to exceed the amount of $15,000” for each of the plaintiffs named in the case, subject to court approval. Moreover, it notes that they intend to “submit a Motion for Attorneys’ Fees and Expenses seeking an award of Attorneys’ Fees not to exceed 33-1/3% of the Settlement Amount ($1.2 million), plus reasonable litigation expenses advanced and carried by Class Counsel for the duration of the Action, not to exceed $225,000.”
We’ll see if, in fact, the court does approve.
What This Means
Of note—and a point we made at the time—one of the law firms representing the plaintiffs, Shepherd Finkelman Miller & Shah LLP, has filed several other suits against plans involving the Fidelity Freedom Funds. Capozzi Adler is, of course, no stranger to this type of litigation, having been one of the more active firms in this genre the past couple of years—targeting (relatively) smaller plans, and obtaining (relatively) quick settlements.
This was a suit against a (relatively) smaller plan—by that we mean less than $1 billion in assets, though a 10,000-participant plan is hardly a small plan. It was unique in that it basically pitted the choice of one class of mutual funds, not against an alternative fund family, but against the same one, but one managed passively (rather than actively—and, arguably then, less expensive. But ultimately the pattern repeats, and the allegations simply carried forward to what would seem to be a comparable circumstance.
Add it to the (growing) list of suits filed and brought to a (relatively) quick settlement. All of which likely supports the next suit.
