The terms in an excessive fee suit settlement announced last fall have finally been revealed.
The plaintiffs here — Douglas G. Bailey, Jason J. Hayes and Marianne Robinson — who are two former and one current participant of the LinkedIn Corporation 401(k) Profit Sharing Plan and Trust — have filed notice of a settlement for the court’s approval.
As for the suit itself, the allegations made in the suit (filed in August 2020) were the “usual” suspects —criticisms regarding the use of something other than the lowest priced share class, the choice of active management (the Fidelity Freedom Funds) when suitable passive alternatives were (ostensibly) available, a reliance on mutual funds when (less expensive) collective investment trusts existed — not to mention issues with revenue sharing, claims of improper dealings with the recordkeeper and a general failure to “leverage the size of the Plan to negotiate for lower expense ratios for certain investment options maintained and/or added to the Plan during the Class Period….”
Turning to the settlement proposal (Bailey et al. v. LinkedIn Corp. et al., case number 5:20-cv-05704), the parties start by noting that it is “…the product of arm’s-length negotiations between the Parties and their counsel, all of whom comprehensively litigated this matter, are well-informed regarding all the issues in this litigation, and have significant experience in complex litigation of this type.”
As for that product, the agreement calls for a cash settlement of $6,750,000, which they note “represents just less than 68%[iii] of the midpoint of the range of realistically recoverable losses.”
That settlement amount is expected to cover: “(1) compensation to current and authorized former participants of the Plan as described in Section 5.2.5 of the Agreement; (2) all claims for attorneys’ fees and expenses approved by the Court; (3) all costs arising from evaluation of the settlement by the Independent Fiduciary as described in Section 5.1.3 of the Agreement; (4) all costs necessary to administer the Settlement, including, among other things, payment for the services of the Settlement Administrator and any related taxes and tax-related costs;[iv] and (5) payment of Case Contribution Awards to Plaintiffs not to exceed $12,500 each, subject to Court approval.”
More specifically, the settlement agreement notes that Class Counsel “anticipates seeking an award of attorneys’ fees of up to one-third of the common fund established by the Settlement, plus all reasonable and necessary expenses advanced by Class Counsel and carried for the duration of the litigation (which will not exceed $150,000), subject to the Approval of the Court.” This, they remind the court reviewing these terms, is because “Class Counsel prosecuted the Class Action on a contingent basis and advanced all associated costs with no expectation of recovery in the event the litigation did not result in a recovery for the Settlement Class.” The go on to note that the plaintiffs’ lawyers “estimate that such an award would only result in a small multiplier of less than 1.25 based upon the time devoted and to be devoted to this engagement.”
“In sum,” the agreement concludes, “the Settlement is the product of vigorous litigation and arm’s-length negotiation by experienced and well-informed counsel, adequately reflects the strength of the parties’ claims and defenses, is based on sufficient discovery and information, and provides significant relief to the Settlement Class. Accordingly, the Court should find the Settlement is fair, reasonable, and adequate, and merits preliminary approval.”
Let’s see what the court has to say on the subject.
[i] No newbie to the excessive fee suit genre, Miller Shah has most recently drawn notice for a series of suits filed against plans that held the BlackRock Lifepath target-date funds — suits that include actions against Genworth Financial Inc., Microsoft, Cisco Systems Inc., Booz Allen Hamilton Inc., Stanley Black & Decker Inc., Wintrust Financial Corp., Advance Publishing and Marsh & McLennan Cos.
[ii] Capozzi Adler PC has been one of the more active litigants of late. It had a busy 2020, in addition to the suit against LinkedIn, there were actions filed against Universal Health Services, Inc., and before that Aegis Media Americas Inc., as well as the $2 billion health technology firm Cerner Corp., as well as Pharmaceutical Product Development, LLC Retirement Savings Plan, Gerken v. ManTech Int’l Corp — and the appeal of losses at the district court in a case involving Salesforce. In May 2021, they also filed suit against the $5.3 billion Humana Retirement Savings Plan, in June against the $2.3 billion Wake Forest University Baptist Medical Center, and in August against the $1.5 billion Baptist Health South Florida, Inc. 403(b) Employee Retirement Plan.
[iii] According to the agreement, “based upon the claims remaining in the case, Plaintiffs’ experts have estimated the average range of realistic and supportable damages to be from $3,943,016.50 million to $15,940,213.00 million depending upon the methodology and assumptions employed, with a midpoint of $9,941,637.25.” It goes on to explain that “while figures in this range are defensible, the likelihood of establishing the higher figure obviously faces more challenges than the lower.”
[iv] These they estimate to be no more than $100,000.