Swift Settlement for Excessive Fee Suit

Capozzi Adler and Miller Shah have wrested another settlement in an excessive fee suit—in record time.

This time it’s the $1.2 billion Rush University Medical Center 403(b) plan—sued by four former workers just a few months ago (Jan. 21, 2022) who has agreed to settle for $2.95 million—as well as “meaningful non-monetary relief related to the ongoing management and administration of the Plan”—to end the proposed class action. 

The participant-plaintiffs here had alleged that the fiduciary defendants: (1) caused the Plan to pay unreasonable recordkeeping and administrative fees; (2) maintained imprudent investment options in the Plan; and (3) caused the Plan to pay unreasonable investment management fees. More precisely, the suit—leaning on Form 5500 disclosures—claims that the Rush Medical plan cost $58/participant in contrast to several allegedly size compatible comparisons that ranged from $23 to $43. The suit also took issue with the plan’s use of the Fidelity Freedom[i] fund target-date suite, and the choice of the actively managed suite, rather than the passive/indexed, which had a lower expense ratio.    

According to the settlement proposal (Barcenas et al. v. Rush University Medical Center et al., case number 1:22-cv-00366), while the Defendants’ motion to dismiss was pending, the parties engaged in initial discovery efforts, including the production and review of documents related to Plan administration and Defendants’ alleged conduct. The parties subsequently agreed to attempt to resolve the Class Action through private mediation, and the fiduciary defendants moved to stay proceedings pending mediation on April 28.

That was followed by a mediation session with Mark E. Segall, Esq. of JAMS, “a well-respected, neutral mediator with experience mediating claims of the kind at issue in the Class Action,” according to the settlement. They reached an agreement in principle to resolve the matter on June 21, and “then worked diligently to document the same in the Settlement Agreement.

“In light of the substantial relief the settlement provides and the risks of continued litigation, plaintiffs and class counsel submit that the settlement is fair, reasonable, adequate, and in the best interests of the settlement class,” the proposal—which must be approved by the court—stated.

“The settlement is the product of vigorous litigation and arm's-length negotiation by experienced and well-informed counsel, and it provides significant relief to the settlement class,” the memorandum continued. “Accordingly, the court should find the settlement is fair, reasonable, and adequate, and merits preliminary approval.”

Will the court agree? Stay tuned.