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T. Rowe Settles Excessive Fee Suit

Litigation

Despite a concerted effort to press for a win in court—and despite a judge’s observation that he deemed “total victory improbable, and recovery on the scale suggested by Plaintiffs highly improbable”—an excessive fee suit has been settled.

This suit—filed way back in 2017—involves allegations by a participant in its own plan (and funds), one David G. Feinberg, on behalf of the T. Rowe Price U.S. Retirement Program and all “similarly situated Plan participants and beneficiaries (henceforth, collectively, “participants”), and all predecessor plans.” The suit claimed that the T. Rowe Price plan fiduciaries breached their fiduciary duties by only offering T. Rowe Price’s own in-house investment funds in its 401(k) plan, which the plaintiff claims “provided a windfall to T. Rowe Price affiliates T. Rowe Price Associates, Inc. (“TRP Associates”) and T. Rowe Price Trust Company (“TRP Trust”), collectively the ‘TRP Investment Affiliates.’”

The settlement (David G. Feinberg et al. v. T. Rowe Price Group Inc. et al., case number 1:17-cv-00427, in the U.S. District Court for the District of Maryland) comes after Chief Judge James K. Bredar of the U.S. District Court for the Maryland rejected T. Rowe Price's bid for a pre-trial win back earlier this year, even as he evidenced skepticism about the merits of the case—if not the genre of such litigation altogether. In rejecting the bid at the time, Judge Bredar commented that, “The Court is generally skeptical of such litigation to the extent it seeks to cast the Court in the role of policymaker and have the Court declare strictly unlawful ‘normal business practice[s]’ that do not harm plan participants and that Congress and the Department of Labor have declined to expressly prohibit.” 

That said, earlier this month Judge Bredar denied the defendants’ request that the Fourth Circuit intervene on the issue of proprietary fund utilization, ruling the litigation wasn’t yet developed sufficiently to warrant appellate review. The case had been set for a September trial, according to Law360.

The announcement of settlement does not contain details, other than to state that “each party is to bear its own costs unless otherwise agreed, in which event the costs shall be adjusted between the parties in accordance with their agreement.” It does mention that the parties still have the right to move for “good cause within 60 days to reopen this action if settlement is not consummated,” and that “if no party moves to reopen, the dismissal shall be with prejudice.” 

What This Means

We’ve noted before that settlements tell you little about the merits of the arguments made, and less about the defense of such claims. While settlement decisions are often the result of a simple cost-benefit analysis—the cost (time and money) of continued litigation in comparison with the cost of the settlement itself—this one definitely has that feel, and one despite what seems not only to be a committed effort to press their case, but one in which the presiding judge was skeptical—but not quite willing to pull the plug.  

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