The terms of a settlement in an excessive fee suit against a $2.3 billion 403(b) plan have come to light.
The suit (Garnick v. Wake Forest Univ. Baptist Med. Ctr., M.D.N.C., No. 1:21-cv-00454, complaint 6/4/21) was filed in June 2021 in the U.S. District Court for the Middle District of North Carolina by participant-plaintiffs Shelley R. Garnick, Tanajah Clark and Zoe R. Jones against the fiduciaries of the $2.3 billion Wake Forest Baptist Medical Center 403(b) Retirement Savings Plan—the Medical Center, the Board of Directors of Wake Forest University Baptist Medical Center, and the Retirement Benefit Committee of Wake Forest University Baptist Medical Center—for breaches of their fiduciary duties to the 19,000 participants of that plan.
In May 2023, the parties announced that they had come to terms “following mediation with a neutral, well-respected mediator.” Those terms have now been presented to the court for consideration/approval.
The Settlement
Noting that “Plaintiffs believe the Settlement is an excellent result, providing a substantial, immediate payment to Settlement Class members and eliminating the risks and cost of trial. A trial could result in a reduced recovery or no recovery at all,” the settlement calls for a cash payment of $3,800,000. The settlement proposal notes that “Plaintiffs evaluated numerous damages scenarios based on Defendants’ alleged breaches of fiduciary duty for (1) failure to prudently select and monitor the Plan’s investment options, (2) payment of unreasonably high recordkeeping and administrative fees significantly above $25 per participant, and (3) excessive total plan costs.”
The proposal[i] (Shelley R. Garnick et al. v. Wake Forest University Baptist Medical Center et al., case number 1:21-cv-00454, in the U.S. District Court for the Middle District of North Carolina) notes that the Gross Settlement Amount is “inclusive of an attorney fees award not to exceed thirty-three and one third percent (33 1/3%) of the Gross Settlement Amount”—or, said another way, a maximum of $1,266,660—as well as reimbursement of attorney expenses up to $50,000 and a maximum of $10,000 incentive awards for each of the Class Representatives (Named Plaintiffs) for their work in bringing the case forward. The three named plaintiffs in this case (who “communicated extensively with Class Counsel, provided counsel with important information, and reviewed the Amended Complaint and other case filings”) are represented by Capozzi Adler PC.[ii]
Which means that the net settlement amount would be approximately $2,453,340 divided among some 19,000 participants in the class (you can do that math).
We’ll see if the court approves.
[i] It is perhaps worth noting the settlement proposal’s acknowledgement of the fluid litigation landscape. “Although Plaintiffs are confident, they would be successful if this case were to go to trial, Defendants have been persistent in their denial of all claims and maintain they have not breached any ERISA standards of fiduciary duties. Plaintiffs survived Defendants’ motion to dismiss in part because the Court “[r]ecogniz[ed] a benchmark [comparator] determination as a factual inquiry not proper at the motion to dismiss stage.” ECF No. 34 at p. 19. However, appropriate benchmark comparators remain a common ERISA controversy that would require adversarial and in-depth expert testimony in order to proceed to trial. Moreover, even though many recent ERISA cases around the country have ruled in Plaintiffs’ favor, others ERISA cases have been dismissed, at least in part, at the summary judgment stage.”
[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 (settled for $6.75 million), there have been 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., 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, as well as the $2.3 billion Wake Forest University Baptist Medical Center noted above, and in August against the $1.5 billion Baptist Health South Florida, Inc. 403(b) Employee Retirement Plan.
