We don’t know all the particulars yet, but a number of pending excessive fee suits have announced settlements.
In a case of good news, bad news, the pace of excessive fee settlements seems to be accelerating (that would be the bad news), but the size of those same settlements seems to be declining (that’s not exactly “good” news, but at least it’s trending in a good direction).
Last week three of them—in different courts, filed at different times, but with similar allegations—announced that the parties had come to terms.
Clark v. Beth Israel Deaconess Med. Ctr.
In the U.S. District Court for the District of Massachusetts the parties in a suit involving Boston’s Beth Israel Deaconess Medical Center Inc. “following mediation on September 1, 2022 with Robert A. Meyer of JAMS, a well-respected neutral mediator with substantial experience mediating ERISA actions” have “agreed in principle to resolve the litigation,” according to a federal court filing indicates (Clark v. Beth Israel Deaconess Med. Ctr., D. Mass., No. 1:22-cv-10068, joint status report 9/15/22). “The Parties are working to memorialize their agreement and prepare the appropriate papers to submit to the Court for preliminary approval”, noting that they expect Plaintiffs file their motion for preliminary approval of the settlement and all necessary and appropriate supporting papers by Oct. 17, 2022.
The suit had only been filed in January 2022 against the $1.3 billion 403(b) plan, alleging excessive recordkeeping fees and questionable decision to choose Fidelity Freedom Funds as the plan’s default investment—alleging that they were more expensive and underperforming relative to alternatives. Miller Shah LLP—who has recently launched a series of suits challenging the selection of BlackRock’s Lifepath target-date funds—represents the plaintiffs in this case.
Walter v. Kerry
In the U.S. District Court for the Eastern District of Wisconsin the parties noted that on Sept. 13, 2022, they “…mediated before private mediator Bob Meyer of JAMS, and reached a settlement in principle to resolve this matter.” According to a filing with the court (Walter v. Kerry Inc., E.D. Wis., No. 2:21-cv-00539, joint status report 9/15/22), they “…will continue to negotiate the terms of a class action settlement agreement over the next several weeks, and Plaintiff intends to file a motion for preliminary approval of the class action settlement no later than October 31, 2022.” The plaintiffs are represented by Walcheske & Luzi LLC.
The suit involving a $444 million retirement plan had originally been filed back in April 2021, but as recently as May 2022, Judge Brett H. Ludwig had allowed the suit to go forward, noting that the U.S. Court of Appeals for the Seventh Circuit’s 2020 decision in Divane v. Northwestern University (where the dismissal of a similar suit was affirmed) no longer controlled, following its remand by the U.S. Supreme Court to a lower court for reconsideration in January. “For a fee to be ‘reasonable as a matter of law,’ it must be reasonable in all seasons, during times to reap and times to sow,” Ludwig said at the time, going on to note that determining reasonability depends on contextual inquiries that can’t be settled in the early stages of litigation.[i]
Reichert v. Juniper Networks Inc.
In a case also involving plaintiffs represented by Walcheske & Luzi LLC (as well as Creitz & Serebin LLP), in the U.S. District Court for the Northern District of California, the parties in a case involving Juniper Networks Inc. told the court (Reichert v. Juniper Networks, Inc., N.D. Cal., No. 3:21-cv-06213, joint notice of settlement 9/15/22), “On September 9, 2022, the Parties reached a class-wide settlement in principle resolving all claims in this matter. The Parties will draft a formal settlement agreement and other documents that will be submitted to the Court for its preliminary approval. On Nov. 11, 2022, Plaintiffs anticipate filing with the Court their motion for preliminary approval of the settlement and all related pleadings and other documents in support of that motion, including a copy of the final settlement agreement.”
That suit—filed in April 2021—targeted the fiduciaries of the $1.4 billion 401(k) plan, claiming they “breached the duties they owed to the Plan, to Plaintiff, and to the other Participants of the Plan (there were 6,860 in 2019, according to the suit) by, among other things: (1) authorizing the Plan to pay unreasonably high fees for retirement plan services (‘RPS’); (2) failing to objectively, reasonably, and adequately review the Plan’s investment portfolio with due care to ensure that each investment option was prudent, in terms of cost; (3) maintaining certain funds in the Plan despite the availability of identical or similar investment options with lower costs and/or better performance histories; (4) authorizing the Plan to pay unreasonably high fees for managed account services; and (5) failing to disclose to Participants necessary Plan information for them to make informed Plan investment decisions.”
What This Means
With the terms as yet undisclosed, it’s hard to discern much other than the role that insurance (and insurance coverage) may well be playing in both the size—and speed—of these settlements.