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Vandy Settlement Finally Settled


A federal judge has approved a settlement of another of the 403(b) university excessive fee suits.

Chief Judge Waverly D. Crenshaw Jr. of the U.S. District Court for the Middle District of Tennessee has signed off (Cassell v. Vanderbilt, M.D. Tenn., No. 3:16-cv-02086, 10/22/19) on the $14.5 million settlement between Vanderbilt University and plaintiffs represented by the law firm of Schlichter Bogard & Dentonon Oct. 22 – just two days after Michael B. Bressman, a professor of law at Vanderbilt Law School, and a continuous participant in the Vanderbilt University Retirement Plan since 2005, withdrew his objection.

The settlement – the terms of which were announced in April – was struck between participant-plaintiffs (represented by the law firm of Schlichter Bogard & Denton) and Vanderbilt University, which had agreed to pay a sum of $14,500,000 into a Settlement Fund, as well as “certain additional relief.” More on that in a minute.

Object ‘Lessons’

In withdrawing his objection, Bressman said he did so originally “in part to obtain details not found in the settlement documents or the information provided to class members to evaluate the proposed settlement,” that he “was asked by colleagues to review the proposed settlement,” and that “upon doing so, Professor Bressman was unable to tell them whether the settlement was good or bad, or fair or unfair, particularly because he was unable to discern how the settlement amount was reached and how it compared to the value of the claims and the potential damages.” Moreover, and this was raised in his objection, he had had concerns that “given the fact that the parties bearing significant responsibility for the alleged overcharges – the service providers – were not contributing to the settlement, the settlement appeared quite unfair and problematic.”

That said, since filing his objection, Bressman notes that he (and his counsel) “engaged in numerous conversations with class counsel, including a conversation as recently as October 20,” and that, having “received answers to a number of material questions, including but not limited to information concerning the value of the claims and the settlement, and the rationale behind them,” as well as a “statement in Class Plaintiff’s response that damages resulting from the use of higher-cost share classes formed a central basis for negotiations” he was able to “further evaluate the adequacy of the settlement.” 

While he noted that he “still has some reservations about the terms of the settlement, particularly the fact that the service providers may be released without facing any repercussions for their conduct, and highly doubts that either the custodial agreement or the law would require Vanderbilt to indemnify the service providers for damages related to their alleged overcharges,” he opted to withdraw his objection and “leaves it to the Court’s discretion to evaluate whether the settlement is fair to the Class and serves the interests of justice, especially considering the lack of any contribution to the settlement by the service providers for their alleged overcharges”.

Relief ‘Brief’

Aside from being the largest 403(b) university plan monetary settlement to date, the Vanderbilt settlement stands out for the “certain additional relief” contained, including ongoing communications with plaintiffs’ counsel regarding the plan’s investment options and the fees for those options, the obligation to conduct a request for proposals (RFP) for recordkeeping and administrative services for the plan to at least three qualified service providers, and most particularly that “after conducting the RFP, regardless of their decision to keep or replace the recordkeeper, they will “contractually prohibit the recordkeeper from using information about Plan participants acquired in the course of providing recordkeeping services to the Plan to market or sell products or services unrelated to the Plan to Plan participants unless a request for such products or services is initiated by a Plan participant.” 

As for the rest of the settlement, describing it as “fair, reasonable and adequate to the Plan and the Settlement Class,” Judge Crenshaw approved the terms, including:

  • Plaintiffs’ counsel – Schlichter Bogard & Denton LLP and Hawkins Hogan PLC – will receive no more than one-third of the settlement fund, or $4,833,333, as well as reimbursement for costs incurred of no more than $225,000.
  • The class representatives – named plaintiffs Loren L. Cassell, Pamela M. Steele, John E. Rice, Penelope A. Adgent, Dawn E. Crago and Lynda Payne – will also receive an incentive amount of $25,000.

Suit ‘Cases’

Of the roughly 20 universities that have been sued over the fees and investment options in their retirement plans since 2016, this is the largest to date. In August, Johns Hopkins struck a $14 million settlement, while in March, Brown University settled for $3.5 million, as well as “other, structural relief,” in May 2018, the University of Chicago entered into a class action settlement for a $6.5 million cash payment and changes to the university’s $3 billion plan, while earlier that year Duke University announced a $10.65 million settlement.

On the other hand, St. Louis-based Washington UniversityNew York University, the University of Pennsylvania and Northwestern University have thus far prevailed in making their cases in court.

What This Means

For the Schlichter law firm, anyway, these settlements seem to have moved beyond “mere” money, and into some fairly extensive procedural guidelines in plan administration and review. While arguably none seem to go beyond what might reasonably be expected of the ERISA fiduciaries of a multi-billion dollar plan, there’s little question that the external oversight of – and reporting to – plaintiffs’ counsel over an extended period could become tedious, at best. 

And keep an eye on the prospects of further attempts of this type of litigation to constrain, if not completely restrict, the marketing of additional products and services to participants by recordkeepers.