The Action claims that under ERISA, the Defendants owed fiduciary duties of loyalty, care, and prudence to the Plans and that they violated those duties in connection with the selection and monitoring of the Plans’ investment options. During the Class Period, participants in the Plans were able to allocate their account balances among various investment funds. Named Plaintiffs allege that as jumbo plans, the Plans had substantial bargaining power regarding the fees and expenses that were charged against participants’ investments. Defendants, however, did not try to reduce the Plans’ expenses or exercise appropriate judgment to scrutinize each investment option that was offered in the Plans to ensure it was prudent. Instead, Defendants abdicated their fiduciary oversight, allowing the Plans’ trustee, Fidelity, to lard the Plans with high-cost, non-Fidelity mutual funds through which Fidelity received millions of dollars in revenue sharing payments, while also giving Fidelity discretion to add any Fidelity mutual fund that Fidelity had available, regardless of whether the funds were duplicative of other options, had high costs, were performing poorly, or were otherwise inappropriate as retirement savings options for the Plans’ participants.
THE DEFENSES IN THE ACTION
Defendants deny all of the claims and allegations made in the Action and deny that they ever engaged in any wrongful conduct. If the Action were to continue, the Defendants would raise numerous defenses to liability, including:
- Defendants did not engage in any of the allegedly improper conduct charged in the Complaint;
- Defendants were not fiduciaries of the Plan, or if they were fiduciaries, their fiduciary duties did not extend to the matters at issue in the Action;
- To the extent that they were fiduciaries as to the matters at issue in the Action, Defendants fully and prudently discharged all of their fiduciary duties under ERISA;
- Even if a court were to determine that Defendants failed to discharge any duty under ERISA, any such breach of fiduciary duty did not cause the Plans or its participants to suffer any loss.
THE ACTION HAS BEEN AGGRESSIVELY LITIGATED
Class Counsel have extensively investigated the allegations in the Action. Among other efforts, Class Counsel reviewed Plan-governing documents and materials, communications with Plan participants, U.S. Department of Labor filings, press releases, public statements, news articles and other publications, and other documents regarding the matters that the Named Plaintiffs allege in the Complaint. This Action was litigated by the Named Plaintiffs and Class Counsel for nearly two years before the Parties agreed on settlement terms. The Complaint in this matter was filed against Defendants on August 18, 2017, by Named Plaintiffs. Defendants filed a motion to dismiss the Complaint on December 15, 2017 that was denied in part, and granted in part by the Court on October 1, 2018. Defendants filed an answer to the Complaint on November 29, 2018. The parties thereafter held a planning meeting to discuss, among other things, the nature and basis of the Parties’ claims and defenses, issues about preserving discoverable information, and a proposed discovery plan. The Parties then submitted a joint report regarding the meeting to the Court on January 2, 2019. The Court then held a conference on January 8, 2019 to discuss the contents of the Parties’ joint plan and to set a schedule for litigating this Action. Following the conference the Parties engaged in preliminary settlement discussions, which as discussed below, ulitimately led to the resolution of this Action.
The proposed Settlement is the product of hard-fought, lengthy negotiations between Class Counsel and the Defendants’ counsel. Over the course of several months, the Parties negotiated via several telephonic conferences and numerous email exchanges. Following arm’s-length negotiations, on April 5, 2019, Named Plaintiffs and Defendants, through their respective attorneys, reached an agreement to settle the Action on behalf of all participants in or beneficiaries of the Plan (except Defendants and their Immediate Family Members), at any time during the Class Period and who maintained a balance of any amount in the Plans during that time period.