After firing off an initial volley of 14 class action lawsuits against Fortune 100 employers and their retirement plans, the St. Louis-based Schlicter, Bogard & Denton law firm now has plenty of company in the attack on 401(k) plan fee practices. As the Schlicter cases proceed, new suits are being filed by other plaintiffs’ firms attacking revenue sharing, disclosures to participants, and allegedly excessive fees. In many of the more recent suits, theories first espoused by Schlicter lawyers have been polished to counter defenses that have been raised in the initial set of lawsuits.
Status of Schlicter Cases
As we predicted when the first seven suits were filed in September 2006 (see “A Frontal Assault on 401(k) Fee Practices”), defendants have had no luck making these cases go away quickly. With one notable exception, none of the 13 different judges overseeing the Schlicter cases has granted the defendants’ requests to have the claims dismissed or clarified. The exception came in a four paragraph order in the Exelon case in which the judge struck the plaintiffs’ claim for investment losses arising out of the defendants’ alleged failure to comply with ERISA Section 404(c). Even that ruling left the door open for the plaintiffs to reassert this theory of recovery in an amended complaint, so long as they clarified how the defendants’ failure to follow Section 404(c) caused their investment losses. The plaintiffs apparently have decided not to re-plead that claim.
The courts rejected motions to dismiss or clarify the plaintiffs’ complaints in the Kraft and Boeing cases (see “District Court Declines to Dismiss Kraft 401(k) Fee Case”). In both of those decisions the court also refused to dismiss the plaintiffs’ 404(c)-based claims. Similar motions to dismiss or clarify are pending in at least nine of the other Schlicter cases.
The case against Deere & Company and Fidelity, which is pending in the Western District of Wisconsin, appears to be on a fast track. Trial in that case has already been preliminarily scheduled for September of this year. The result is that the
As if managing 14 class action lawsuits were not enough, the Schlicter attorneys now find themselves fighting not only the legal teams of their Fortune 100 targets, but also a cadre of other plaintiffs’ attorneys seeking to horn in on the action. In what amounts to a battle for lead class counsel status – and a priority claim to any attorneys’ fees awarded – a separate group of lawyers has filed almost identical claims against two of the Schlicter targets. Joining in the challenges against
In what may be a significant development in the plaintiffs’ favor, attorneys for the AARP were recently granted permission to intervene on behalf of the plaintiffs in the
Aside from the Schlicter lawsuits, claims alleging ERISA violations as a result of excessive fees are finding their way into other cases. Making good on its promise to “investigate” fee practices, the ERISA powerhouse
Adding to the list of cases challenging fee practices, two lawsuits filed against General Motors in
Although it is certainly too early to rule out additional lawsuits against large employers and their 401(k) plans, or copy-cat suits against smaller employers and plans, it appears that sponsors of variable annuity investment products, which are typically offered under Code Section 403(b) arrangements, may be sitting in the hottest of the hot seats. These products have been heavily criticized for their lack of transparency and high fees. Critics also contend that annuity providers often engage in various forms of “pay to play” practices. These include arrangements in which investment companies allegedly pay annuity providers what amounts to a kick-back (in the form of revenue sharing payments) to gain shelf space on the provider’s list of investment products that are made available to 403(b) plans, or in which the annuity provider pays 403(b) plan sponsors (such as teachers unions) to endorse the annuity provider among its members.
Plaintiffs’ attorneys also claim to be investigating other 401(k) investment and service provides, including Ameriprise Retirement Services, Automatic Data Processing, and Bisys. It is conceivable that one or more of those entities will join Fidelity at the defense table. Moreover,
We can expect to see more lawsuits taking on retirement plan fees in the coming months. If you would like to keep up with those developments, please register to receive our periodic updates by sending us an email directly.
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