Nevin's Data "Points"

The ERISA litigation field in recent years has seen copycat filings, plagiarism in pleadings, factual flaws, and misleading assertions—but to my eyes, we’ve just hit a new low. I’m speaking of what appears to be a new strategy, at least in this area of the law. Specifically, a California law firm by the name of Lieff Cabraser Heimann & Bernstein is in the midst of what appears to be a pre-trial “shakedown.” More specifically—brought to my attention by Daniel Aronowitz (writing for The Fid Guru Blog )—Leiff Cabraser is currently engaged in a letter writing campaign to plan sponsors, alerting them to a series of assertions about ERISA litigation, allegations about the fees paid by participants in their plans (relative to a standard that has been repeatedly criticized in that context at trial)—all alongside the fact that they’ve allegedly found an as-yet-unnamed plaintiff-participant in the plan in question that is said to be willing to represent a class action allegi...

The flurry of lawsuits unleashed on holders of the BlackRock LifePath target-date funds is not without precedent—but it’s surely a head scratcher. I’m referring, of course, to the recent  swarm of lawsuits  challenging nearly a dozen of the nation’s largest 401(k) plans and their decision(s) to select, and hold, on their investment menu the BlackRock LifePath target-date fund suite. It’s a decision that the Shah Miller law firm (on behalf of multiple ex-participant plaintiffs) says was the result of fiduciaries who “chased low fees” over performance. [i] Of course, it’s not unusual for these types of lawsuits cite obscure articles as authority, rely on Form 5500 data that often doesn’t tell the whole story, state as fact things that are really only theories (or opinions), lean on averages, or base comparative conclusions on surveys distorted by sampling size or content.  But in a characterization straight out of George Orwell’s  1984 , this one draws...

So much of our lives have been disrupted by the COVID-19 pandemic—but the pace of 401(k) litigation, it seems, has, if anything, accelerated. Now, some may find the label “terror” in the title extreme. In fact, it hadn’t really occurred to me until I read the response of defendants to a suit slapped on Genentech Inc. and the plan fiduciaries of its $7.6 billion 401(k) plan in early October. In a response to that excessive fee suit, the defendants’ attorneys referred to this suit—and others like it—as “an  in terrorem  attack on fiduciaries and employers seeking sweeping monetary and injunctive relief geared toward disrupting employee benefit relationships and causing protracted, expensive litigation.”  “In terrorem,” Latin for “into/about fear,” has a legal context—a legal threat, really—one generally voiced in hope of compelling an action (or lack of action) without resorting to a lawsuit or criminal prosecution. It normally arises in regard to a provision...

So, how much should the plaintiffs’ attorneys who wrangled a $12 million settlement receive for their time, effort and trouble? Well, if you’ve been keeping up with such things, you’ll do some quick math and arrive at a figure of $4 million since, after all, these class action suits [i] —undertaken on a contingent fee basis—generally produce a pay day of somewhere between 25% and 30% of the settlement amount. [ii] In this case, that’s the settlement amount requested by the law firm of Schlichter Bogard & Denton for their work in a suit involving Oracle Corp. and its 401(k) plan (over 6,300 hours—5,631.10 hours of attorney time & 696.5 hours of non-attorney time—according to the filing ( Troudt v. Oracle Corp . , D. Colo., No. 1:16-cv-00175, motion for attorneys’ fees 5/8/20). That’s aside from the requested reimbursement of what those same attorneys characterize as “reasonable out-of-pocket expenses of $410,501.60, [iii]  and $25,000 for each of the named clas...

There were a lot of ERISA litigation settlements in 2019 – but how are those trending? An analysis by Bloomberg Law finds that class settlements in employee benefit disputes hit $449 million in 2019 – a figure that they noted was up significantly from 2018’s $291 million, but well short of the $559 million in settlements recorded in 2017. That said, “only” about half of the 2019 “tab” – some $193 million – came from excessive fee suits, according to the report. The average of such settlements? $12 million. In March , the parties in  Tussey v. ABB , one of the oldest (2005) excessive fee suits, came to terms for $55 million. Other settlements announced included: Northrop Grumman  ( $16.5 million );  a 2017 stable value suit settlement finally approved ;  the settlement terms of two fiduciary breach suits involving Safeway’s 401(k) plan, its investment structure, plan consultant, and selection of target-date funds have been submitted for court...

Our industry has long disparaged the apparent “overindulgence” 1 of participants in the stock of their employer as a retirement investment. However, for plan fiduciaries – and those who advise them – there may be a more pressing concern. Anyone who has been paying attention to 401(k) plan litigation these past several years knows that a common trigger – perhaps the most common trigger – for litigation is the presence of company stock in the plan; more specifically, the presence of company stock that has sharply declined in value. In fact, these days no sooner does some big earnings surprise or unanticipated business calamity make the headlines than the plaintiffs’ bar is out “trolling” for potential clients. And let’s face it, a 401(k) plan is a class action litigant’s dream – potentially thousands of similarly situated and comparably injured plaintiffs in one place (so to speak).   But if the instances of litigation have been numerous, the odds of success –...