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June 23 — Great-West Life & Annuity Insurance Co. lost another battle in a lawsuit challenging the money it makes off annuity contracts sold to 401(k) investors ( Teets v. Great-West Life & Annuity Ins. Co. , D. Colo., No. 1:14-cv-02330-WJM-NYW, 6/22/16 ).
A federal judge in Colorado certified the case as a class action on behalf of more than 270,000 investors in about 13,600 different retirement plans. The judge also denied Great-West's attempt to block expert testimony on the amount of money at stake in the lawsuit.
“We see this as a big step forward in getting class members the recovery they deserve,” Nina Wasow, a partner with Feinberg Jackson Worthman & Wasow LLP and counsel for the plan participants, told Bloomberg BNA June 23.
Wasow also praised the judge for recognizing that the Great-West investment fund at issue affected all 401(k) plan participants in the same way.
A spokesman for Great-West said the company would continue the fight.
“This lawsuit and the claims it makes are without merit, and we will continue to defend the matter vigorously,” Stephen Gawlik, director of public relations for Great-West, told Bloomgerg BNA June 23.
The dispute centers on the Great-West Key Guaranteed Portfolio Fund, a guaranteed investment contract the company offered to participants in 401(k) plans. According to the plan participants who filed suit, Great-West's ability to unilaterally set the interest rate participants earned off this product allowed it to keep more than $350 million per year in profits that should have been distributed to 401(k) investors. The participants claim this violates the Employee Retirement Income Security Act.
Great-West defended its handling of the fund by characterizing the fund as a “guaranteed benefit policy” exempt from ERISA. This argument failed to persuade Judge William J. Martinez, who denied Great-West's motion to dismiss the lawsuit in spring 2015.
In his most recent ruling—issued June 22—Martinez granted the plan participants' motion for class certification, finding that they satisfied the requirements of rules 23(b)(1) and 23(b)(3) of the Federal Rules of Civil Procedure.
Martinez also denied Great-West's request to exclude expert testimony from Steven Pomerantz, a mathematics professor who frequently testifies in lawsuits involving mutual funds and 401(k) plan investments.
Great-West argued that Pomerantz's method for calculating the fund's profits was “fundamentally flawed” because he failed to consider certain of the company's costs. Martinez found no reason to exclude Pomerantz's testimony on this ground, noting that Great-West remained “free to cross-examine Pomerantz on these issues.”
The participants are represented by Keller Rohrback LLP, Schneider Wallace Cottrell Brayton Konecky, Feinberg Jackson Worthman & Wasow LLP and Law Offices of Scot D. Bernstein PC. Great-West is represented by Sidley Austin LLP and Wheeler Trigg O'Donnell LLP.
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Text of the decision is at http://www.bloomberglaw.com/public/document/Teets_v_GreatWest_Life__Annuity_Insurance_Company_Docket_No_114cv/3.
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