Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
Aug. 8 — Allianz Asset Management of America couldn't convince a federal judge to dismiss class action claims challenging the allegedly high-fee, in-house mutual funds in its 401(k) plan ( Urakhchin v. Allianz Asset Mgmt. of Am., L.P., C.D. Cal., No. 8:15-cv-01614-JLS-JCG, 8/5/16 ).
In largely denying Allianz's motion to dismiss the case, the judge dealt a blow to the financial companies being hit by an ongoing flurry of lawsuits challenging the in-house mutual funds in the 401(k) plans for their employees. So far, these lawsuits have been gaining traction, with judges declining to dismiss the claims against Putnam Investments LLC, BB&T Corp. and now Allianz.
The companies currently defending similar lawsuits include:
Last fall, two participants in Allianz's 401(k) plan filed a class action complaint accusing the plan's fiduciaries of offering Allianz-affiliated mutual funds that carried “outrageously high” fees that benefited the company at the expense of its workers. They also accused the fiduciaries of using the plan as a testing ground for new funds that lacked a sufficient track record.
Allianz tried to have these claims dismissed by arguing that the plan participants lacked standing to challenge the fees of funds in which they weren't personally invested. Judge Josephine L. Staton of the U.S. District Court for the Central District of California disagreed, explaining in an Aug. 5 opinion that the participants' alleged injury related to the defendants' “management and fund selection process as a whole rather than the unique factual nature of individual funds.”
Allianz also criticized the lawsuit as untimely, but Staton found nothing to back this up in the documents that were properly before the court.
Moreover, Staton found that the participants stated valid claims for fiduciary breach under the Employee Retirement Income Security Act. On that point, Staton found it “unavailing” that Allianz also allowed workers to invest in unaffiliated mutual funds through a Schwab Personal Choice Retirement Account.
“Whether the combination of the Allianz-affiliated ‘core' investment options and the Schwab investment option together create a prudent portfolio is therefore a question of fact that is inappropriate to resolve at the motion to dismiss stage,” Staton wrote.
Finally, Staton declined to dismiss the participants' allegations related to the monitoring of plan fiduciaries, but she agreed to dismiss their claims for restitution and disgorgement of profits. Specifically, Staton found that the participants didn't seek the return of any specific assets alleged to be in the defendants' possession.
Goodwin Procter LLP represents Allianz. The workers are represented by Apollo Law LLC, Kabateck Brown Kellner LLP and Nichols Kaster PLLP.
Nichols Kaster has been the driving force behind this flurry of litigation over proprietary mutual funds, representing the employees suing New York Life, Putnam, Deutsche Bank, American Airlines, M&T Bank, American Century, and BB&T Corp.
To contact the reporter on this story: Jacklyn Wille in Washington at email@example.com
To contact the editor responsible for this story: Jo-el J. Meyer at firstname.lastname@example.org
Text of the decision is at http://www.bloomberglaw.com/public/document/Aleksandr_Urakhchin_et_al_v_Allianz_Asset_Management_of_America_L.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)