Allianz Workers Get Class Treatment in Suit Over 401(k) In-House Funds

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Carmen Castro-Pagan

Allianz Asset Management of America L.P. workers won class certification on their lawsuit challenging the allegedly high-fee, in-house mutual funds in their 401(k) plan ( Urakhchin v. Allianz Asset Mgmt. of Am., L.P. , C.D. Cal., No. 8:15-cv-01614, 6/15/17 ).

U.S. District Judge Josephine L. Staton June 15 conditionally granted the plan participants’ motion for class certification. Participants sufficiently showed they have standing to continue as a class by producing evidence suggesting that Allianz managed and selected funds for the plan based on whether the funds would benefit the company rather than the participants, Staton said.

Participants also produced evidence showing that Allianz’s management of the plan results in investment options that, on average, charge higher fees than participants otherwise would pay if Allianz were to consider and select nonproprietary funds, Staton said. Participants have met the procedural requirements to continue their challenge as a class, she found.

Financial companies that put their own investment funds in their workers’ retirement plans have been flooded by ERISA class actions. In the past year, judges have refused to dismiss similar cases against BB&T Corp., Putnam Investments,Deutsche Bank, Franklin Resources, American Century, and Edward Jones. Principal Life Insurance Co. and New York Life Insurance Co. settled cases for $3 million each, and TIAA reached a $5 million settlement last month. Last year, a federal judge in Massachusetts granted class treatment to participants raising similar challenges against Putnam.

Ruling for the participants, Staton modified the proposed class in light of the participants’ requested reliefs. She divided the class in two subclasses. The first one is composed of 4,000 current participants in the plan, and the second group includes 1,637 people who were participants in the plan during the relevant period but have since closed their accounts.

The ruling is the latest setback for Allianz in this case. Last year, Staton declined to dismiss the lawsuit, holding that the participants stated valid claims of fiduciary breach under the Employee Retirement Income Security Act.

In their request for class certification, the participants asked the court to appoint as class counsel two law firms instead of individual attorneys. Staton reserved her ruling on the adequacy of class counsel pending supplemental declarations from participants identifying the individual attorneys who will serve as class counsel in the case.

Nichols Kaster PLLP and Kabateck Brown & Kellner LLP represent the class. Goodwin Procter LLP represents Allianz.

To contact the reporter on this story: Carmen Castro-Pagan in Washington at ccastro-pagan@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

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