AT&T Defeats Excessive Fee Lawsuit Over Its $34.8 Billion 401(k)

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By Carmen Castro-Pagan

AT&T Inc. defeated a lawsuit accusing the company of violating federal benefits law by allowing excessive record-keeping and administrative fees in its $34.8 billion 401(k) plan.

The workers didn’t allege sufficient facts to establish they filed the lawsuit in a timely manner and had standing to bring a claim related to Fidelity’s BrokerageLink feature, Judge Virginia A. Phillips of the U.S. District Court for the Central District of California held July 18.

Phillips’ ruling isn’t a complete victory for the telecommunications giant, as she allowed the three workers who filed the lawsuit under the Employee Retirement Income Security Act to amend their allegations by the end of the month.

The workers, who seek to represent at least 241,414 plan participants, alleged that the record-keeping fees the plan paid to Fidelity Investments Institutional Operations Co. were well above the market rate, and cost them tens of millions of dollars in unreasonable fees. They also challenged the fees related to the Fidelity’s BrokerageLink feature, which offered retail shares of certain mutual funds instead of less expensive institutional shares of the same funds.

The workers alleged that one of them invested through the BrokerageLink account, but they failed to include details as to what funds he purchased or how this led to his financial detriment, Phillips said. This allegation doesn’t support the inference that he suffered an injury, Phillips said.

This ruling is consistent with decisions involving Northrop Grumman, Pioneer Natural Resources USA Inc., the University of Chicago, and Delta Air Lines Inc., where judges have tossed claims when investors failed to allege that they were invested in the challenged funds or participated in the plan.

As to the timeliness of the workers’ lawsuit, Phillips also sided with AT&T. The workers’ failure to include facts related to when they discovered AT&T’s alleged misconduct didn’t allow the court to determine whether ERISA’s limitations period applies, Phillips said.

Solouki Savoy LLP, Schneider Wallace Cottrell Konecky Wotkyns LLP, and Berger & Montague PC represent the workers. Mayer Brown LLP represents AT&T.

The case is Alas v. AT&T, Inc., C.D. Cal., No. 2:17-cv-08106-VAP-RAO, order granting defendants’ motion to dismiss 7/18/18.

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