Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
Between 30,000 and 67,000 participants in BB&T Corp.'s 401(k) plan who sued the financial institution over alleged fiduciary breaches related to fees and investment options in their plan can proceed as a class ( Sims v. BB&T Corp. , 2017 BL 301853, M.D.N.C., No. 1:15-cv-00732, 8/28/17 ).
The participants meet the standards for class certification, Judge Catherine C. Eagles of the U.S. District Court for the Middle District of North Carolina held Aug. 28. Varying investment strategies among participants don’t create an intraclass conflict, especially a fundamental one that would defeat commonality—one of the standards required to proceed as a class, Eagles said. In addition, the fact that participants didn’t invest in all of the funds alleged to be imprudent in the lawsuit doesn’t defeat the typicality standard, because the theories of liability are the same, Eagles held.
The decision is another significant victory for current and former participants in BB&T’s retirement plan. In 2016, Eagles declined to dismiss the participants’ lawsuit, which accused BB&T of reaping millions of dollars in revenue by putting its proprietary funds in its $3 billion retirement plan.
Earlier this year, Eagles dismissed the participants’ fiduciary breach claims against financial firm Cardinal Investment Advisors LLC, holding that the participants failed to allege that the firm was a fiduciary under the Employee Retirement Income Security Act.
In the past three years, more than two dozen financial companies—including JPMorgan Chase Bank, Charles Schwab Corp., and Morgan Stanley—have been targeted by proposed class actions challenging the in-house investment products in their workers’ 401(k) plans. Many judges have ruled against the financial companies, refusing to dismiss cases against Allianz, Deutsche Bank, Franklin Resources, American Century, and Edward Jones. So far, only two companies have emerged from these cases victorious: Putnam Investments LLC and Wells Fargo.
Some companies targeted for in-house 401(k) investments have negotiated settlements, including Principal Life ($3 million), New York Life ($3 million), TIAA ($5 million), and American Airlines ($22 million).
In her latest ruling, Eagles also rejected BB&T’s argument that there was a conflict because the participants who benefited by investing in the alleged imprudent funds would be harmed if class members prevailed on their allegations. She pointed that BB&T didn’t provide any explanation of how participants could possibly be harmed if damages were recovered on behalf of the plan.
There is no requirement that participants forfeit investment gains acquired as a result of a breach of fiduciary duty, she said. Moreover, BB&T didn’t cite any case in support of their argument that a participant who profited from investing in a particular fund would be forced to pay money back to the plan if the plan’s inclusion of that fund violated the plan’s fiduciary duties.
Finally, despite BB&T’s opposition, Eagles also allowed two law firms—Schlichter Bogard & Denton and Nichols Kaster—be appointed class counsel.
Womble Carlyle Sandridge & Rice PLLC and Groom Law Group Chartered represent BB&T.
To contact the reporter on this story: Carmen Castro-Pagan in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jo-el J. Meyer at email@example.com
Copyright © 2017 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 firstname.lastname@example.org.
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 email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)