Oracle Corp. Faces Setback in $40 Million 401(k) Fee Lawsuit

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 Jacklyn Wille

Oracle Corp. got some bad news on Feb. 16 when a magistrate judge recommended that a proposed class action challenging the fees in its 401(k) plan move forward ( Troudt v. Oracle Corp. , 2017 BL 47916, D. Colo., No. 1:16-cv-00175-REB-CBS, report and recommendation 2/16/17 ).

The lawsuit accuses the California software company of draining more than $40 million from its retirement plan through a bad deal with the plan’s record keeper, Fidelity Management Trust Co. A federal magistrate judge in Colorado recommended that the lawsuit move forward despite Oracle’s bid for dismissal, saying that the dispute should be resolved on a fuller factual record.

This win for St. Louis law firm Schlichter Bogard & Denton—which has won multimillion-dollar settlements in 401(k) cases against Boeing Co., Lockheed Martin Corp. and Novant Health Inc.—comes six months after the firm suffered a big loss in a similar lawsuit challenging the 401(k) fees of oil giant Chevron Corp. Lawsuits challenging 401(k) plan fees have come at a rapid-fire pace in the past several years, with the most successful cases targeting financial companies that put their own products in their workers’ plans.

Companies that recently lost bids to dismiss lawsuits over 401(k) plan fees include BB&T Corp., Allianz Asset Management of America, Putnam Investments LLC, Deutsche Bank, Franklin Resources Inc. and Edward D. Jones & Co. On Feb. 14, New York Life Insurance Co. said it would pay $3 million to settle similar claims over its 401(k) plan.

In the Oracle case, Magistrate Judge Craig B. Shaffer of the U.S. District Court for the District of Colorado declined to focus heavily on this wider body of litigation and instead concentrated on the law in the U.S. Court of Appeals for the Tenth Circuit, which is the federal appeals court governing Colorado.

Shaffer said there was no controlling Tenth Circuit decision on these specific questions. However, the Tenth Circuit has instructed judges not to weigh evidence or “consider the truth or falsity” of a complaint when ruling on a motion to dismiss, Shaffer said.

Given this, Shaffer recommended that the case move forward so that more information about Oracle’s plan—which holds about $12 billion for the benefit of more than 65,000 participants—could be presented.

Shaffer’s recommendation now will be considered by District Judge Robert E. Blackburn, who can accept or reject Shaffer’s reasoning.

Schlichter Bogard & Denton LLP represents the Oracle plan participants. Morgan Lewis & Bockius and Brownstein Hyatt Farber Schreck represent Oracle.

Both Schlichter Bogard and Morgan Lewis are heavily involved in the field of 401(k) fee litigation. The firms are currently facing off in disputes over the retirement plans of Johns Hopkins University and the University of Pennsylvania.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com

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

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Pension & Benefits Daily