Principal Stable Value Fund Case Should Get Ax, Magistrate Says

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By Jacklyn Wille

A proposed class action challenging the Principal Stable Value Fund’s fees and performance should be dismissed because the lead plaintiff stands to gain no money from a legal victory, a magistrate judge recommended ( Austin v. Union Bank & Trust Co. , D. Or., No. 3:14-cv-00706-YY, report and recommendation issued 5/17/17 ).

An earlier ruling had allowed portions of the case to move forward, but a magistrate judge recommended May 17 that the lawsuit be dismissed because the named plaintiff, Kerry D. Austin, never had standing to bring his claims. Austin sold his investment in the Principal Stable Value Fund shortly before filing the lawsuit, and he had less than $1 invested in this fund during the proposed class period, the judge said. Because Austin’s potential recovery in this case was less than 1 cent, the magistrate said the case should be dismissed for lack of standing.

The lawsuit argues that the stable value fund drained workers’ retirement savings by charging excessive fees and using an unduly conservative investment strategy that failed to keep pace with inflation. A similar lawsuit targeting CVS Health’s stable value fund was dismissed last month. In March, a federal judge certified a class action accusing JPMorgan of the inverse problem—adopting an overly risky investment strategy for its fund.

Stable value funds—which are meant to be conservative, low-risk options that protect against interest rate volatility—have become a flash point in litigation under the Employee Retirement Income Security Act. Retirement plan sponsors including Anthem Inc., Chevron Corp. and Insperity Inc. have been sued for failing to include stable value funds in their investment lineups. None of those claims succeeded. Other lawsuits have targeted the companies that offer and manage stable value funds, with cases pending against Fidelity Management Trust Co., Massachusetts Mutual Life Insurance Co. and Prudential Retirement Insurance & Annuity Co.

In determining that Austin lacked standing, the magistrate judge said the “miniscule amount Austin has at stake in this litigation” is “problematic.” Because he stood to recover less than 1 cent, Austin failed to show that his alleged injury could be redressed by a favorable decision, the magistrate judge said.

“In this court’s view, whatever it means to have a palpable economic injury, it means something more than a loss that rounds to $0.00,” the magistrate judge said.

This lack of standing wasn’t remedied by a potential new plaintiff who alleged damages of more than $700, the magistrate judge said. That’s because the “critical moment for examining standing” is when a case is filed, the magistrate judge said.

Given this, Magistrate Judge Youlee Yim You of the U.S. District Court for the District of Oregon recommended that the case be dismissed. This recommendation can be accepted, rejected or modified by the district judge hearing the case.

Austin is represented by Stoll Stoll Berne Lokting & Shlachter PC, Keller Rohrback LLP, Schneider Wallace Cottrell & Konecky LLP, Edgar Law Firm LLC and Feinberg Jackson Worthman & Wasow LLP. The Principal defendants—Union Bank & Trust Co. and Morley Capital Management—were represented by Sidley Austin LLP and Kilmer Voorhees & Laurick PC.

To contact the reporter on this story: Jacklyn Wille in Washington at

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

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