University Retirement Fee Cases: Where They Are Two Years Later

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

Two years ago, retirement fee litigation saw a new wave of lawsuits targeting prominent U.S. universities and the way they manage their workers’ retirement savings.

Fast forward two years and the cases are far from being resolved. Among the 20-plus universities sued, one defeated the claims after trial, two got quick wins without trials, and one reached a multimillion-dollar settlement.

It all started during a two-week period in August 2016 when the St. Louis-based law firm Schlichter Bogard & Denton LLP—the firm famous for bringing class actions against major employers over the investment fees in their 401(k)s—sued 12 universities, including the elite Columbia, Duke, Cornell, New York University, Yale, and the Massachusetts Institute of Technology.

Other law firms later joined the fray, filing suits against eight other universities, including Brown, Georgetown, George Washington, and the University of Chicago.

Faster Than Corporate Cases

Sources tell Bloomberg Law that although the cases are moving at a fast pace, it’s too soon to get a clear idea of how they’ll be resolved.

Bonnie Treichel, senior consultant at Multnomah Group, told Bloomberg Law that one thing appears certain: These cases are moving faster than the lawsuits involving 401(k) plans filed more than a decade ago by Schlichter against major corporations such as Lockheed Martin Corp., Caterpillar Inc., Boeing Corp., and Kraft Foods.

For example, the case against New York University that started in 2016 already has been tried, Treichel said.

Marquette University law professor Paul Secunda said that the university lawsuits are moving faster than the cases against the corporations. Secunda, who specializes in labor and employment law, said that this might be because the law has become clearer on employer fiduciary responsibilities in light of a 2015 U.S. Supreme Court decision.

Face Trial or Settle?

In general, the lawsuits allege that university retirement plans charged excessive fees, included too many investment options, failed to offer cheaper investment alternatives, and wasted money on multiple record-keeping providers.

For the most part, courts have allowed some of the claims to advance to trial, with the exception of rulings dismissing all claims against the University of Pennsylvania and Northwestern. Both cases are pending appeal in the Third and Seventh circuits, respectively.

The Third Circuit scheduled oral arguments in the case against Penn for Oct. 2. A federal judge in Maryland allowed Johns Hopkins University to appeal his order refusing to completely toss the workers’ lawsuit. If the Fourth Circuit agrees to review the decision, it will become the third appeals court in the country addressing issues related to alleged ERISA violations involving 403(b) plans.

In May, the University of Chicago reached a $6.5 million settlement—the first university to do so. Duke University has engaged in settlement negotiations but hasn’t reached a deal yet, according to court documents.

Workers at NYU and Duke have won class certification. Participants in plans sponsored by Cornell, Emory, and MIT currently are seeking class, status and rulings should be coming soon.

NYU was the first university to go to trial and win.

The universities are watching other cases going through litigation to determine whether they followed prudent procedures, Secunda said. For the moment there is no overall strategy on whether to settle or continue litigation, he said.

Judges have started scheduling trials in cases against Vanderbilt, Duke, and MIT for 2019. There is some inconsistency on the type of trial the universities will be facing, as judges are mostly allowing bench trials, meaning that a judge would preside and rule over the claims, but at least two have scheduled jury trials.

Judges have denied jury trials in cases against NYU, Emory, Columbia, Northwestern, Duke, and the University of Chicago. Judges have scheduled jury trials in the cases against Vanderbilt and MIT.

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