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A federal judge stands ready to approve an excessive fee settlement proposal—but not the requested attorney fees.
The settlement was struck between participant-plaintiffs Brian Reichert and Derek Deviny and Juniper Networks, Inc.—the terms announced roughly a year ago. The suit in question had alleged that “…many managed account services merely mimic the asset allocations available through a target date fund while charging additional unnecessary fees for their services.”
The $3 million cash settlement had been announced back in September 2022 by the parties, following an August 2021 filing of the original suit that targeted the fiduciaries of the $1.4 billion 401(k) plan, claiming they “breached the duties they owed to the Plan, to Plaintiff, and to the other Participants of the Plan (there were 6,860 in 2019, according to the suit).[1]
That said, the settlement’s terms (Reichert v. Juniper Networks Inc., N.D. Cal., No. 3:21-cv-06213, motion for preliminary settlement approval 11/11/22) were basically a relatively straightforward $3 million in cash—according to the settlement agreement more than 11% of the plan participants’ total estimated damages of $26 million—an amount that the plaintiffs said was “on par” with settlements approved in similar ERISA lawsuits.
‘Just Way Too High’
Of course, even when the parties come to terms, those terms must still be approved by the court—and here, U.S. District Judge James Donato rejected the attorney fee ask of $900,000, calling it "just way too high,” according to a Law360 report.
Judge Donato noted that, based on the total fees racked up to date—$142,232—approving the amount requested would be a figure more than six times the amount supported by the lodestar amount,[2] nothing he has ever awarded, the judge said, according to the report. Judge Donato characterized the case as relatively small and straightforward. "Occasionally, we'll get what I call sweat equity [when] plaintiffs worked relentlessly," the judge said, according to the Law360 report. "That didn't happen."
He also pushed back on why the plaintiffs were also seeking $36,000 in expenses, on top of nearly $40,000 in settlement administration expenses and $15,000 for independent fiduciary fees. He also questioned the $5,000 service awards requested for the two plaintiffs named in the suit. “They're not going to get five grand each, particularly as the average recovery is approximately $100, that's completely disproportionate," the judge said, according to the report.
Earlier this month another federal judge in another federal court district also modified the terms of the proposed settlement in another excessive fee case.
Ironically, it also involved a $3 million cash settlement—and an adjustment on the compensation sought for attorneys relative to an analysis based on the so-called “lodestar” method.
Footnotes
[1] That suit—filed in April 2021—targeted the fiduciaries of the $1.4 billion 401(k) plan, claiming they “breached the duties they owed to the Plan, to Plaintiff, and to the other Participants of the Plan (there were 6,860 in 2019, according to the suit) by, among other things: (1) authorizing the Plan to pay unreasonably high fees for retirement plan services (‘RPS’); (2) failing to objectively, reasonably, and adequately review the Plan’s investment portfolio with due care to ensure that each investment option was prudent, in terms of cost; (3) maintaining certain funds in the Plan despite the availability of identical or similar investment options with lower costs and/or better performance histories; (4) authorizing the Plan to pay unreasonably high fees for managed account services; and (5) failing to disclose to Participants necessary Plan information for them to make informed Plan investment decisions.”
[2] Basically, the lodestar method involves multiplying the number of hours reasonably devoted to the case by a reasonable hourly rate—the latter may, of course, vary based on the geographical area, the nature of the services provided, and the experience of the attorneys. And, of course, what’s deemed “reasonable.”
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