A suit which had alleged that a profit-sharing plan’s investment allocation was “inappropriate” and the plan fiduciaries’ actions in establishing and maintaining it imprudent has settled.
The settlement (Toomey v. DeMoulas Super Markets, Inc., D. Mass., No. 1:19-cv-11633, motion for settlement approval 11/20/20) between DeMoulas Super Markets Inc. (which operates New England grocery chain Market Basket) and plaintiffs Paul Toomey, Nanette Langone and Randall May (on behalf of the Estate of Martin May) came in a case filed in 2019 in the U.S. District Court for the District of Massachusetts, that had had a motion to dismiss—dismissed—this past April.
Unlike most of the litigation dealing with excessive fees and stock drop litigation, this involved a traditional profit-sharing plan, with participants’ accounts funded solely by employer contributions, subject to a six-year vesting schedule. Indeed, employees were not permitted to contribute their own money to the plan—which, between 2013 and 2017, had approximately 11,000 to 13,000 participants and between $580 million and $756 million in assets. It did have an investment policy statement (IPS), which called for 70% of the plan’s assets to be allocated into domestic fixed income options and 30% into equities. However, one of the allegations made was that that the plan’s “one-size-fits-all target allocations” were “inappropriate,” but “especially inappropriate for participants in their twenties, thirties, and forties, who are decades away from retiring.”
Settlement Terms
As for the settlement terms, they include both a monetary component (the aforementioned $17.5 million) and a non-monetary component that the settlement says “address[es] Plaintiffs’ allegation that the Plan’s investment portfolio allowed ‘little opportunity for growth.’” Specifically, the fiduciary defendants have agreed to:
1. limit the amount of plan assets held in cash or cash equivalent accounts to 10% or less; and
2. modify the plan’s IPS to increase the annual return target by 100 basis points.
To get to this point, the parties note that to date, “Defendants have produced over 35,000 pages of documents, including Trustee meeting minutes and materials detailing Defendants’ process for managing the Plan, class member data, and information regarding the Plan’s investment performance and investment managers,” and that “on September 30, 2020, the Parties engaged in a full-day mediation before Hunter Hughes.”
Accordingly, therefore, and noting that this motion is “not opposed by Defendants as parties to the Settlement,” the plaintiffs “respectfully request that the Court enter an order: (1) preliminarily approving the Settlement; (2) certifying the proposed class for settlement purposes; (3) approving the proposed Notices and authorizing distribution of the Notices; (4) scheduling a final approval hearing; and (5) granting such other relief as set forth in the proposed Preliminary Approval Order submitted herewith.”
Nichols Kaster PLLP and Block & Leviton LLP represented the plaintiffs.
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