‘Or’ Else? Excessive Fee Suit Settlement Terms Questioned

A federal judge has questioned the wording in a $7 million excessive fee settlement agreement.

The suit—filed way back on Valentine’s Day, 2017—involved allegations by a participant in its own plan (and funds), one David G. Feinberg, on behalf of the T. Rowe Price U.S. Retirement Program and all “similarly situated Plan participants and beneficiaries (henceforth, collectively, ‘participants’), and all predecessor plans.” The suit claimed that the T. Rowe Price plan fiduciaries breached their fiduciary duties by only offering T. Rowe Price’s own in-house investment funds in its 401(k) plan, which the plaintiff claims “provided a windfall to T. Rowe Price affiliates T. Rowe Price Associates, Inc. (“TRP Associates”) and T. Rowe Price Trust Company (“TRP Trust”), collectively the ‘TRP Investment Affiliates.’” The settlement—$7 million cash and some plan design changes—was announced in January.

However, in reviewing the wording in the settlement—specifically the description of the liabilities from which T. Rowe Price would be shielded as a result—U.S. District Judge James K. Bredar took issue, commenting that, “The release on its face appears to apply to claims with a different factual predicate. By use of ‘or,’ the enumerated claims appear to be expressly not limited to those based on the same factual predicate of this case.” 

Judge Bredar explained (David G. Feinberg et al. v. T. Rowe Price Group Inc. et al., case number 1:17-cv-00427, in the U.S. District Court for the District of Maryland) that the release from liability includes those claims “(a) that were asserted in the Complaint or Action or that, whether or not pleaded in the Complaint or Action, could be predicated on the same allegations, acts, omissions, facts, events, matters, conduct, or transactions alleged in the Complaint or Action,’ or (b) specific enumerated categories”—and wondered why that last “or” shouldn’t more appropriately be “including.”     

Acknowledging that it wasn’t the court’s job to advise on the terms of the settlement (“to do so would be advisory”), Judge Bredar went on to note that “the release on its face appears to apply to claims with a different factual predicate.” More specifically, he commented that “by use of ‘or’ the enumerated claims appear to be expressly not limited to those based on the same factual predicate of the case.”

Said another way, those “specific enumerated categories” might have been interpreted as including an imprudent selection of funds beyond/after/other than the ones challenged in this particular suit.

Oh—and just to make sure he had their attention– Judge Bredar not only asked for confirmation of the intent to update the language in the settlement agreement, but wrote that if the parties didn’t respond, he would be scheduling a separate briefing “on the appropriateness of the relief as proposed, and whether the Court’s unwillingness to endorse this element of the Proposed Settlement would be fatal to its final approval.”

Not surprisingly, the parties agreed to modify the terms.