$15 Million Settlement Proposed in 401(k) Excessive Fee Suit

“Following several years of thorough and active litigation…including numerous dispositive and procedural motions, full discovery, and preparation for a twelve-day jury trial originally scheduled for April 2023,” the parties in an excessive fee suit have come to terms.

Here participant-plaintiffs Kimberly Garthwait, Cumal T. Gray, Kristine T. Torrance, and Michael J. Hushion of the Eversource 401(k) Plan have submitted for the court’s approval an “Unopposed Motion for Preliminary Approval of Class Settlement” with the fiduciary defendants of that plan, as well as Eversource Energy Service Company, the Board of Directors of Eversource Energy Service Company, the Eversource Plan Administration Committee, and the Eversource Investment Management Committee. 

The Claims

The plaintiffs here claimed (the initial suit was filed in June 2020) that the defendants breached fiduciary duties owed to the Plan and its participants and beneficiaries under ERISA “by failing to discharge their duties with respect to the Plan: (a) solely in the interest of the Plan’s participants and beneficiaries; (b) for the exclusive purpose of providing benefits to participants and their beneficiaries and defraying reasonable expenses of administering the Plan; and (c) with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. In addition, Plaintiffs claim Defendants violated their respective obligations to monitor other fiduciaries of the Plan in the performance of their duties.”

For their part, the defendants “dispute Plaintiffs’ claims and deny that they breached any fiduciary duties.”

The Rationale

By way of supporting their motion, the parties note that they “have, for nearly three years, vigorously pursued relief on behalf of the Plan and the Settlement Class,” that they agreed to that result “only after extensive briefing of substantive and procedural motions, fact and expert discovery, substantial trial preparation (including the preparation  of factual stipulations, proposed jury instructions, and verdict forms, among other pretrial submissions), and arm’s-length negotiations by experienced counsel under the auspices of an experienced neutral mediator, including at a day-long private mediation and numerous follow up sessions over the course of several months with the mediator as well as an independent expert retained by the mediator to assist the Parties in assessing issues related to liability and damages.” Finally, they note that “resolving the case at this juncture allows the Parties to avoid continued and costly litigation that would deplete resources which could otherwise be used for the resolution of this action, and which might result in a recovery of less than that provided by the Settlement, or no recovery.”

The Settlement

The settlement agreed to (Garthwait v. Eversource Energy Service Company et al., case number 3:20-cv-00902, in the U.S. District Court for the District of Connecticut) amounts to $15,000,000, described by the parties as “an exceptional result for the Plan and Settlement Class under all of the circumstances and warrants preliminary approval.” Indeed, plaintiffs (and their experts) “have estimated realistically achievable damages as ranging from $14,895,443.34 to $26,842,926.28, based upon the comparator used and interest rate applied, and offsetting any potentially duplicative losses suffered by the Plan.” Or, as they put it, “quite significant, as it would represent approximately 72% of the midpoint of the reasonable damages calculations of Plaintiffs and their experts.”

From that, “Class Counsel[1] will request one-third of the Gross Settlement as an award of attorneys’ fees, as well as “reimbursement for litigation expenses actually incurred, not to exceed $500,000.00, also to be recovered from the Gross Settlement Amount.”

The settlement agreement also provides up to $15,000 for each of the named plaintiffs for serving as representatives of the class in bringing the suit.

We’ll see what the court has to say.

Footnote

[1] Miller Shah LLP and Capozzi Adler PC.