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$5 Million Settlement Struck in 401(k) Excessive Fee Suit

Fiduciary Rules and Practices

Another excessive fee suit involving proprietary funds has settled a little more than a year after the suit was filed.

In this one, plaintiffs Jubril Pecou and Ashley Schiefer (who joined the suit later) had filed suit (represented by Nichols Kaster PLLP.) against the Bessemer Trust Company and the Profit-Sharing Plan Committee of Bessemer Trust Company alleging, among other things, that they caused the plan and its participants to invest in expensive and underperforming proprietary Old Westbury mutual funds. 

The suit claimed that the plan's costs were two times higher than those of plans of a similar asset size (up to $500 million) that the suit claimed was "entirely due" to the decision to retain those Westbury funds. And, as has been alleged in (pretty much every single one of these proprietary fund suits), the suit alleged that the decision to include those funds was about building up the firm’s investment management business, rather than its participants’ best interests.

The Settlement


But that, as they say, was then. Now (Pecou v. Bessemer Trust Co. et al., case number 1:22-cv-01019, in the U.S. District Court for the Southern District of New York) the parties have come to terms — a $5 million settlement — “negotiated at arm’s length by experienced counsel with the assistance of a well-respected mediator, Robert A. Meyer” — that the parties agree was “a significant recovery for the Class,” and one that “falls well within the range of negotiated settlements in similar ERISA cases.”

More specifically the agreement explains that, “at the time of mediation, the Named Plaintiffs’ damages models estimated that the total losses ranged from approximately $19.5 million to $45.0 million under models endorsed by the relevant caselaw and Restatement (Third) of Trusts” — and that, based on THAT estimate, this settlement “represents approximately 11% to 26% of the total estimated losses.”  The settlement claims that this is “on par with numerous other ERISA class action settlements that have been approved across the country.”

The settlement also requires that Class Counsel file their Motion for Attorneys’ Fees and Expenses at least 21 days before the deadline for objections to the proposed Settlement, not to exceed one-third of the Settlement Amount.

The named plaintiffs in the case would receive “Case Contribution Awards of up to $7,500” each.

All subject to court approval. Stay tuned.