Less than a week after the suit was filed — but (apparently) after six months of arm’s length negotiation with the assistance of a national mediator, the parties in an excessive fee suit have come to terms.
According to the settlement agreement (Ramsey v. Philips North America LLC, S.D. Ill., No. 3:18-cv-01099-NJR-RJD, joint motion for preliminary approval of class settlement 5/11/18) between plaintiffs — represented by Schlichter Bogard & Denton LLC — and Philips North America LLC, over two years before filing, the parties “engaged in an adversarial discovery process to investigate the underlying merit of Plaintiffs’ claims and Defendant’s defenses.” After outlining a number of key events in that timeline, the agreement explains that “only after negotiating for an additional six months regarding the terms of the Settlement did the Parties reach an agreement,” going on to note that “during this extended dispute resolution process, the Parties agreed to toll the statute of limitations.”
The settlement agreement outlines the five counts from the complaint, specifically that the plan fiduciary/defendant:
- Breached its duties by providing participants the Vanguard Prime Money Market Fund as the sole capital preservation investment option.
- Breached its duties by providing Plan investments that charged unreasonable annual expenses compared to lower-cost versions of the same investments and alternative funds that were available to the Plan.
- Caused the Plan to pay unreasonable administrative fees to the Plan’s recordkeeper.
- Breached its duties by providing as a Plan investment option the Principal Diversified Real Asset Fund “despite its consistent and dramatic underperformance compared to its benchmark, peer group, and similar lower-cost investment alternatives that were available to the Plan.”
- Breached its duty to monitor the actions of the Plan fiduciaries.
The settlement agreement calls for the defendants to:
- Deposit $17,000,000 in an interest-bearing settlement account that will be used to pay the participants’ recoveries as well as Class Counsel’s Attorneys’ Fees and Costs, Administrative Expenses of the Settlement, and Class Representatives’ Compensation.
- Conduct a request for proposal process for recordkeeping services to the Plan (during the first 18 months following final approval of the settlement).
- Publish a communication to then current Plan participants explaining the risks and benefits of the Plan’s money market fund investment option (within the first year following final approval of the settlement).
- Use an independent consultant familiar with fixed income investment options in defined contribution plans “who will review the investment lineup and make recommendations to the Plan’s fiduciaries regarding whether to retain the money market fund and whether to add a stable value or comparable fund.”
- Provide Class Counsel a list of the Plan’s investment options and fees (during the three-year Settlement Period).
Additionally, in considering investment options for the Plan, the settlement agreement calls for the Plan’s fiduciaries to consider: “(1) the lowest cost share class available for any particular mutual fund considered for inclusion in the Plan as well as other criteria applicable to different share classes; (2) the availability of revenue sharing rebates on any share class available for any particular mutual fund considered for inclusion in the Plan; and (3) the availability of collective trusts, to the extent such investments are permissible and are otherwise identical to a particular mutual fund considered for inclusion in the Plan.”
The agreement states that plaintiff’s counsel will “both monitor compliance with the settlement for three years and take any necessary enforcement action without cost to the Class.”
The agreement also calls for Incentive payments to the seven Named Plaintiffs, noting that plaintiffs will seek $15,000 for each of the Named Plaintiffs. Additionally, “Class Counsel will request attorneys’ fees to be paid out of the Gross Settlement Fund in an amount not more than one-third of the Gross Settlement Amount, or $5,666,666, as well as reimbursement for costs incurred of no more than $35,000.”
Now we’ll see what the court has to say.