Capozzi Adler has struck another excessive fee settlement with a billion-dollar plan.
This suit was filed by participant-plaintiffs Craig Parmer and Mark A. Laurance against the fiduciaries of the Land O’ Lakes Employee Savings & Supplemental Retirement Plan in May of 2020. In particular, they claimed that the fiduciary defendants of the $1.4 billion plan did not use a prudent process in the selection of the investment options in the plan (more specifically that there were cheaper, identical options available), and that they failed to properly monitor recordkeeping fees and to use the size of the Plan’s assets as leverage to negotiate lower fees (more specifically that those fees ranged from $32/participant to $166/participant annually, when they alleged that a reasonable amount should have been no more than—wait for it—$5/participant).
The fiduciary defendants, of course, denied any liability or wrongdoing. Moreover, during the process of discovery, the “defendants provided documents showing the Plan’s contractual recordkeeping rates with Alight were much lower than alleged by Plaintiffs,” according to the settlement petition.
The settlement petition outlines a series of actions taken in the interim—the inevitable series of filings, motions to dismiss, responses to those motions, hearings on those items, decisions that dismissed some claims, but left others live, more motions, more responses, etc.—all culminating last Dec. 12 with an announcement to the court that a settlement has been reached.
Mediation was involved—though prior to that the defendants produced more than 7,200 pages of documents, including plan documents, summary plan descriptions, participant investment disclosures, committee charters, investment policy statements, trust and recordkeeping agreements, fee schedules, committee meeting minutes and materials, and account statements.
The Settlement Process
On Nov. 30, there was a mediation before David Geronemus, Esq., “a neutral, third-party private mediator with experience mediating ERISA class actions.” After reviewing all of the relevant information, the plaintiffs determined maximum potential damages to the Plan to be a maximum of $9,006,703.78 assuming all revenue received by the Plan’s recordkeeper and trustee should have been considered fees for recordkeeping and administrative costs, and a reasonable per participant annual fee should have been $35 per participant. Not surprisingly, the fiduciary defendants disagreed with Plaintiffs’ calculation of damages “because the revenue Plaintiffs alleged was received by the Plan’s recordkeeper far exceeded the Plan’s contractually agreed rates with its recordkeeper.” But when all was said and done, the parties arrived at a settlement in principle, “settling this matter for $1,800,000.00,” and the final agreement was finalized and executed on Feb. 28.
The agreement (Parmer et al. v. Land O' Lakes Inc. et al., case number 0:20-cv-01253, in the U.S. District Court for the District of Minnesota) also includes nonmonetary terms, specifically that “within three years after the Settlement Effective Date, if the Plan’s fiduciaries have not already done so, the Plan’s fiduciaries will conduct or cause to be conducted a request for proposal relating to the Plan’s recordkeeping and administrative services.”
The agreement also notes that the plaintiffs’ counsel “…intends to seek to recover their attorneys’ fees not to exceed $599,940.00” (that’s a third of the total settlement, though it looks like an oddly specific amount), as well as the recovery of litigation costs and expenses “advanced and carried by Class Counsel for the duration of this litigation, not to exceed $50,000.00.” As for the two named plaintiffs in the suit, the settlement contemplates seeking “Class Representatives’ Case Contribution Awards in an amount not to exceed $10,000 each…”
Will the court approve? We shall see…
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