The parties in an excessive fee suit—that also raised issues regarding an arbitration clause—are “…pleased that after years of hard-fought litigation, they are able to present for preliminary approval a proposed settlement.”
That settlement includes a cash payment of $4,000,000.00 (four million dollars) and “certain non-monetary relief.” The plaintiffs write that they believe this is an excellent result which represents 30% to 34% of their best-case estimated damages of $11.6 million to $13.3 million.
Part of that “hard-fought” process included “vigorous arms-length negotiations between counsel experienced in ERISA class actions and under the auspices of Robert A. Meyer of JAMS, a third-party private mediator with extensive experience mediating ERISA actions.”
Case History
The suit was initially filed back in December 2019, alleging (as most in this genre do) that the fiduciaries of the Cintas 401(k) plan violated their fiduciary duties of prudence, care, and loyalty imposed by ERISA § 404(a), 29 U.S.C. § 1104(a). More specifically, the suit alleged the did so by (1) failing to actively monitor the Plan’s administrative expenses and pursue reduction in Plan costs to participants; (2) failing to ensure investment funds in the Plan were prudent and in the best interest of Plan participants; and (3) and Cintas’ failure to monitor the performance and processes of the Committee Defendants to ensure the adequate performance of their fiduciary obligations. Again, all pretty standard stuff.
In response, the Cintas defendants (in March 2020) filed a Motion to Compel Arbitration and Stay the Proceedings,[1] which was denied by the court in January 2021 and appealed in the United States District Court of Appeals for the Sixth Circuit in June 2021, which affirmed the denial of the lower court in April 2022. The Cintas defendants then appealed to the United States Supreme Court—which denied hearing the case in January 2023.
The aforementioned mediation[2] took place in October 2023, with a notice to the court that a settlement in principle had been reached in November 2023.
Non-Monetary Relief
In addition to the cash settlement noted earlier, the settlement (Hawkins v. Cintas Corp., S.D. Ohio, No. 1:19-cv-01062, settlement motion 2/9/24) calls for the Cintas plan fiduciaries to, “Within three years, but no later than five years … conduct or cause to be conducted a request for proposal relating to the Plan’s recordkeeping services.”
Included in that cash settlement (and thus netted from it) are attorney’s[3] fees “not to exceed thirty-three and one third percent (33 1/3%) of the Gross Settlement Amount. Put differently, the attorney fee award cannot exceed $1,333,200.00.” It also provides for a reimbursement of attorney expenses up to $100,000 and a maximum of $3,500 incentive awards for each of the Class Representatives (Named Plaintiffs) for their work in bringing the case forward.
By way of encouraging the approval of the court, the plaintiffs say they believe it to be “an excellent result, providing a substantial, immediate payment to Settlement Class members and eliminating the risks and cost of trial. A trial could result in a reduced recovery or no recovery at all”—going on to comment that “the question now before the Court is simply whether the settlement is fair enough that it is worthwhile to expend the effort and costs associated with sending potential class members notice.”
Stay tuned.
Footnotes
[1] Cintas argued the lawsuit was blocked by an arbitration agreement in workers’ employment contracts.
[2] During which the plaintiffs noted that they were “provided sufficient information that allowed them to refine their potential damages to a range of $11.6 million to $13.3 million which was based on Plaintiffs’ theory that, during the Class Period, Defendants could have obtained recordkeeping fees of between $23 to $28 per participant for the 35,000 to 52,000 participants in the Plan each year of the Class Period.” That said, the settlement agreement acknowledges that the defendants “disputed Plaintiffs’ calculations asserting that even under Plaintiffs’ theory of the case, recordkeeping damages were far lower.”
[3] Capozzi Adler PC and Connick Law LLC.
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