Excessive Fee 401(k) Suit Settles

While an excessive fee suit had alleged the loss of “millions of dollars in excessive fees, costs, and lost investment opportunity,” the parties have settled for a fraction of that.

The suit was brought in November 2021 in the U.S. District Court for the Central District of California by former participants of the VCA Inc. Salary Savings Plan (Brian Smith, Jacqueline Mooney, Angela Bakanas and Matthew Colón[1]) who claimed that the administrative/recordkeeping fees paid by the 11,700-participant plan — ranging as high as $105/participant — were excessive in view of what they asserted were the average fee of similar plans ($38/participant). 

And — unlike a number of other recent cases — the judge in this case was willing to take to trial the plaintiffs’ assertions with regard to fee calculation (the fiduciary defendants counter-claimed that the fees paid were actually $36/participant) and comparability of other plans.

The Settlement

The settlement — following what it said were the production of 1,829 pages of documents (“which Plaintiffs’ counsel thoroughly reviewed and analyzed”), “detailed mediation briefs” (“laying out their respective positions on the merits of the litigation and framework for a potential classwide settlement”), and an all-day mediation session where “the negotiations were hard-fought” — calls for a cash settlement of $1.5 million, which the settlement characterizes as “an estimated 25%[2] of their projected maximum damages.” 

A settlement (Smith et al. v. VCA Inc. et al., case number 2:21-cv-09140, in the U.S. District Court for the Central District of California) that, once allocated across the $563 million plan of the VCA Animal Hospitals plan to  “all persons who participated in the Plan at any time during the period from Nov. 22, 2015 through July 24, 2020, including any Beneficiary of a deceased Person who participated in the Plan at any time during the Class Period, and any Alternate Payee of a Person subject to a QDRO who participated in the Plan at any time during the period from November 22, 2015 through July 24, 2020,” but excluding “Defendants and their Beneficiaries, any Plan fiduciaries, and the Judges assigned to this case” — well, let’s take a minute and deduct the expenses that will also be paid from that amount. 

Fees & Expenses

The four named class representatives would get $3,000 each, and the plaintiffs’ counsel have said they would seek up to 33 1/3% of the settlement fund,[3] as well as administrative and notice charges estimated to run between $45,000 and $65,000. 

Oh, and while the plan had some 11,700 participants, the settlement estimates that there are approximately 24,000 class members to spread what’s left. 
Now we’ll see if the court approves.

Footnotes

[1] The plaintiffs are represented by Robert Ahdoot and Andrew W. Ferich of Ahdoot & Wolfson, PC and Michael L. Roberts and Erich P. Schork of Roberts Law Firm, U.S., P.C.

[2] “Plaintiffs’ estimate that maximum “excess fee” damages that could be obtained if this matter were taken through trial to a favorable judgment would be approximately $5-6 million” — hence the 25% figure.

[3] The settlement notes that they “identified and investigated the claims in this lawsuit and the underlying facts, engaged in motion practice, conducted discovery, spoke with numerous Class Members, engaged in an all-day mediation session and protracted negotiations with VCA, and successfully negotiated this Settlement.”