Shoe Show Strikes Excessive Fee Suit Settlement

The fiduciaries of a relatively small retirement plan have come to relatively smaller terms in an excessive fee suit.

First and foremost, the settlement proposed provides $330,000 in the form of a “Settlement Fund.”

This litigation was initially commenced on Sept. 3, 2020, alleging that the fiduciary defendants of the $40 million, 1,500 participant plan[1] breached their fiduciary duties[2] by offering unreasonably priced investment options and charging excessive fees. And while the defendants deny the allegations, they have come to terms.

According to the proposed settlement, the case was “aggressively litigated,” employed a “well-respected mediator,” engaged “in some pre-mediation negotiations, a full day of mediation, and then further discussions following mediation.” And then, “after these contentious negotiations, the case settled.”

The settlement (Smith et al. v. Shoe Show Inc. et al., case number 1:20-cv-00813, in the U.S. District Court for the Middle District of North Carolina) calls for Angeion Group to be named as the Settlement Administrator, who after responding to a request for proposal has bid $24,990 for the work on this case—an amount that will come out of the $330,000 settlement. Moreover, the settlement agreement says that “if for some reason the Angeion Group has a cost overrun, the extra amount will be paid by Plaintiffs’ counsel, not by the Class or out of the Settlement Fund.”

The settlement also calls for $2,500 each to be paid to the named participants in the case — an amount the settlement says “is in line with precedent recognizing the value of an individual stepping forward to represent classes, particularly where many people would perceive, correctly or incorrectly, that stepping forward could hurt their ability to gain employment in the future.”

As for the plaintiffs’ attorneys’ fees and costs, the class counsel[3] has requested attorney’s fees in the amount of 30% of the gross settlement amount, or $90,000. The proposal notes that plaintiffs “have retained and are paying experts and have worked hard…” and that “because the case settled before very extensive discovery counsel believes thirty percent (30%) is more appropriate than one-third (1/3), which it says is typical in such cases. Additionally, they are seeking reimbursement for $20,000 in expert costs that have been paid to their experts. “The experts helped find and analyzed this case. They provided assistance with the complaint. They assisted with mediation and were in touch with counsel during the mediation.” Moreover, the proposal states that “their $20,000 bill is a reduction of their normal rates.”

“After extensive negotiations by plaintiffs' counsel with well-regarded counsel on both sides, the attorneys have concluded the settlement is fair and adequate," the proposal says.

“This settlement is therefore the product of extensive arms-length negotiations. Plaintiffs request that the Court preliminarily certify the Class and the Settlement, approve the form and manner of the Settlement Notice, preliminarily approve the Plan of Allocation and schedule a date for a Fairness Hearing.”

Stay tuned.

Footnotes

[1] Shoe Show is a footwear retailer with over 1,100 stores across 47 states.

[2] More specifically, the plaintiffs alleged that the Shoe Show defendants imprudently failed to (1) limit MassMutual’s fees, (2) offer funds utilizing the most affordable share classes, and (3) offer passive funds.

[3] The plan participants are represented by Andrew L. Fitzgerald of Fitzgerald Hanna & Sullivan PLLC and by Aaron B. Houchens of Aaron B. Houchens PC.