On Tuesday, a federal judge out of Colorado granted tens of thousands of Oracle Corp. 401(k) plan participants class certification. The Employee Retirement Income Security Act (ERISA) suit alleges that the tech company piled up excessive record-keeping fees for the plan as well as holding on to funds that were performing poorly.
Plan participants allege Oracle was breached its duties in accordance with ERISA when they piled up tens of millions of dollars of excessive fees and failed in their duty to implement a prudent process for investment funds. The 18-page decision issued by U.S. District Judge Robert E. Blackburn created a class of all plan participants and beneficiaries of the named plan since January 2009. This will include tens of thousands of members. The judge did stipulate that the class will only apply to excessive fee claims since the original proposed class definition was too broad.
Judge Blackburn created two additional classes in connection to the case. One class was designated for plan participants in the Artisan Fund and the other was for plan participants in the TCM fund. Both will have time limitations applied to and will apply to imprudent investment claims. The other fund identified in the suit, PIMCO, did not receive a class certification because there was not a class representative listed.
Counsel for the plaintiffs intend to show at trial that the employees/retirees lost valuable retirement assets due to the excessive fees and poor plan management.
The original suit was filed in early 2016 by a group of plan participants. The group alleged that Oracle and its 401(k) committee breached their fiduciary duties. Allegations also claim that the company breached its duties by engaging in ERISA prohibited transactions and specifically claimed that the company filed to act on behalf of the interests of their plan participants.
According to the suit, Oracle’s record-keeping fees to Fidelity Management Trust Co., the plan trustee, were calculated on a revenue-sharing model that was scaled with the plan’s assets instead of calculating the fees in accordance with the number of participants. Plaintiffs claim that this lack of a fixed fee per participant resulted in significant losses for plan participants due to unreasonable expenses. In the time period between 2009 and 2014, the fund’s assets went from $3.6 billion to over $11 billion. So, while Fidelity revenue saw a drastic increase, the services they provided in exchange remained the same.
When alleging poor plan management and the retaining of poorly performing funds, the suit specifically identified Artisan, PIMCO and TCM, claiming that they caused significant overall losses.
If you have questions or concerns regarding a breach of fiduciary duty under ERISA, please get in touch with one of the experienced California employment law attorneys at Blumenthal Nordrehaug Bhowmik De Blouw LLP.