$140M ERISA Class Case Filed Against Home Depot: Over 200,000 Retirement Plan Beneficiaries Represented

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In an ERISA suit filed in April 2018, plaintiffs Jaime H. Pizarro and Craig Smith allege that The Home Depot places employees in poorly performing funds and also causes plan participants to overpay for Robo Investment Advice. The class complaint was filed on behalf of the plaintiffs and close to 200,000 current and former plan participants in the U.S. District Court of the Northern District of Georgia. The complaint was filed against The Home Depot, the 401(k) plan’s investment and administrative committees, and investment advisors from two different companies, Alight Financial Advisors, LLC and Financial Engines Advisors, LLC. The complaint alleged that the Home Depot committed two major violations:

1.     Violated their basic fiduciary duties under ERISA

2.     Abused their employees’ trust through mismanagement of participants’ 401(k) retirement plan

Allegations state that the Home Depot chose a number of funds for the employee 4019(k) that performed poorly and allowed investment advisers to charge their plan participants exorbitant fees. It is also alleged that the company completely disregarded a kickback scheme that was occurring between a plan investment adviser and the plan’s bookkeeper. Estimated losses for employees affected are significant. One respected financial information and technology organization concluded that the average plan participant earned $100,000 less in retirement savings than employees in top-rated retirement plans similar in size. This $100,000 loss is the equivalent of about 18 additional years on the job for each Home Depot plan participant. The plaintiffs seek $140 million in damages.

Home Depot has over $6 billion in assets and is one of the largest 401(k) plans in the country. Counsel for the plaintiffs argue that ERISA fiduciary standards are clear and that while Home Depot should be held to the highest standard, they fall below the lowest standard in this particular case. According to information presented in the complaint, Home Depot’s plan investment options appear to consistently underperform their own benchmarks and those of comparable investment opportunities. Plaintiffs claim this is largely due to the company’s practice to select investment options without due diligence and fail to appropriately monitor performance.

If you need information about ERISA fiduciary standards or if you seek class action status for violations in the workplace, please get in touch with one of the experienced employment law attorneys at Blumenthal Nordrehaug Bhowmik De Blouw LLP.

California Judge’s Common Sense Ruling Grants Disney Summary Judgment on FCRA Class Claim

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In a class action lawsuit against Disney under the Fair Credit Reporting Act (FCRA), the Culbersons alleged that Disney was in violation due to obtaining a background check prior to providing the plaintiff with proper disclosure as well as by taking adverse action without adhering to the proper adverse action process. While the Culbersons were able to obtain class certification, Disney prevailed at summary judgment.

The Los Angeles Division of the Superior Court of California granted summary judgment to Disney on February 9th, 2018 on both claims presented by the Culbersons. The court ruled that while the Culbersons may be able to state a claim for the existence of a technical FCRA violation on Disney’s part, there was no willful violation of FCRA.

The Court disagreed with the Culbersons interpretation of FCRA in connection to the adverse action claim. According to FCRA, if an employer intends to take any adverse action against a potential employee due to information obtained in a background check, they must first adhere to pre-adverse action protocol requiring the employer to give the applicant a copy of the background check and a summary of rights before taking the adverse action.

According to the Culbersons, Disney followed their own coding system for applicants including a category for “no hire” that constitutes adverse action. The categorizing of applicants in the Disney hiring system occurs prior to the submission of a copy of the background check and summary of rights to applicants. The Culbersons argued that this procedure constituted Disney actively and willfully failing to follow an appropriate pre-adverse action process.

The Court disagreed. They found that Disney’s “no hire” code did not actually constitute adverse action because it was only an internal decision. Employers are allowed to make internal decisions regarding potential employees without it constituting adverse action. According to the Court’s line of reasoning, Disney was not in violation of FCRA simply because they used an internal coding system for new applicants including a “no hire” category prior to sending out pre-adverse action letters.

Similarly, the Court held that Disney’s background check disclosure did not willfully violate FCRA. It was not determined whether or not the document included “extraneous” information as the Culbersons claimed. The Court declined to address the technical adherence to FCRA’s rule that the background check disclosure be a separate document solely dedicated to this purpose.

If you were not notified prior to adverse action taken by a potential employer, or if you were not properly notified of a background check being used during a pre-screening employment process, please get in touch with one of the experienced California employment law attorneys at Blumenthal Nordrehaug Bhowmik De Blouw LLP.

Federal Judge Grants Tens of Thousands of Oracle Corp. Plan Participants Class Certification

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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.