$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.

Judge Refused to Rethink Certification of Class in Franklin Templeton ERISA Suit

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U.S. District Judge Claudia Ann Wilken refused to rethink the certification of a class of Franklin Templeton retirement plan participants. Plaintiffs allege the investment management company favored its own funds over cheaper and more efficient outside funds – in violation of the Employee Retirement Income Security Act (ERISA).

The company, Franklin Resources, Inc. filed a motion that the court amend the order to deny lead plaintiff Marlon H. Cryer’s motion for class certification. The motion was denied with the judge ruling that a class action waiver in a severance agreement signed by Cryer cannot be used against him since claims he brought were in accordance with ERISA Section 502(a)(2) and on behalf of the plan. She specifically stated that the decision regarding such a claim’s filing under that particular section of code couldn’t be bargained away without the consent of the plan.

Preventing individual plan participants from bringing Section 502(a)(2) claims as a class action could effectively prevent fiduciaries from being held accountable in court in the event that they are involved in wrongdoing. The judge previously ruled that the claims Cryer made were typical of the proposed class and that the common issues of law were appropriately identified. It was also noted that if each of the thousands of proposed class members were forced to litigate individually, it would result in a significant risk of inconsistent judgments.

The class members include plan participants from July 28, 2010 through the date of an eventual judgment.

The lead plaintiff, Cryer, is a former Franklin Templeton employee. He was terminated from his position in February 2016 and filed the lawsuit the following July alleging the company violated its fiduciary duty to its plan participants. Specifically, he claims that the company invested in in-house funds with unreasonable fees that were, in fact, paid to the company itself and some of its subsidiaries. The fees associated with the in-house funds were significantly higher than the fees that were being charged by other, similar mutual funds that were available.

Cryer alleges that retirement plan participants were offered a Franklin Templeton money market funds in the place of a stable value fund, which is not the norm and resulted in higher fees that were routed back to the company.

If you have similar allegations or need to ask questions about ERISA violations, please get in touch with one of the experienced California employment law attorneys at Blumenthal, Nordrehaug & Bhowmik.

Allina Health System Hit with ERISA Suit in Connection to Retirement Plans

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In August 2017, Allina Health System faced a proposed class action in Minnesota federal court filed by former employees alleging that Allina Health flouted ERISA (the Employee Retirement Income Security Act). The employees allege that Allina failed to make sure that the options available were not detrimental to retirement plan participants.

Judy Larson, Janelle Mausolf, and Karen Reese are all ex-employees of Allina Health System. All named Allina Health System (provider of medical care in Minnesota and Wisconsin), the Allina board of directors, the company’s chief administrative officer, chief human resources officer, and entire retirement committee as defendants in the suit. Within the extensive complaint (91 pages in full), the plaintiffs stated that the two defined contribution retirement plans they have an issue with, have more than $1 billion in combined assets, making them jumbo plans. In fact, this makes them amongst some of the largest plans in the entire nation. The sheer size of the plans means Allina has significant buying power regarding expenses and fees that are charged against their participants’ investments.

In spite of this and the opportunity it created to potentially reduce the plans’ costs and otherwise manage the offered investment options in the most prudent fashion, Allina abdicated its fiduciary oversight to Fidelity, the plans’ trustee.

Under Fidelity’s oversight, the plans saw high-cost, non-Fidelity mutual funds through which Fidelity themselves received millions in revenue sharing. The situation also enabled Fidelity to add any Fidelity mutual fund that was available no matter if the funds duplicated other options or not, had higher than norm costs, had low performance, or were otherwise not beneficial to plan participants.

In the end, the plan participants ended up paying fees that were much higher than those from comparable retirement plans with similar asset amounts. The plaintiffs allege the Allina breached its duties of loyalty and prudence through a systematic failure to monitor performance and costs for the retirement plans’ investment options and by including high-cost options that were not only not beneficial, but actually detrimental to participants. The company’s failure to negotiate lower fees and expenses associated with the plans and failing to swap out high-cost/low performance options for better performing, more fiduciary prudent options was also noted in the plaintiffs’ allegations.

The plaintiffs in the case seek class action status that would include tens of thousands of people.

If you have similar allegations or need to ask questions about employment law violations in the workplace, please get in touch with one of the experienced California employment law attorneys at Blumenthal, Nordrehaug & Bhowmik.