Franklin Templeton’s motion to stay was denied by a California federal judge, U.S. District Judge Claudia Wilken. The Defendant filed the motion requesting a stay pending the outcome of an appeal to the Ninth Circuit, but the judge denied the motion stating that she did not rely on the case before the appellate court when she granted class certification.
Plaintiffs in the case allege that Franklin Resources Inc. stacked its employees’ 401(k) plan with company products rather than offering better-performing funds. The judge’s decision to certify the class of workers making the allegations was based on the Ninth Circuit’s 1999 ruling in Bowles v. Reade – not on another federal judge’s opinion in an ERISA suit against USC as the Defendant, Franklin Templeton, claimed.
The Defendant argued that the Ninth Circuit’s ruling on the appeal of the decision in Munro v. University of California would affect class certification in the case currently being considered before Judge Wilken. Wilken was not convinced. Wilken responded that it was possible the cited ruling could affect the case, but that Franklin Resources Inc. did not show that is was certain or even likely that it would. It was also noted that if it did affect the case it would simply affect class action status, not whether the case could be brought at all. The Defendant would have to face the claims of the lead Plaintiff, Marlon H. Cryer, (and other individuals) either way.
The judge also noted that the company would not face any significant penalty of harm if a stay were not issued as the Munro ruling would have a minimal effect on the case, but that workers could experience great harm if forced to wait to pursue their claims. A stay of this nature could last for over 2 years. Additionally, the judge pointed out that this type of ongoing injury to the plaintiffs would be difficult to quantify at the end of the case.
The original lawsuit against Franklin Templeton was filed in July 2016, including allegations that the firm breached its fiduciary duties under ERISA. Allegations were made that the Defendant had its 401(k) plan invest hundreds of millions of dollars into mutual funds with high fees managed by itself and its subsidiaries. Workers were granted class certification in July 2017. Judge Wilken consolidated the case with a similar proposed class action filed against the company by Nelly Fernandez in April. Fernandez sought class certification in May claiming that the company also engaged in prohibited transactions. Additional individual defendants were named.
If you have questions about ERISA or what constitutes a breach of fiduciary duty, please get in touch with one of the experienced California employment law attorneys at Blumenthal Nordrehaug Bhowmik De Blouw LLP.