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.

Excessive Investment Fees Result in Agreed Upon $14M Settlement from Fujitsu

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In order to end a proposed class action close to $150 million, Fujitsu agreed to pay a $14 million settlement. The proposed class action alleged that the company paid more in investment fees for retirement funds than necessary affecting close to 23,000 current and former employees.

Workers hope the judge approves the deal that would be worth about $600 for each class member. They argue that it is a favorable comparison to other settlements in ERISA (Employee Retirement Income Security Act) suits regarding excessive fees. The settlement amount proposed is about 1% of the plan’s total value according to the class.

The workers’ unopposed motion for preliminary settlement approval urged the judge to approve the settlement stating that the amount was impressive in aggregate, when considered on a per-capita basis, and when viewed as a percentage of the plan’s assets. It compares favorably to other recent 401(k) settlements by all measures.

Workers originally sued Fujitsu in June 2016 alleging that the company mismanaged the employee retirement plan. Claims insisted that Fujitsu bought more expensive classes of funds than was necessary, deprived workers of returns, failed to monitor record keeping/administrative fees paid, and kept investments in plan offerings that were far too expensive.

Fujitsu first attempted to argue for dismissal claiming that the workers’ claims were based on “hindsight” and that the fees were appropriate and in line with those approved by the court in other suits. Their motion to dismiss was denied in April, but the judge did “leave open the possibility” that the arguments could win at summary judgment or trial. He also noted that some of the workers’ claims could be time-barred.

In September, the parties involved agreed on a draft deal after mediation efforts to reach a resolution. The draft deal was recently finalized and the workers now seek approval.

Approval of the settlement would mean that participants in the class (employees participating in the Fujitsu 401(k) plan between June 2010 and September 2017 would receive payment. The class includes 22,705 members. Close to a quarter of the settlement amount will likely go towards attorney fees and costs.

If you have questions about ERISA or your rights in regard to your employer provided 401(k) accounts, please get in touch with an experienced California employment law attorney at Blumenthal Nordrehaug Bhowmik De Blouw LLP.

3 ERISA Suits Against First Bankers Results in $16M Settlement Deal

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In November 2017 First Bankers Trust Services Inc. agreed to a $16 million settlement in order to resolve 3 DOL ERISA suits alleging they breached fiduciary duties by allowing 3 employee stock ownership plans to overpay for their own companies’ stock. First Bankers also committed to reforming its practices and policies regarding the handling of employee stock plan transactions. 

The settlement will put an end to 3 DOL suits brought in 2012 after investigations into plans sponsored by SJP Group Inc., Maran Inc., and Rembar Co. Inc. Each of the plans gets payouts from First Bankers (SJP’s plan will receive $8 million, Maran’s plan will receive $6.6 million and Rembar’s plan will receive $1.1 million). The settlements offer reimbursement to plans and participants as well as committing First Bankers Trust Services to clear procedures and transparency in order to ensure appropriate compliance in future dealings. 

According to DOL, First Bankers was both trustee and fiduciary for all three of the plans cited and as such, they had an obligation under ERISA to make sure that the plans did not pay more than fair market value for company stock. Also according to DOL, First Bankers signed off on purchases without doing the due diligence required of their position. Their failure to do so allegedly resulted in the plans overpaying millions for the stock. 

SJP, a New Jersey based paving company: The case regarding SJP went to bench trial in New Jersey federal court in 2016. U.S. District Judge Michael A. Shipp issued a ruling in March finding that First Bankers breached is duties and engaged in ERISA-prohibited transactions resulting in SJP’s plan to overpay close to $9.6 million for SJP’s own stock. 

Maran, a New York based clothier: At a bench trial in April, U.S. District Judge George B. Daniels of New York’s Southern District agreed to hold off judgment due to settlement discussions between the parties. 

Rembar, a New York based maker of precision parts from refractory metals: The Rembar case was still awaiting trial at the time of the settlement discussions. 

These cases make it clear just how vital it is that those retained to advise a plan about stock purchases fulfill their fiduciary duties; making sure that the price a plan pays for the plan sponsor’s stock reflects true market value. 

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

ERISA Deal’s $42M to St. Joseph’s Nurses Gets Initial OK

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In recent news, the St. Joseph’s Nurses received preliminary court approval for a $42 million settlement of claims. The New Jersey St. Joseph’s Healthcare System nurses won the settlement regarding claims that the system underfunded the pension plan. The deal was reached after the court stated that church-affiliated entities are exempt from ERISA (Employee Retirement Income Security Act).

The initial approval was offered by U.S. District Judge John Michael Vasquez. The nurses indicate that the settlement would reduce the plan’s alleged underfunding by approximately 50%. The final fairness hearing was scheduled for March of 2018.

The deal was proposed in August by the St. Joseph’s nurses following a Supreme Court ruling that extended ERISA’s exemption for religious entities, which effectively negated one of the key arguments for the plaintiffs in the case. The nurses advised the court that St. Joseph’s already put an amount slightly more than the settlement amount into the plan. Under the settlement agreement, the hospital would also be required to ensure all benefits are paid out for the next seven years (at a minimum). 

It is meant to provide certain and immediate relief to the class through removing the uncertainty associated with continued litigation and improving the plan participants’ retirement security.

The suit is the result of a consolidation of two proposed class actions, both filed in May of 2016. One filed on behalf of Donna Garbaccio, a nurse out of the Paterson, New Jersey St. Joseph’s Hospital and Medical Center from 1978 through 1998. This suit claimed that the pension plan was underfunded by more than $180 million. The second was filed on behalf of Mary Lynne Barker, nurse for St. Joseph’s from 1968 through 2003, Anne Marie Dalio, nurse for St. Joseph’s from 1984-1994, and Dorothy Flar, nurse for St. Joseph’s from 1990 through 1995. This suit claimed the plan was underfunded by a more substantial $210 million.

Plaintiffs alleged that St. Joseph’s violated ERISA law by denying protections to participants and beneficiaries of the pension plan through incorrect claims that the plan was exempt under ERISA due to qualifying as a “church plan.” This was one of the plaintiffs’ main arguments – that a church plan must be established by a church to qualify for the ERISA exemption. 

In the Supreme Court’s June 5th opinion, ERISA’s religious exemption provision was extended to plans that are maintained by church affiliates – even when an actual church did not actually establish the plan. This decision overturned federal circuit court rulings that the exemption would only apply in cases where the church itself actually established the benefit plan.

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

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.

Class Certified in Deutsche Bank ERISA Suit

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Class certification was granted by a New York federal judge in the ERISA suit against Deutsche Bank. Class members are participants of a Deutsche Bank Americas Holding Corp. 401(k) plan and are accusing the bank of mismanaging the plan in violation of ERISA or the Employee Retirement Income Security Act.

Class certification was granted by U.S. District Judge Lorna G. Schofield enabling the case to go forward as a class action representing participants and beneficiaries of the Deutsche Bank Matched Savings Plan after December 21, 2009, the individual accounts of which suffered losses. Lead plaintiffs and class members share an interest in remedying mismanagement and claims originate from the same events, i.e. participation in the plan. It was also noted that there are questions of law or fact that are common to the class. Together the judge ruled this warranted class certification.

Questions Seeking Class-wide Resolution:

·       Whether or not each defendant was a fiduciary

·       Whether or not the company’s process for assembling the plan menu and investment options was tainted by conflict of interest/imprudence

·       Whether or not the company’s process for monitoring the plan menu and investment options was tainted by conflict of interest/imprudence

·       Whether the company behaved imprudently when failing to control recordkeeping expenses

The resolution of these questions should generate common answers that would drive the investigation of defendant liability.

The company argued that the plaintiffs did not have an adequate understanding of the case – depending on their lawyers heavily for specifics, but the court found this argument unpersuasive considering that the claims involve technical financial decisions that would be difficult for plaintiffs to answer questions about on their own.

Plan participants were offered 22 core investment options. 10 of the options were mutual funds affiliated with DBAHC – proprietary funds that charged investment management and administrative fees that are actually paid out to DBAHC subsidiaries. (*Information regarding core investment options current as of December 2009).

Plaintiffs also alleged that the bank favored high-cost proprietary funds that were to their own benefit – at the expense of plan participants. According to Judge Schofield, the plan has about 22,000 participants and 10,000 former participants that were affected by the design and management of the plans.

Plaintiffs allege the bank served as fiduciaries of the plan and that they breached their duties of care and loyalty when selecting and monitoring plan investments biased for the bank and against plan participants. They also allege that DBAHC engaged in self-dealing transactions, which are prohibited.

If you have questions regarding class certification or ERISA, please get in touch with an experienced California employment law attorney at Blumenthal, Nordrehaug & Bhowmik.

ERISA Suit Against Ascension Health Settled at $29.5M

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In early September 2017, Ascension Health agreed to a $29.5 million dollar settlement deal to settle claims in putative class lawsuits based on allegations that the faith-based health care company denied ERISA (Employee Retirement Income Security Act) protections to plan participants and beneficiaries.

The judge granted preliminary approval of the proposed class action settlement in consolidated putative class action suits when participants and beneficiaries of the Wheaton Franciscan Retirement Plan requested it in September. Ascension Health, a Missouri based organization, acquired the Wheaton Franciscan Services’ health care subsidiaries in the southeastern region of the Wisconsin state in spring of 2016.

According to plaintiff statements in court documents, the company guaranteed $29.5 million payment of benefits to members of the proposed settlement class in the event that trust assets attributable to the plan were insufficient to cover benefits.

In the original approval bid, plaintiffs made it clear that the obligation held by Ascension Health under the plan benefit guarantee would continue so long as the plan was sponsored by any of the releases. It was further noted that if plan assets and liabilities covering the settlement class members was transferred to a successor due to any type of corporate transaction, Ascension Health should ensure the successor honored the commitment/guarantee.

Plaintiffs filed suit initially in April 2016. This was followed by another putative class complaint in June 2016. The two cases were consolidated in January 2017. Allegations stated that Wheaton and Ascension denied ERISA protections to plan participants while claiming that the plan qualified as an ERISA-exempt “church plan.”

Plaintiffs alleged that the Defendants underfunded the plan by over $134.5 million. Allegations also stated that plan participants were improperly required to finish 5 years of service prior to becoming fully vested in their accrued benefits. In addition, plaintiffs state that the organization violated ERISA when they decreased accrued benefits by adding several amendments and filing to provide class members with required reports and/or statements.

The consolidated action was stayed by the court, pending the outcome of Advocate Health Care Network v. Stapleton in the U.S. Supreme Court. In June 2017, the opinion was issued stating that pension plans do not have to be established by churches in order to qualify as ERISA-exempt church plans.

Once this opinion was issued, the parties reached an agreement to settle the case.

If you have questions about ERISA or your rights in regards to the retirement plans provided by your employer, please get in touch with one of the experienced employment law attorneys at Blumenthal, Nordrehaug & Bhowmik.