(401k Specialist) -- It could be argued it’s the case that started it all.
After 12 years of lawyers, litigation and legal filings, a settlement has been reached in Tussey v. ABB Inc., in which a breach of fiduciary duty was alleged.
Schlichter Bogard & Denton announced Thursday that it has secured a $55 million agreement with ABB on behalf of the company’s employees and retirees.
The law firm, home to high-profile tort attorney Jerry Schlichter, represented a class of participants in the ABB 401k plans, in a suit which ABB supposedly subsidized its corporate expenses with fees paid out of its employees’ retirement assets.
Tussey v. ABB Inc. was the first 401k case to go to a full trial and the longest such matter, of over dozens filed since by various parties, to come to a conclusion.
Schlichter Bogard & Denton originally filed the complaint on December 29, 2006, in the U.S. District Court for the Western District of Missouri. In 2012 the plaintiffs obtained a $36.9 million judgment, which was then appealed in two separate actions to the Eighth Circuit Court of Appeals, and twice remanded to the District Court for further proceedings.
The plaintiffs previously obtained a court order extensively reforming the 401k plan to reduce fees. In this settlement, the plaintiffs’ losses will be addressed with damages.
“We’re in the thirteenth year fighting ABB’s scorched earth approach, through multiple trials and appeals, and over $50 million the defendants spent to avoid compensating ABB employees and retirees,” Schlichter said in a statement. “We’re now pleased to bring this case to an end, which is substantially more than the original judgment. In addition, they have already benefitted from reform of the company 401k plan, which the court ordered to eliminate excessive fees and self-dealing by ABB to also help ABB employees for the long-term future.”
First of its kind
The firm claims the narrative of this case parallels the history of 401k excessive fee cases, which it said did not exist before this case was filed.
In 2006, when Schlichter Bogard & Denton brought this case, no law firm in the United States had ever filed a 401k excessive fee case; nor had the Department of Labor, which oversees 401k plans, in the thirty-year history of 401k plans.
“Today, Tussey v. ABB Inc., stands as the seminal legal action which defined a generation of litigation to protect the core interests of 401k plan savers and retirees. “
Plaintiffs alleged and the court ruled, that the defendant allowed excessive recordkeeping fees and selected in the plan high cost and poor performing investments compared to available alternatives.
The plaintiffs also alleged and the court held that ABB engaged in self-dealing by using Fidelity for recordkeeping both the 401k and corporate plans, which included a corporate pension plan, the health and welfare plan, and payroll processing, with Fidelity providing ABB’s corporate plans at a loss, while Fidelity made over a 50% profit from the employees’ 401k plan.
Thus, the District Court found that ABB was improperly using the retirement savings of its employees and retirees to subsidize its own costs.
ABB was previously ordered by the court to use a competitive bidding process, including a request for proposals, to select a new recordkeeper, and that recordkeeper shall not provide any corporate services to ABB.
ABB was also ordered to choose the share class of investments that has the lowest expense ratio, rather than more expensive retail share classes.
