Lockheed Martin 401(k) case to proceed as class action

The case will go to trial following a decision handed down by the Supreme Court

Dec 17, 2013 @ 1:08 pm

By Darla Mercado

A years-long case against Lockheed Martin Corp., alleging a breach of fiduciary duty with respect to its 401(k) plan, is being permitted to proceed as a class action.

On Monday, the Supreme Court let stand a decision in the 7th U.S. Circuit Court of Appeals that permits employees of the defense contractor to proceed with a class action against the firm. The case will now go to trial.

The 2006 suit, Abbott v. Lockheed Martin Corp., centers on the claim that Lockheed Martin had breached its fiduciary duty to its participants and their beneficiaries through a number of actions, including the assessment of “unreasonably high fees” for plan services and investment management.

Anthony Abbott, the lead plaintiff and a participant in one of Lockheed’s savings plans, is represented by Jerome Schlichter of Schlichter Bogard & Denton. The suit has been filed on the behalf of more than 100,000 employees and retirees at Lockheed, which has a 401(k) plan with more than $20 billion in assets.

Mutual fund investment managers working with the company’s 401(k) allegedly assessed hard dollar fees and revenue-sharing payments, according to the suit. At times, the fund managers would forgo the revenue-sharing payments, but Lockheed allegedly failed to capture that money and use it in the interest of the plans and its participants, the plaintiffs claim.

“As a result, when the forgone revenue sharing — consisting of millions of dollars — is taken into account, the participants and beneficiaries of the plans paid unreasonably high fees for the services and/or investment management they received,” according to the suit.

Other allegations include the “imprudent selection” of Lockheed’s stable-value fund, “a very low-yielding fund which greatly underperformed an index of stable-value funds [and] caused employees and retirees to fail to keep pace with inflation,” according to the suit.

Donna Savarese, a Lockheed Martin spokeswoman, would not make an executive available for comment, but wrote in an e-mailed statement: “Lockheed Martin is disappointed with the Supreme Court’s decision, and we remain committed to defending against this lawsuit at all stages of the litigation.”

The claim related to the stable-value fund was the linchpin in the case’s progress as a class action, Mr. Schlichter said. “The people in the plan described it as a money market fund,” he said. “The return was far less than the return a benchmarked stable-value fund would yield.”

The 7th Circuit Court had reversed a lower court ruling that the claim related to the stable-value fund could not proceed as a class, Mr. Schlichter said. Lockheed petitioned the Supreme Court in October, seeking an order from the high court to direct the lower court to review the case. Instead, the Supreme Court denied the petition.

“The takeaway is that this case will proceed as a class on the behalf of everyone in the stable- value fund, in addition to the other claims,” Mr. Schlichter added.

The lawsuit against Lockheed Martin is one of a dozen 401(k) excessive fee and fiduciary breach-related suits Mr. Schlichter has brought against employers. Thus far, he has garnered six settlements against the likes of International Paper Co. and Cigna Corp., while the other six — including two against defense contractors Northrop Grumman Corp. and the Boeing Co. — are still pending.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

Advisers should look beyond 529 plans for college planning

Editor Fred Gabriel talks to reporter Ryan Neal about how college-savings strategies are more important than ever as tuition costs soar.

Latest news & opinion

New ways to pay for college

Experts respond to real-life scenarios of people struggling to afford higher education.

How technology is reshaping the advice business

Artificial intelligence, Amazon and robo-advisers are some of the topics on the minds of tech experts.

Best- and worst-performing sector funds and ETFs this year

A rising tide may lift all ships, but a bull market doesn't lift all stock sectors. Here are the best- and worst-performing sectors this year, with the top and bottom fund in each sector.

Betterment slapped with $400,000 fine from Finra

Robo-adviser cited for violating customer protection rule and not maintaining its books and records correctly.

Supreme Court ruling on SEC judges unlikely to upend advice industry

But it could give rise to new hearings for some advisers who are already in litigation with the agency such as Dawn Bennett.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print