Dismissal of small 401(k) plan excessive-fee lawsuit 'highly atypical'

The case, which involved a $9 million plan, was voluntarily dismissed by plaintiffs in an unusual turn of events

Jul 1, 2016 @ 10:58 am

By Greg Iacurci

An excessive-fee lawsuit seen as a potential bellwether for a shift of such suits down to the small 401(k) plan market has, in a rare move, been voluntarily dismissed by plaintiffs only a few weeks after it was filed.

Plaintiffs in the suit Damberg et al v. LaMettry's Collision Inc. et al had alleged fiduciaries of a $9 million 401(k) plan breached their duties under the Employee Retirement Income Security Act of 1974 by allowing excessive fees to be charged for plan investments, record keeping and administration.

At the time the suit was filed in May, legal experts said the suit could well prove to be a “harbinger” for excessive-fee suits moving down market from multibillion-dollar plans.

However, plaintiffs decided to “voluntarily dismiss this action without prejudice,” according to a document filed June 17 in the U.S. District Court for the District of Minnesota. There was no explanation provided for the dismissal.

The defense was scheduled to file a response to the original complaint by Friday, July 1, but wasn't given the opportunity to do so because of the abrupt dismissal of the case.

“This is all very strange,” said William Sjoholm, an attorney at DeWitt Ross & Stevens who represented the defendants. “We thought the lawsuit in the beginning was strange, and having it dismissed seemed appropriate. But that's really stranger considering they went through the time and effort to start the lawsuit in the first place.”

J. Ashwin Madia, principal at Madia Law and attorney for the plaintiffs in the LaMettry's lawsuit, didn't return a request for comment.

Marcia Wagner, principal at The Wagner Law Group, who's unaffiliated with the case, said it's “highly atypical” a suit would be voluntarily withdrawn.

“When something's withdrawn so quickly, I wonder if it's a personal element,” she said. Whereas such lawsuits concerning large plans are more impersonal, because corporations involved have hundreds if not thousands of employees, legal affairs feel much less so among smaller employers, she said.

The two plaintiffs representing the class both had their employment terminated involuntarily, Mr. Sjoholm said, adding that it's impossible to know if this was a motivation for the lawsuit.

Although the plaintiffs could technically bring suit again (because the case was dismissed without prejudice) it would be “even more atypical” to do so, according to Ms. Wagner.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

InvestmentNews celebrates diversity & inclusion in the financial advice business

Highlights of the Excellence in D&I Awards, showcasing the achievements of 26 individuals and firms that are moving the needle when it comes to diversity and inclusion.

Latest news & opinion

Don't be fooled by the numbers — the industry is in a dangerously vulnerable state

Last year's stock market gains helped advisers turn in solid growth in assets and revenue, but that growth could disappear in the next market downturn.

Divided we stand: How financial advisers view President Trump

InvestmentNews poll finds 49.2% approve of his performance, while 46.7% disapprove. How has that changed over the course of his presidency?

10 states with the most college student debt

Residents of these states have the most student debt when you consider their job opportunities.

Ex-Wells Fargo brokers sue for damages, claiming they lost business in wake of scandals

In a Finra arbitration complaint, two brokers allege that Wells Fargo's problems damaged their business.

Invesco to buy OppenheimerFunds

Deal brings Invesco another $246 billion in assets, as well as high-fee actively managed funds.

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