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

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at The Wagner Law Group, who's unaffiliated with the case, said it's “highly atypical” a suit would be voluntarily withdrawn. “When something's withdrawn so quickly, I wonder if it's a personal element,” she said.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.