There has been a flood of settlements this year in 401(k) plans lawsuits, netting plaintiffs and the law firms that built the cases millions of dollars.
Several of those cases involved financial services firms, including MetLife, which recently indicated in court records that it has reached a deal to settle a two-year lawsuit.
“There have been more settlements announced this year — 30 to our count — than most years,” said Daniel Aronowitz, managing principal of 401(k) insurer Euclid Fiduciary. “We see two things happening: More cases have worked their way through the litigation process, especially from the years like 2020 with the most filings; and more cases are settling quickly when certain law firms are involved.”
Over the past few years, there has been a rapid rise in the number of law firms and cases pursuing a quick-hit strategy — lobbing claims against 401(k) sponsors in hopes of getting a high number of small but fast settlements.
But other law firms, such as Schlichter Bogard or Sanford Heisler, “are playing the long game and seeking high settlements,” as they are “focused on performance and duty of loyalty claims, which have a higher settlement value,” Aronowitz said in an email.
This year has seen big settlement figures. For example, General Electric is settling the case against it for a proposed $61 million, and a case against Verizon settled for $30 million.
Recently, at least one law firm has reportedly been contacting plan sponsors before filing claims and alluding to possible settlements.
MetLife declined to comment on the settlement it recently reached.
The insurer was sued in 2021 by plaintiffs alleging the company breached its fiduciary duties to participants by stocking the now $7.9 billion plan with its own line of index funds. Those funds had higher fees than options available from competitors, which resulting in MetLife employees paying more than they needed to, the plaintiffs claimed.
That case, which was brought by law firm Nichols Kaster, alleged that the fees charged by the MetLife index funds were as much as six times higher than third-party options. The settlement-in-principle notice didn't include the proposed dollar amounts that plan participants and the law firm could receive.
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