Northrop Grumman settles fiduciary breach lawsuit with DC plan participants

The $16.75 million settlement comes after 10 years of litigation.
JUN 12, 2017

Northrop Grumman and participants in two company 401(k) plans have agreed to a $16.75 million settlement over allegations that plan executives violated their fiduciary duties under ERISA. Participants sued two Northrop Grumman plans in September 2006, while another lawsuit was filed by different participants in January 2007. The complaints were consolidated in the class-action case In Re Northrop Grumman Corporation ERISA Litigation. The parties reached a tentative settlement on March 19, 2017, and the formal settlement, announced Monday, must be approved by U.S District Court Judge Andre Birotte Jr. in Los Angeles. (More: Merrill Lynch to settle 401(k) lawsuit for $25 million) The settlement affects the Northrop Grumman Savings Plan, whose class members will receive 85% of the payment, and the Northrop Grumman Finance Security and Savings Program, whose class members will receive the remaining 15%. The former plan had assets of $19.34 billion and the latter had assets of $543.1 million as of Dec. 31, 2015, according to their most recent Form 5500s. Both plans are based in Falls Church, Va. Participants argued that retirement plan executives violated their ERISA duties "by improperly distributing plan assets in the form of administrative expenses to Northrop Grumman for services performed by Northrop Grumman employees," the settlement agreement stated. "Defendants have denied and continue to deny the claims and contentions" of the participants, the agreement said. The settlement was reached because lawyers for both sides "believe that the settlement is best for all class members," the document added. The settlement covers the period between Sept. 28, 2000, and May 11, 2009, according to a news release from Jerome Schlichter, the lead attorney for the participants, and managing partner at Schlichter, Bogard & Denton. "After 10 years of litigation, we are pleased that the employees and retirees of Northrop Grumman will now benefit from this settlement," Mr. Schlichter said in the release. (More: How 401(k) advisers can bullet-proof themselves against litigation risk under DOL fiduciary rule) "We believe the administration of our plans is fully consistent with applicable legal requirements," Tim Paynter, vice president of strategic communications for Northrup Grumman, said in an email. "After years of litigation, we are pleased to have agreed to a settlement that will resolve this matter and benefit our plan participants." Even if the District Court judge approves the settlement, ERISA litigation involving Northrop Grumman isn't over. In September 2016, participants, for whom Mr. Schlichter is lead counsel, sued, making similar allegations for actions occurring from 2010 onward. The case, Marshall vs. Northrop, remains pending in the same court. (More: Use of multiple record keepers could hurt defendants in 403(b) lawsuits) Robert Steyer is a reporter with InvestmentNews' sister publication Pensions & Investments.

Latest News

What advisors need to know about SECURE 2.0’s impact on retirement income planning
What advisors need to know about SECURE 2.0’s impact on retirement income planning

Catch-up contributions, required minimum distributions, and 529 plans are just some of the areas the Biden-ratified legislation touches.

EToro to tokenize US stocks on Ethereum network for 24/7 trading
EToro to tokenize US stocks on Ethereum network for 24/7 trading

Following a similar move by Robinhood, the online investing platform said it will also offer 24/5 trading initially with a menu of 100 US-listed stocks and ETFs.

GTCR to acquire FMG Suite, expanding its wealth tech portfolio
GTCR to acquire FMG Suite, expanding its wealth tech portfolio

The private equity giant will support the advisor tech marketing firm in boosting its AI capabilities and scaling its enterprise relationships.

$29B Lido Advisors expands in Utah with Olympus Wealth Management
$29B Lido Advisors expands in Utah with Olympus Wealth Management

The privately backed RIA's newest partner firm brings $850 million in assets while giving it a new foothold in the Salt Lake City region.

Annuities hit new $223B high in H1 2025, LIMRA says
Annuities hit new $223B high in H1 2025, LIMRA says

The latest preliminary data show $117 billion in second-quarter sales, but hints of a slowdown are emerging.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.