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.
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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.
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"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.
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Robert Steyer is a reporter with InvestmentNews' sister publication Pensions & Investments.
