With a rare jury trial looming, a university has settled claims in an excessive fee suit with plaintiffs represented by Schlichter Bogard & Denton.
This time the settlement (Cunningham v. Cornell Univ., S.D.N.Y., No. 1:16-cv-06525, electronic minute entry 9/1/20) involves the fiduciaries of Cornell University’s 403(b) plan, who—with a rare jury trial slated for September 29—has agreed to settle an excessive-fee suit. The suit—one of the first[1] of the genre filed four years ago—was filed on behalf of some 28,000 current and former plan participants in Cornell’s 403(b) plan, a plan that, as of December 2014 had $1.9 billion in assets, according to the suit.
The parties announced they’d settled the case’s one remaining claim—the issue of the plan’s utilization of retail class mutual funds (TIAA-CREF Lifecycle target-date funds) when less expensive, institutional class shares were available.
Previous Decision(s)
The Cornell University defendants had successfully fended off most of the claims a year ago in the U.S. District Court for the Southern District of New York, when Judge P. Kevin Castel ruled that while the plaintiffs had plausibly argued that it was imprudent to pay annual record-keeping fees of more than $115 per participant—but presented no evidence[2] that this caused the plan to suffer losses.
Judge Castel also found in favor of the Cornell defendants on charges that specific plan investments underperformed or were too expensive, noting that Cornell’s retirement plan committee reviewed these investments and weighed the pros and cons of retaining them in the plan.
As recently as May, Judge Castel encouraged the parties to either settle the case or consider waiving the jury trial, citing the impact COVID-19 has had on civil jury trials.
But that, as they say, was then—the parties now say they plan to submit settlement paperwork by Sept. 21, and while the specific terms have not yet been finalized, but both sides have “requested that the trial scheduled to begin Sept. 29, 2020 be vacated” in anticipation of doing so.
Footnotes
[1] Of the roughly 20 universities that have been sued over the fees and investment options in their retirement plans since 2016, there have been eight announced settlements; the largest to date with MIT, for $18.1 million, and prior to that Vanderbilt University, which in April 2019 announced a $14,500,000 cash settlement, as well as a long list of process/procedural changes that were, as with the MIT settlement (and now the Emory University plan, which settled for $16.75 million https://www.napa-net.org/news-info/daily-news/emory-university-settles-1... , and Johns Hopkins, which settled for $14,000,000, also alongside a number of plan design/procedural changes. In March, Brown University settled for $3.5 million, as well as “other, structural relief.” In May 2018, the University of Chicago entered into a class action settlement for a $6.5 million cash payment and changes to the university’s $3 billion plan, while earlier that year Duke University announced a $10.65 million settlement. Princeton University has recently announced, those the terms are not yet known. On the other hand, St. Louis-based Washington University, New York University and Northwestern University have thus far prevailed in making their cases in court (though the Washington University defendants have just lost an appeal). The University of Pennsylvania, which in 2017 won at the district court level, in 2019 had that decision partially overturned by an appellate court, though the plan fiduciaries’ motion for an en banc review of that decision was rebuffed. Oh, and they continue to be filed, the most recent against the University of Miami in early May.
[2] It didn’t help that the judge barred the plaintiffs from introducing expert witness opinions that a reasonable price for annual record-keeping services was closer to $40 per participant, as he determined that that opinion wasn’t backed by a reliable methodology.
- Log in to post comments