Washington University Settles for $7.5 Million—and Changes

After “nearly five years of intensive litigation,” a little over a month ago, a university 403(b) excessive fee suit settled—and now we know the terms.

The suit was originally filed in June 2017 by Latasha Davis and Jennifer Elliott on behalf of Washington University’s plan of more than 24,000 participants and beneficiaries. The suit claimed that the fiduciary defendants violated ERISA by: 

• allowing plan participants to pay excessive fees for recordkeeping services (Count I); and 
• offering certain investment options they say were too expensive for one reason or another (Count II).

In October 2018, those claims were dismissed by Judge Ronnie L. White of the U.S. District Court for the Eastern District of Missouri, basically holding that the plaintiffs failed to state a claim. However, in 2020, noting that “at this point, the complaint only needed to give the district court enough to infer from what is alleged that the process was flawed,” the Eighth Circuit Court of Appeals breathed new life into the litigations, which in turn led to a pushback from the fiduciary defendants, claiming that these plaintiffs were unable to adequately represent the interests of the plan’s 27,000 current and former workers, and a motion for summary judgment (dismissal of the case based on a failure to state an injury/claim). And that’s where things stood—with a June court date looming—when, on March 1, news of a settlement was announced.

The Settlement

The cash part of the settlement (Davis v. Wash. Univ. in St. Louis, E.D. Mo., No. 4:17-cv-01641, settlement motion 4/15/22) is $7,500,000, described by the parties as “fair, reasonable, adequate, and in the best interests of Settlement Class Members, providing for a substantial and immediate benefit. The Settlement was reached after arm’s length negotiations with a widely-recognized and distinguished mediator, and is the product of hard-fought litigation, comprising: motions to dismiss briefing and argument, including review by the Eighth Circuit; full class certification briefing; Defendants’ and third parties’ production and Plaintiffs’ careful review of over 113,000 pages of documents; 11 fact witness depositions and three expert depositions; and motion practice that addressed a discovery dispute as well as summary judgment and Daubert motions.” Indeed, it explains that “the developed record gave the parties a thorough understanding of the strengths and weaknesses of their positions in this case and informed its settlement.”

There was, however, more to the settlement terms. Specifically, it calls for the fiduciary defendants to:

• provide annual fiduciary training for all members of the Washington University Retirement Plan Advisory Committee (RPAC), as well as any new RPAC member(s) at or around the start of their tenure on the RPAC. As part of this annual training, each voting member of the RPAC is to acknowledge that he, she or they serve in a fiduciary capacity and understand his, her or their obligations as a fiduciary;
• evaluate the Plan’s Investment Policy Statement (IPS) at least annually, with input from the Plan’s investment consultant, and implement any updates to the IPS as Defendants may deem appropriate;
• issue a Request for Proposal for Plan recordkeeping services before the conclusion of the Settlement Period (three years from the settlement date);
• see that the Plan’s current investment consultant, CAPTRUST, will advise Defendants with respect to the Plan’s investment options and fees, which advice will include consideration of the performance of Plan investment options, the costs/fees of those investment options, the reasonableness of Plan recordkeeping fees (generally, and in light of the particular services provided to the Plan), the method or means of paying Plan recordkeeping fees, and the overall Plan investment lineup (including the number of options, diversification among those options, etc.); and
• continue maintaining the privacy of Settlement Class Members’ confidential personal information, and to instruct the Plan’s recordkeeper(s) not to use (or allow to be used) Settlement Class Members’ personal information obtained as a result of providing recordkeeping services to the Plan for the purpose of selling non-Plan services or products.

Other Terms

The plaintiffs’ attorneys[1]’ fees and expenses, subject to the approval of the court, are to be taken from the Gross Settlement Amount, and shall be paid out of the Qualified Settlement Fund in this Agreement—Class Counsel are not expected to request an award of attorneys’ fees higher than one-third of the Gross Settlement Amount, plus expenses.

Class Counsel is also expected to apply to the Court for Plaintiffs’ Compensation awards to Plaintiffs Davis, Elliott, and King-Sims in an amount not to exceed $5,000.

Now we’ll see if the court approves…

Footnote

[1] The participant-plaintiffs are represented by Chimicles Schwartz Kriner & Donaldson-Smith LLP; Berger Montague PC; Schneider Wallace Cottrell Konecky LLP; Edelson Lechtzin LLP; Carey Danis & Lowe; and Edgar Law Firm LLC.