In the long-running case of Tussey v. ABB, the 8th U.S. Circuit Court of Appeals has found that a district court mistook the appellate court’s direction for a definitive ruling on how to measure plan losses, and as a result entered judgment in favor of the ABB fiduciaries despite finding they did breach their duties.
In the back and forth on the case, on previous remand, the U.S. District Court for the Western District of Missouri found fiduciaries to a 401(k) plan abused their discretion when making an investment lineup change, but since plaintiffs in the case failed to prove damages using the appropriate calculation, judgement was entered in favor of the fiduciaries.
The district court previously calculated the plans’ losses by comparing the returns on the Fidelity Freedom Funds to what the participants would have earned if they had invested in the Wellington Fund instead. The 8th Circuit suggested “it seems the participants’ mapping damages, if any, would be more accurately measured by comparing the difference between the performance of the Freedom Funds and the minimum return of the subset of managed allocation funds the ABB fiduciaries could have chosen without breaching their fiduciary obligations.”
On remand, the district court again held the ABB fiduciaries breached their fiduciary duties. Yet the district court concluded the participants had failed to prove any losses under the theory the appellate court “tacitly approved” in the first appeal—comparing the Freedom Funds’ returns to the worst-performing of the funds the ABB fiduciaries could have properly chosen—so the ABB fiduciaries prevailed on that claim. In light of that result, the district court reduced the participants’ attorney fee award for work through trial by almost $2.2 million, to $10,768,474. The district court also awarded the participants $900,000 for work on the appeal—just over two-thirds of what they requested—for a total of $11,668,474.
The participants appealed the district court’s ruling on measuring losses and liability for the breach. In a consolidated cross-appeal, the ABB fiduciaries argue both parts of the fee award are still too high. NEXT: Flaws in awards calculation