Compliance

Litigators Call for Supreme Court Review of Tussey Case

By John Manganaro editors@plansponsor.com | August 08, 2014
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August 8, 2014 (PLANSPONSOR.com) - A well-known 401(k) fee litigation firm has asked the U.S. Supreme Court to review key pieces of an appellate court’s decision in Tussey v. ABB, Inc.

In technical terms, the law firm of Schlichter, Bogard & Denton has petitioned the U.S. Supreme Court for a “writ of certiorari” in Tussey v. ABB, Inc. As the firm’s founder and managing partner, Jerry Schlichter, tells PLANSPONSOR, a writ of certiorari is an appeals request submitted to a superior court, asking the superior court to use its discretion to review all or part of a decision handed down by a lower court.

In this case, the firm is asking the U.S. Supreme court to review a recent decision from the 8th U.S. Circuit Court of Appeals, which vacated a portion of a previous district court judgment that found for the plaintiffs against defendants ABB and Fidelity (see “Fidelity Wins Some in Appeal of Tussey Case”). The case has a complicated procedural background, but the primary matters at hand involve accusations that ABB fiduciaries breached their duties to the company’s 401(k) plan by failing to diligently investigate the plan’s recordkeeper (i.e., Fidelity) or the plan’s investment fees and recordkeeping costs.

Schlichter says ABB Inc., a power and automation technology company, did not reasonably negotiate for rebates from the investment companies whose funds were offered in the plan. Schlichter claims (in this case and others) that when plans pay too much for investment services and plan administration, participants often end up subsidizing other corporate services received from the recordkeeping provider, such as payroll processing or health plan administration. It’s an argument applied widely across 401(k) fee litigation cases, and one that causes significant stress among mega plan sponsors and providers alike due to the potential class action status of plaintiffs and the large dollar figures at stake (see “Fee Suit Litigator Discusses Best Practices”).

Indeed, the lower court in Tussey v. ABB originally awarded $13.4 million to the ABB plan participants, but the decision was quickly appealed to the 8th Circuit. This current petition to the Supreme Court comes after the 8th Circuit vacated key parts of the original pro-ABB decision—essentially tempering the damages assessed against ABB and Fidelity.