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Fidelity Also Liable According to Laughrey’s ruling, Fidelity Trust breached its fiduciary duties to the plans when it failed to distribute float income—interest earned on assets—solely for the interest of the plan, and Fidelity Research violated its fiduciary duties when it transferred float income to the plans’ investment options instead of the plans. The court found ABB defendants jointly and severally liable for $ 13.4 million lost by the plans due to ABB’s failure to monitor recordkeeping fees and negotiate for rebates, and $21.8 million lost by the plans due to the mapping of the Vanguard Wellington Fund to the Fidelity Freedom Funds. Fidelity defendants are jointly and severally liable for compensating the plans $1.7 million for lost float income. Laughrey rejected the plaintiffs’ global damages theory, which is based on the assumption that ABB’s breaches infected all of its investment decisions for the plans and the assumption that damages should thus be measured by the performance of ABB’s defined benefit plans. “While the court is suspicious that the relationship between ABB and Fidelity Trust infected more than the specific instances identified in this order, the court cannot rely on suspicion and therefore rejects Plaintiffs’ global damage theory,” Laughrey wrote. Participant Ronald C. Tussey, filed the suit in 2006 against ABB alleging it breached its Employee Retirement Income Security Act (ERISA) fiduciary duties by paying excessive fees to Fidelity Trust and by failing to disclose to plan participants the revenue-sharing arrangement (see “ABB Excessive Fee Suit Survives Initial Challenge”). The court opinion is here.
Fidelity Also Liable
According to Laughrey’s ruling, Fidelity Trust breached its fiduciary duties to the plans when it failed to distribute float income—interest earned on assets—solely for the interest of the plan, and Fidelity Research violated its fiduciary duties when it transferred float income to the plans’ investment options instead of the plans.
The court found ABB defendants jointly and severally liable for $ 13.4 million lost by the plans due to ABB’s failure to monitor recordkeeping fees and negotiate for rebates, and $21.8 million lost by the plans due to the mapping of the Vanguard Wellington Fund to the Fidelity Freedom Funds. Fidelity defendants are jointly and severally liable for compensating the plans $1.7 million for lost float income.
Laughrey rejected the plaintiffs’ global damages theory, which is based on the assumption that ABB’s breaches infected all of its investment decisions for the plans and the assumption that damages should thus be measured by the performance of ABB’s defined benefit plans. “While the court is suspicious that the relationship between ABB and Fidelity Trust infected more than the specific instances identified in this order, the court cannot rely on suspicion and therefore rejects Plaintiffs’ global damage theory,” Laughrey wrote.
Participant Ronald C. Tussey, filed the suit in 2006 against ABB alleging it breached its Employee Retirement Income Security Act (ERISA) fiduciary duties by paying excessive fees to Fidelity Trust and by failing to disclose to plan participants the revenue-sharing arrangement (see “ABB Excessive Fee Suit Survives Initial Challenge”).
Rebecca Mooreeditors@plansponsor.com