A $500,000 class settlement between AAA Carolinas and former employees has received early approval in a North Carolina federal court. The plaintiffs brought a lawsuit that alleged retirement plan fiduciaries breached their duties to retirement plan participants.
Under the terms of the settlement agreement, signed by defendants Carolina Motor Club Inc. and the Auto Club Group, over 2,000 current and former workers who receive benefits through the AAA Carolinas 401(k) plan will be covered.
The agreement received early approval from Judge Max O. Cogburn, Jr., United States District Court Judge for the Western District of North Carolina, Charlotte Division. The defendants denied any wrongdoing but agreed to settle the case in part to avoid the substantial costs of litigation, according to the settlement and stipulation.
Judge Cogburn defined the class period as beginning July 6, 2014, through the date the court grants preliminary approval of the settlement. Approval of class settlement resulted from negotiations between the parties to the lawsuit, judge Cogburn wrote in the class settlement order.
“Plaintiffs and defendants, through counsel, conducted extensive, arm’s-length negotiations concerning a possible compromise and settlement of the action, including a day-long mediation,” Judge Cogburn, Jr., stated. “The parties exchanged mediation statements, which included argument, analysis, and damages calculations of consulting experts. Following negotiations, the parties reached agreement on material terms of the settlement, including the amount of the settlement fund and non-monetary relief, as set forth herein.”
By agreeing to a class settlement, defendants did not admit to fiduciary breach resulting in alleged harm to participants for retirement plan losses or any wrongdoing.
“The Court has not decided in favor of either side in the action,” Cogburn stated.
“The settlement agreement, and these proceedings related to the approval of the settlement agreement, and this order are not evidence of any liability, responsibility, fault, or wrongdoing on the part of any party including any party receiving a release,” according to the settlement agreement and stipulation.
By the terms of the class settlement, defendants will pay or cause their insurance carrier to pay $500,000 into an account at a financial institution identified by class counsel, comprising the ‘Settlement Fund.’
The settlement amount includes expenses for administering the settlement, taxes, expenses and fees incurred for an independent fiduciary’s review of the settlement for the plan as well as court-approved attorney’s fees, expenses and compensation to the plaintiffs, the order states.
“The net amount of the settlement fund, after payment of the aforementioned costs and expenses, will be allocated to the settlement class members according to the approved plan of allocation, if and when the court enters an order finally approving the settlement,” judge Cogburn stated.
Plaintiffs brought the original lawsuit in 2021. The lawsuit alleged plan fiduciaries mismanaged the 401(k) plan, caused fiduciary breaches and failed to review the plan’s recordkeeping expenses through the request for proposal process periodically. Specifically, plaintiffs argued the retirement plan caused harm to participants, and was filled with high-priced and underperforming investment options.
By the terms of the class settlement, defendants must agree that within two years of complete settlement approval, the Auto Club, directly or through its plan fiduciary committee, will conduct a request for proposal for recordkeeping services for the 401(k) plan.
AAA Carolinas did not respond to a request for comment on the class settlement.
« When Can an Employee in a 457(b) Plan Use A Three-Year Catch-Up Election?