Judge OKs Adviser Deferred Comp Settlement

April 2, 2009 (PLANSPONSOR.com) - A federal judge in New Jersey has approved a $1-million settlement to a long-standing legal battle waged by a group of former Prudential Financial advisers over whether they had been denied deferred compensation benefits.

U.S. Magistrate Judge Mark Falk of the U.S. District Court for the District of New Jersey, in an order approving the deal, noted that an out-of-court disposition of the case is best because it would avoid having to face a potentially unsympathetic jury mad at Wall Street over the nation’s financial downturn.

“[M]any of the Class Members are high income individuals in the financial services sector for whom a jury may have little sympathy given the current economic crisis facing our country,” Falk wrote. “Therefore, plaintiffs could face the prospect that a jury would not sympathize with their case and thus either find no liability or severely limit any damages awarded to the class.”

Falk also asserted that the deal is fair and reasonable and the fact that only two members of the class action suit objected means the settlement had widespread support among the plaintiffs.


According to the ruling, the MasterShare Plan was introduced by Prudential in 1999. It was a deferred compensation program allowing Prudential employees to invest pre-tax earnings through payroll deductions in shares of the Prudential Stock Index Fund at a 25% discount of the purchase price of Prudential securities, the court said.

The shares of Prudential stock were deposited into a customer account established for each employee and the stock would vest three years after purchase, according to the court. Prudential also offered enhanced premium shares in the Prudential Stock Index Fund, which were contributions made by Prudential that took into account the employee’s and the company’s performance, the court said.

The plaintiffs were Prudential financial advisers who were transferred to Wachovia Securities on June 30, 2003, as part of a deal between the two companies.

According to Falk, each plaintiff ended employment with Wachovia Securities in 2004, and they now allege they were constructively terminated by Wachovia Securities due to "deplorable" and "impossible" working conditions. They claim they were not paid all benefits they were owed under the MasterShare Plan.

Under the terms of the settlement, financial advisers who contributed in the MasterShare Plan will receive 4% of their wage contributions. Financial advisers who contributed to the Wachovia plan will receive 3% of their wage contributions. The settlement further provides that if the $1 million is not sufficient to make the 4% and 3% payments to the advisers, all class members will receive a pro rata reduction of the funds they would have received.

The ruling in Serio v. Wachovia Securities LLC, D.N.J., No. 06-4681 is available  here .