Parties in a lawsuit alleging fiduciaries of the 401(k) plan offered to employees of the Oracle Corporation breached their duties under the Employee Retirement Income Security Act (ERISA) in various ways through mismanagement of the plan have file a motion for approval of a class action settlement.
Under the agreement, the defendants, or an entity acting on their behalf, will deposit $12,000,000 in an interest-bearing settlement account.
In addition to the monetary component of the settlement, the defendants agreed that for a period of three years, they will instruct the plan’s recordkeeper in writing that in performing previously agreed upon recordkeeping services with respect to the plan, it must not solicit current plan participants for the purpose of cross-selling proprietary non-plan products and services, unless in response to a request or expressed need by a plan participant. In addition, the agreement states that in the event the defendants enter into a new recordkeeping agreement with the existing recordkeeper or a new recordkeeper during the three year settlement period, they agree that any resulting contract shall include a provision similarly restricting the recordkeeper from soliciting current plan participants for the purpose of cross-selling proprietary non-plan products and services.
“This non-monetary provision provides substantial value to current and future participants by ensuring that the plan’s recordkeeper does not improperly benefit from the sale of retail financial products and services to the detriment of plan participants,” the motion states.
The proposed class action suit was filed in January 2016. The lawsuit claimed Oracle Corporation breached its fiduciary duties by causing participants to pay recordkeeping and administrative fees to Fidelity that were “multiples of the market rate available for the same services.”
The text of the complaint further suggested defendants “breached their fiduciary duties of loyalty and prudence and engaged in transactions expressly prohibited by ERISA … by failing to act solely in the interest of plan participants and failing to adequately monitor the investment options in, and service providers to, the plan.” The defendants were also accused of “preventing participants in the plan from discovering their breaches through a series of false and misleading communications to plan participants.”Last March, the U.S. District Court for the District of Colorado issued summary judgement largely in favor of the defense. Still, as the motion for preliminary approval of the settlement notes, Oracle agreed to settle “on the eve of trial.”
« Friday Files – February 28, 2020