Parties in JPMorgan Self-Dealing Suit Reach Settlement

The lawsuit alleged plan fiduciaries acted for their own benefit by forcing participants to choose among costly investments managed by JPMorgan and BlackRock.

In a letter from attorneys for the defendants, a federal judge was informed that all parties have reached an agreement to settle a lawsuit alleging self-dealing by fiduciaries of JPMorgan’s 401(k) plan.

“We represent defendants in the above-referenced action, and write jointly with plaintiffs to notify the court that plaintiffs and defendants have reached an agreement in principle to settle this action on a class-wide basis,” the letter states.

JPMorgan Chase Bank was hit with a string of proposed class action lawsuits in early 2017, with this one filed in January of that year, alleging similar allegations. Plaintiffs argued the company’s 401(k) plan fees were not properly controlled and that conflicts of interest damaged net-of-fee performance.

“Plan’s fiduciaries breached their duties of loyalty and prudence to the plan and its participants by failing to utilize an established systematic review of the investment options in its portfolio to evaluate them for both performance and cost, regardless of affiliation to JPMorgan Chase. … This failure to adequately review the investment portfolio of the plan led thousands of plan participants to pay higher than necessary fees for both proprietary investment options and certain other options for years,” the original complaint stated. The text of the lawsuit dives into detail of the retirement plan’s investment menu, suggesting prudent plan fiduciaries would have moved to replace a number of proprietary investment options with alternatives from the wider market.

The lawsuit alleged plan fiduciaries larded the plan with proprietary fund investment options that charged excessively high fees that inured to the benefit of affiliates of JPMorgan and one of JPMorgan’s closest business partners, BlackRock Institutional Trust Co. It argued that, instead of acting for the exclusive benefit of the plan and its participants and beneficiaries, plan fiduciaries acted for the benefit of themselves by forcing participants to choose among costly investments managed by JPMorgan and BlackRock.

According to the letter, “The parties anticipate that they will finalize the settlement agreement and submit a motion for preliminary approval of the settlement by May 22, 2020.”