The fiduciaries of several 403(b) plans sponsored by New York University (NYU) defeated a class action lawsuit last month brought by participants. Sacerdote et al. v. New York University is one of a glut of cases brought against higher learning institutions, alleging that excessive recordkeeping and investment fees were charged and underperforming investment options were offered by the plans. The U.S. District Court for the Southern District of New York found that NYU’s retirement plan committee adequately managed the plan’s recordkeepers and investment options.
While a number of such cases have settled or been dismissed, this was the first to proceed to trial. The case provides helpful guidance for other fiduciaries subject to the Employee Retirement Income Security Act (ERISA) and particularly those responsible for 403(b) plans.
But in a new turn of events, on September 19, NYU called for sanctions against the workers and attorneys from law firm Schlichter Bogard & Denton behind the now-dismissed proposed class action suit arguing in New York federal court that their suit had been an attempt to avoid unfavorable rulings in an earlier, identical case.
- There were four different bases on which the court could sanction the workers and their attorneys, for their “frivolous and vexatious conduct,” the university said. NYU argued that the workers and attorneys violated Federal Rule of Civil Procedure 11 with the allegedly duplicative lawsuit.
- Secondly, the university contended that the workers’ attorneys should be held liable for the costs of its motions to dismiss the suit under Title 23 Section 1927 of the U.S. Code.
- Thirdly, NYU said that the court could also use its inherent authority to sanction the workers and attorneys, arguing that the court already found the claim was “without a colorable basis” and brought “in bad faith.”
- In addition, the school said attorneys’ fees could be awarded under ERISA, because the alleged improper conduct was willful and in bad faith, the workers’ counsel could afford the fees and the award could deter the counsel from bad behavior in other cases.