Caterpillar Fee Suit Clears First Legal Hurdle

A federal judge cleared the way for participants in Caterpillar’s 401(k) plan to pursue their fiduciary breach claims, but only on issues other than allegations of inadequate revenue-sharing disclosures.

On the issue of whether the company’s revenue-sharing arrangements were proper, U.S. District Judge Joe Billy McDade of the U.S. District Court for the Central District of Illinois agreed with the plan administrators that the Employee Retirement Income Security Act (ERISA) and Department of Labor (DoL) do not currently require the disclosure of revenue-sharing arrangements. So, any potential fiduciary breach did not concern the revenue-sharing payments, McDade ruled.

However, dealing with the participants’ other claims, the court said those must be tested after additional pre-trial proceedings. Participants’ main allegation was that the administrators breached their duties by not acting in the participants’ best interests and charging excessive fees to generate a profit for themselves (see “Lawyer: Excessive Fee Suits Not an Organized Anti-Plan Campaign).

On another issue, McDade said he could not yet resolve the issue of whether plan administrators are protected by the ERISA Safe Harbor provision. The court said the administrators have not yet proven the participants had control over their accounts as Section 404(c) requires.

The case is Martin v. Caterpillar Inc.