An Employee Retirement Income Security Act class action suit was brought against Ventura Foods LLC, a Brea, California-based food production and processing firm, in the U.S. District Court for the Central District of California by a current Ventura employee. The case is called Jim Gramstad vs. Ventura Foods, LLC.
The lawsuit, filed on December 21, 2022, alleges that Ventura overpaid its recordkeeper by allowing variable indirect fees to grow unreasonably high.
Recordkeepers can be paid directly or through revenue sharing. If the funds being managed do well, the revenue sharing fees can grow in excess of what direct payments would have produced at normal market rates.
Funds do not grow more expensive to manage as they grow in value, so plan sponsors are supposed to collect rebates from recordkeepers who are paid by way of revenue sharing if their fees become unreasonable, the complaint alleges.
The plaintiffs allege that Ventura violated their fiduciary duties by not monitoring the growth of these fees. The plaintiffs obtained and summarized the Form 5500s sent by Ventura to the Department of Labor and allege that Ventura paid more on a per-participant basis than plans of a similar size. These excessive fees hurt the savings and compounding value of the participants, according to the complaint.
The fees were untethered to the services rendered by the recordkeeper, since they were based on asset price, and the plan did not receive extra or custom services from the recordkeeper, according to the complaint.
The plaintiffs also allege that Ventura maintained poorly performing funds in its investment lineup, which failed to meet industry standard benchmarks such as Morningstar category indexes, which categorize funds so they can be compared with each other.
The complaint specifically cites the T. Rowe Price Blue Chip Growth Fund, which was ranked in the bottom 10% in its category by Morningstar but was not removed by the plan. The plaintiffs also cite the Oakmark Equity and Income and Invesco Developing Markets funds as imprudent choices which hurt the participants’ savings.
The plaintiffs say the only way these outcomes were possible is if Ventura had a very flawed investment process. The plaintiffs are represented by Christina Humphrey Law and Tower Legal Group.
Ventura Foods did not return a request for comment and has not yet filed a response to the lawsuit. The Ventura Foods, LLC Profit Sharing 401(k) Plan had $322.7 million in assets and more than 2,900 participants as of December 31, 2021, according to the complaint.