Excessive Fee Suit Gets Class Action Approval

A 401(k) participant excessive fee lawsuit against a Connecticut-based manufacturer has been certified as a class action, moving it one step further through the legal process.

U.S. District Judge Nanette K. Laughrey of the U.S. District Court for the Western District of Missouri issued the ruling in a suit against ABB after determining that the plaintiffs had presented a strong enough preliminary case that the fees in the company’s 401(k) plan were too high.

Laughey also asserted that the class action procedure was appropriate in the case because participants’ claims were sufficiently similar.

That means the suit now represents more than 12,000 employees who participated in the plan sponsored by the provider of power and automation products and services. Also named as defendants were Fidelity Management Trust Company and Fidelity Management & Research Company.

Named plaintiff Ronald C. Tussey charged in the suit that ABB and Fidelity breached their fiduciary duties under the Employee Retirement Income Security Act (ERISA) by allowing Fidelity Trust to steer the plan toward expensive Fidelity funds which, in turn, paid Fidelity Trust for the business.

Tussey also charged that ABB and Fidelity Trust hid the fees through a revenue sharing program under which Fidelity Trust would be paid a portion of its administrative fees from funds selected by participants and that the revenue sharing arrangement was not properly disclosed.

“Taking into account the fees collected by Fidelity Trust from the Plan directly, and the revenue sharing Fidelity collected from the investment companies which were selected as investment options for the Plan, a reasonable fact finder could conclude that the Fidelity Defendants collected excessive fees, given the national data,” Laughrey wrote. “Because all members of the class are interested in these excess fees being returned to the Plan, there is clearly a common question of both fact and law that satisfies the commonality requirement,”

Laughrey rejected defendants’ arguments that the lawsuit was unsuitable as a class action because Tussey’s claims were dependent on proof concerning each participant’s investment choice and how those choices affected the fees charged to each participant.

The court also turned aside arguments that Tussey lacked proper legal standing, finding that the losses caused by the level of plan fees occurred to the plan and not a single participant.

The case is Tussey v. ABB Inc., W.D. Mo., No. 06-04305-CV-NKL, 12/3/07). The latest decision is available here.