Compliance July 1, 2007
Exelon Fee Case Receives Class Action Status
Just days after the dismissal of a similar case in a different jurisdiction, a federal judge has agreed that an excessive fee suit against Exelon Corp. can move forward as a class action.
Reported by Fred Schneyer
U.S. District Judge John W. Darrah of the U.S. District Court for the Northern District of Illinois ruled that the five employees who brought the lawsuit were adequate representatives of the class because they say they have been hurt by Exelon’s retirement plan practices. Darrah said there could be more than 23,000 former, current, and future participants represented in the case, based on data in court documents.
Darrah claimed that future class members are often included in the group represented by a collective lawsuit and that it made sense to keep them in the Exelon class because plaintiffs were asking the court to not let Exelon continue with its current retirement plan policies.
The court also pointed out the 7th U.S. Circuit Court of Appeals had ruled in other cases that ex-workers had legal standing if they left the plan “at a smaller benefit than they were due.”
Darrah also asserted that the St. Louis law firm of Schlichter, Bogard & Denton was qualified to represent the interests of the class members. The Schlichter firm has been in the forefront of much of the current plan fee controversy, going after a number of large corporations in the courts over excessive fee and inadequate fee disclosure allegations.
The Exelon suit alleged that Exelon and fiduciaries of its 401(k) plan breached their Employee Retirement Income Security Act (ERISA) fiduciary duties by paying unreasonable fees and revenue sharing payments to providers such as T. Rowe Price and not adequately telling participants about the payments.
In February, the court threw out the employees’ request for recovery of “investment losses” allegedly incurred when the plan allowed its investment managers and service providers to charge unreasonable fees.
One court recently granted a plan sponsor victory with the dismissal of a suit against Deere & Co, and two units of Fidelity Investments (See Deere and Fidelity Fee Lawsuit Thrown Out). U.S. District Judge John Shabaz of the U.S. District Court for the Western District of Wisconsin contended that the defendants had followed current laws and regulations regarding retirement plan fee disclosures.
The Exelon case is Loomis v. Exelon Corp., N.D. Ill., No. 06 C 4900, 6/26/07.