Judge Orders Fee Case Evidence Be Given to DOL

A federal district court has approved the Department of Labor’s motion to intervene in a 401(k) excessive fee case.

In its reply in support of its motion to intervene in the case against Northrop Grumman, the Department of Labor (DOL) noted that its Employee Benefits Security Administration (EBSA) investigation and the litigation are substantially similar since they both involve questions related to the administration of the plan, including an examination of expenses paid by the plan and whether those expenses are reasonable. “The documents produced in this litigation regarding fees and expenses paid by the Plan, and whether such fees and expenses are reasonable, are clearly relevant to EBSA’s investigation into the reasonableness of fees and expenses paid by the Plan,” the court document says.

The EBSA said it first attempted to obtain records from plaintiffs’ counsel, Schlichter, Bogard & Denton, in 2011, but Northrop encouraged the U.S. District Court for the Central District of California to deny the request, saying the EBSA should obtain the documents directly from the company. The EBSA claimed records produced by the company in the three years since were deficient, so it issued a subpoena to the Schlichter law firm.

The Schlichter subpoena covers a broader time period than the EBSA investigation. The EBSA said many documents produced for the period beyond the investigative period are relevant to its investigation because they show the various expense trends which bear on their reasonableness, which might assist it in determining whether any person is violating or has violated any provision of the Employee Retirement Income Security Act (ERISA).

The court modified a protective order granted to Northrop Grumman to permit Schlichter’s firm to produce to the DOL all documents which have been created, obtained or produced by Schlichter which reflect non-litigation events occurring after January 1, 2006, relating to the Northrop Grumman Savings Plan.

The case was originally filed in September 2006. Plaintiffs claimed the defendants violated their ERISA fiduciary responsibilities by including in their retirement plans investment options for which plaintiffs claim the fees were too high.