Monday, May 5, 2008
The rage of the defense bar, that is. The National Law Journal reports (subscription required):
Congress and the U.S. Department of Labor are taking a hard look at so-called hidden fees in 401k retirement plans — but not as hard as the look taken by plaintiffs' firms that are suing corporations for allegedly failing to protect their employee's nest eggs.
At least 12 cases have been brought by Jerome J. Schlichter of Schlichter Bogard & Denton in St. Louis, alleging that plan sponsors such as Boeing, International Paper and Caterpillar neither examined nor disclosed to plan participants fees that are split among service providers. The suits are brought under the Employee Retirement Income Security Act of 1974 (ERISA) . . . .
Plaintiffs call the fees "hidden" because the management fee that participants see is often a lump sum that includes the costs of separate services by different providers, making it difficult for participants to compare costs among similar plans.
Defense attorneys believe plaintiffs will have a difficult time proving a company's negligence over excessive 401k fees, even if the company could have paid plan administrators less.
"It becomes a battle of experts,'' said Nancy G. Ross of McDermott, Will & Emery in Chicago, who is defending Northrop in two class actions. "Just because one expert would have done it differently doesn't prove the plan administrators did it wrong. Negligence is very hard to prove in the ERISA world.''
Perhaps Ms. Ross is engaging in wishful thinking in light of the Supreme Court's decision in LaRue, which makes breach of fiduciary suits in the 401(k) context all the more likely, and potentially easier to prove.