has won the first skirmish of a legal war that started last fall when a class action firm targeted for allegedly charging excessive fees in the John Deere 401(k) plan. Defined contribution plan industry insiders are closely watching the case since a Fidelity loss could have wide ranging impact in that market.
In what is good news for the Boston Behemoth and a set back for Schlichter Bogard & Denton
-- the St. Louis law firm that brought the suit and has been busy filing a score more -- a federal judge in Wisconsin on Wednesday junked
a fee lawsuit against heavy equipment maker Deere & Co.
The dismissal does not mean that Fidelity, or even all 401(k) providers, are out of the woods.
Schlichter Bogard slapped Fidelity with the suit last December following a wave of litigation it brought against plan sponsors. The claim in the plan sponsor suits is simple: the employers failed to perform their fiduciary duty and allowed participants to pay fees that were too high for the services provided.
The Deere case was exceptional among those brought by Schlichter Bogard in that it also named Fidelity as a party to the suit, alleging that Fidelity was also a plan fiduciary. DC plan providers have long taken pains to prevent themselves from assuming plan fiduciary status.
ERISA lawyers interviewed by MFWire
have suggested that Bogard had a slim chance of winning the case, but that they were closely watching it nonetheless.
In his ruling Wednesday on the Deere complaint, Judge John Shabaz
of the U.S. District Court for the Western District of Wisconsin, described the complaint as a "rambling 38-page collection long on legal argument, public policy rhetoric and repetition, but vague in its allegations of facts which might be relevant to the claims alleged."
"The allegedly omitted disclosures are not required by the language of the regulations," Shabaz wrote, adding that "there is nothing to suggest that receiving this additional non-prescribed information would effectively enhance investment decisions."
On the issue of excessive fees, Shabaz wrote: "The only possible conclusion is that to the extent participants incurred excessive expenses, those losses were the result of participants exercising control over their investments within the meaning of the safe harbor provision."
"We agree with the ruling," said Fidelity spokesperson Vin Loporchio, adding: "We believe we provide valuable services to 401(k) clients for whom Fidelity serves as a recordkeeper and trustee."
, a spokesperson for Deere, said: "We believe the case was without merit and we agree with the judge's ruling."
, president of the Profit Sharing/401(k) Council of America, hailed the ruling as an "important recognition that companies and their providers who sponsor excellent retirement programs, especially when the fees paid by the plan are institutional, will not have to go through a long and expensive process in order to prove that they're meeting their legal obligations."
STILL IN THE WOODS
Besides the Deere suit, Fidelity was named in two other fee lawsuits filed by St. Louis-based Schlichter Bogard, which has lodged a total of more than a dozen complaints against large plan sponsors and providers since last fall. In two suits, Fidelity was named co-defendant alongside sponsors ABB
Meanwhile, Fidelity is not alone in finding itself in the docket because of what class action lawyers characterize as excessive fees. Separately, Chicago-based SimmonsCooper has also brought a case against Principal Financial that was filed in August.
The dismissal is not dimming the hopes of the lawyer who was behind the suit. Jerome Schlichter
, managing partner at Schlichter Bogard & Denton
, which filed the complaint on behalf of four Deere employees, told sister publication 401kWire.com
that the Deere case was the "only case in which a judge ruled this way."
"We intend to pursue the case and we expect to prevail," Schlichter said.
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