Schlichter Strikes Another Excessive Fee Suit Settlement – National Association of Plan Advisors

Just days before a scheduled trial date, Columbia University has struck a deal with plaintiffs in an excessive fee suit involving the universitys 403(b) plan.

The notice (Cates v. Trs. of Columbia Univ., S.D.N.Y., No. 1:16-cv-06524, notice of settlement 4/7/21) that the parties had come to terms comes one week after Judge George B. Daniels ordered all designated witnesses[i]to testify in personand less than a week before the April 12 start date of that trial in the U.S. District Court for the Southern District of New York.

While particulars of the settlement were not disclosed, the letteraddressed to Judge Danielsasks for a 45 day pause so that they can prepare the settlement paperwork.

Case(s) History

The suit was one of the first wave of 403(b) university suits filed by the law firm of Schlichter Bogard & Denton in August 2016. The plan offered 116 options, with two recordkeepers (TIAA-CREF and Vanguard), and the plaintiffs had alleged that, By failing to monitor and control the compensation paid to TIAA-CREF and Vanguard for recordkeeping and administrative services, Defendants caused the Plans to pay unreasonable expenses for administration, resulting in Plan losses of at least $15$20 million.

While at least 20 universities have been sued over the fees and investment options in their retirement plans since 2016, settlements have been struck with the University of Pennsylvania,Brown University,Vanderbilt Universityand theUniversity of Chicago. On the other hand, St. Louis-basedWashington University,New York UniversityandNorthwestern Universityhave prevailed in making their cases in court.

What this Means

Theres only so much you can learn from a settlementwhere the parties seem to basically agree to disagree, conceding that the outcomefor good or ill (depending on your perspective)under a full adjudication (much less appeal) is uncertain at best, and as likely to wind up costing twice as much (in time and expense, if not settlement amount) as to be tossed out by a judge (though those time and expense costs remain).

However, we will (and should) wait until the particulars of the settlement are shared to see if there are, in fact, lessons to be learned from this one.

[i]More than a dozen of Columbias witnesses expressed discomfort about testifying in person during the COVID-19 pandemic, but Judge Daniels said the virus does not alone constitute good cause or compelling circumstances to allow witnesses to testify remotely rather than personally in court.

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Schlichter Strikes Another Excessive Fee Suit Settlement - National Association of Plan Advisors