PLANADVISER - May/June 2019 - 48

regulatory radar
Major
Cases
A roundup of recent
noteworthy retirement plan
litigation developments
Tussey v. ABB Finally Resolved
The parties in the long-running case of
Tussey v. ABB, Inc., have reached a settlement
of $55 million-the final result of
more than a decade of litigation, courtordered
nonmonetary remedies and
multiple appellate court rulings.
In the original 2006 lawsuit, filed
in the U.S. District Court for the
Western District of Missouri, plaintiffs
alleged multiple breaches of fiduciary
duty under the Employee Retirement
Income Security Act (ERISA), arguing
in sum that ABB subsidized its corporate
expenses with fees paid out of its
employees' retirement assets.
Among other claims, the plaintiffs
alleged that ABB engaged in
self-dealing by using Fidelity Investments
for recordkeeping both the
employer's 401(k) and multiple corporate
benefit plans-viz., a pension
plan and a health and welfare plan-
and for payroll processing. Plaintiffs
suggested that Fidelity provided ABB's
corporate plans at a loss, while turning
a strong profit on the 401(k) plan-
saying this arrangement amounted to
a form of disloyalty and self-dealing
that ERISA prohibits and that harmed participants.
The plaintiffs' counsel says the monetary settlement,
short the attorney fees, will be rebated to ABB retirement
plan participants' accounts.
For its part, ABB denied the many allegations leveled by
participants and fought the case up and down the federal
court system. Fidelity also pushed back and received a
favorable appellate court ruling in 2014. In that ruling, the
8th U.S. Circuit Court of Appeals agreed with Fidelity and
ABB that the District Court had relied on hindsight in an
earlier ruling that determined that a switch from certain
Vanguard funds to Fidelity funds violated ERISA. Fidelity
was also found not liable for alleged breaches concerning its
use of " float " income.
The recently revealed settlement agreement comes after
many twists and turns in the case. In 2012, the plaintiffs
obtained a $36.9 million judgment, which was eventually
appealed once, unsuccessfully, to the U.S. Supreme Court
and twice to the 8th Circuit, which itself twice remanded
the matter to the Missouri District Court for further
proceedings.
As a result of the earlier judgments, ABB was ordered by
the courts to use a competitive bidding process, including
a request for proposals (RFP), to select a new recordkeeper.
ABB was also ordered to choose the share class of investments
with the lowest expense ratio, rather than more
expensive retail share classes. In the settlement, the plaintiffs'
losses will be addressed with monetary damages.
ERISA litigation analysts agree that Tussey, as one of the
original 401(k) plan excessive fee and disloyalty lawsuits,
48 | planadviser.com May-June 2019
Art by Wyatt Hersey
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