A new entrant to the world of 401(k) lawsuits is trying what appears to be a novel tactic: Contacting plan sponsors out of the blue and implying that they should settle.
That’s before the hint of any lawsuit or request for information about the plan that would lead to a lawsuit, said Daniel Aronowitz, managing principal of 401(k) insurer Euclid Fiduciary, who has had at least seven clients contacted by law firm Lieff Cabraser Heimann & Bernstein.
Like other plaintiffs’ firms, Lieff Cabraser alleges in the notices that plans have unreasonably high record-keeping fees, Aronowitz said. What’s different is that the initial notice amounts to a request to settle potential claims — something that none of the copycat firms that have piled into the lucrative business of ERISA litigation have apparently tried.
“We think defense counsel need to fight back, because this is unfair,” Aronowitz said. “The plaintiff law firms are taking advantage of that fact that there is no business judgment rule under ERISA.”
That means that in excessive fee cases, defendants often have to disprove a negative — they have to show in court that their plans aren’t as bad as plaintiffs might claim, he said.
A commonality among the letters that big companies have received is that the law firm claims that a plan’s fees are out of line with plans of a similar size, citing figures from the “401k Averages Book.” In each letter that clients have received, the example is that a $200 million plan charges participants $13 annually for record keeping.
“This really offends me, because it’s not what the book says,” Aronowitz said.
Most 401(k) plans with less than $400 million in assets pay for a portion of record keeping through the use of revenue-sharing fees that
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