California Judge Refuses to Pause Franklin Templeton ERISA suit

Franklin Templeton’s motion to stay was denied by a California federal judge, U.S. District Judge Claudia Wilken. The Defendant filed the motion requesting a stay pending the outcome of an appeal to the Ninth Circuit, but the judge denied the motion stating that she did not rely on the case before the appellate court when she granted class certification.

Plaintiffs in the case allege that Franklin Resources Inc. stacked its employees’ 401(k) plan with company products rather than offering better-performing funds. The judge’s decision to certify the class of workers making the allegations was based on the Ninth Circuit’s 1999 ruling in Bowles v. Reade – not on another federal judge’s opinion in an ERISA suit against USC as the Defendant, Franklin Templeton, claimed.

The Defendant argued that the Ninth Circuit’s ruling on the appeal of the decision in Munro v. University of California would affect class certification in the case currently being considered before Judge Wilken. Wilken was not convinced. Wilken responded that it was possible the cited ruling could affect the case, but that Franklin Resources Inc. did not show that is was certain or even likely that it would. It was also noted that if it did affect the case it would simply affect class action status, not whether the case could be brought at all. The Defendant would have to face the claims of the lead Plaintiff, Marlon H. Cryer, (and other individuals) either way.

The judge also noted that the company would not face any significant penalty of harm if a stay were not issued as the Munro ruling would have a minimal effect on the case, but that workers could experience great harm if forced to wait to pursue their claims. A stay of this nature could last for over 2 years. Additionally, the judge pointed out that this type of ongoing injury to the plaintiffs would be difficult to quantify at the end of the case.

The original lawsuit against Franklin Templeton was filed in July 2016, including allegations that the firm breached its fiduciary duties under ERISA. Allegations were made that the Defendant had its 401(k) plan invest hundreds of millions of dollars into mutual funds with high fees managed by itself and its subsidiaries. Workers were granted class certification in July 2017. Judge Wilken consolidated the case with a similar proposed class action filed against the company by Nelly Fernandez in April. Fernandez sought class certification in May claiming that the company also engaged in prohibited transactions. Additional individual defendants were named.

If you have questions about ERISA or what constitutes a breach of fiduciary duty, please get in touch with one of the experienced California employment law attorneys at Blumenthal Nordrehaug Bhowmik De Blouw LLP.

ERISA Suit Results in $12M Deal for Allianz Retirement Fund Plan Participants

Facing allegations of imprudent management of workers’ retirement funds, Allianz Asset Management agreed to pay $12 million to settle. According to allegations against the company, they kept everything in the Allianz family of funds excluding all other possibilities from consideration.

U.S. District Judge Staton found the amount offered to plan participants reasonable and granted preliminary approval to the approved deal. The deal was struck at a little over 25% of Allianz’ potential liability in the case. Current and former plan participants allege that the actions of the company were not in the best interest of investors and that the company treated the retirement plan as a way to promote the company’s family of mutual fund businesses while maximizing its own profits. The settlement comes only after close to two years of litigation and a conditional certification of class.

The Defendants did file a motion to dismiss, as well as a motion for summary judgment. While there are other cases that contain similar facts and allegations that ended in favor of the defendants, in this particular case, the court found that factors specific to the case warranted granting preliminary approval. The proposed settlement would be to cover all participants and beneficiaries of the plan since October 7, 2009.

In October 2015, a group of plan participants led by Aleksandr Urakhchin filed a complaint accusing the company of breaching its fiduciary duty to its own investors when they did not consider all available options. Or in other words, by excluding non-Allianz mutual funds, Allianz violated ERISA.

According to the complaint, because the company held onto the funds, plan participants ended up spending millions in excessive fees annually. For instance, in 2013, fees being charged for proprietary funds were about 75% higher than averages for the same time period. This resulted in over $2.5 million in unnecessary, exorbitant fees in 2013 alone. Investors claimed that not only did the company not consider non-Allianz options that may have performed better, but that the Allianz branded-funds chosen often had little or no track record and that frequently underperformed. Even after this became obvious, employees claim the company moved forward with their policy to pour employee retirement funds into Allianz owned investments.

As a part of the agreed upon settlement deal, Allianze will retain an unaffiliated investment consultant to conduct an annual evaluation of the lineup and review the policy statement for at least three years.

If you need to discuss problematic handling of your retirement funds, or other ERISA violations, please get in touch with one of the experienced California employment law attorneys at Blumenthal Nordrehaug Bhowmik De Blouw LLP.