A final settlement of $57 million has been agreed to in Spano v. Boeing Inc., a landmark fee case filed under the Employee Retirement Income Security Act.
The case was settled last August just as it was scheduled to go to trial, almost 10 years after the claim was originally filed.
It is the second largest ERISA settlement on the books, after a $62 million settlement was agreed to in July in Abbott v. Lockheed Martin Inc. Plaintiffs in both cases were represented by St. Louis-based Schlichter, Bogard and Denton.
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In the Boeing case, plaintiffs alleged that fiduciaries to the company's 401(k) plan, the Voluntary Investment Plan, allowed the plan's recordkeeper, State Street Bank, to charge excessive fees.
They claimed recordkeeping fees were 35 percent more expensive than the highest end of the industry benchmark range.
Plaintiffs also alleged fiduciaries failed their duty to prudence under ERISA by embedding mutual funds in the plan menu with high management fees, allegedly for the purpose of channeling revenue sharing profits to CitiStreet, a State Street subsidiary.
One State Street small cap proprietary fund included up to 50 basis points in costs for revenue sharing, according to court papers.
A technology sector stock fund, which was added to the plan in 1997 and was the only "sector" fund available, held large portions of many participants' assets and was kept in the lineup until 2004, well after the technology stock bubble burst in 1999.
The fund lost 22.5 percent in 2000, 45 percent in 2001, and 47 percent in 2002. Plaintiffs argued that inclusion of the fund was imprudent, as it is rare for 401(k)s to include sector funds, due to their high concentration in a specific area of the stock market.
The Voluntary Investment Plan holds about $45 billion of workers and retirees retirement assets. The plaintiffs' claim also alleged that Boeing fiduciaries had not shopped the plan for service providers for the 10 years prior to the claim.
In settling the case, which Boeing had publicly vowed to fight until the end on the eve of the trial, the company denied all of the allegations and contended fiduciaries and the plan complied with all of ERISA's requirements.
The nearly decade's worth of procedural battles was notable for its contentiousness by Judge Nancy Rosenstengel, the third of three judges to preside over the case in U.S. District Court for the Southern District of Illinois.
In one proceeding, after urging the sides to come to settlement, she expressed doubt that that day would come in light of the "deep antagonism and hostile posturing" from attorneys on both sides of the case.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
