Settlement comes on day of scheduled trial in retirement class-action lawsuit
By Sara Randazzo
Published on Aug 26, 2015 on The Wall Street Journal
Boeing Co. agreed on Wednesday to a preliminary deal to settle a long-running lawsuitaccusing the company of mishandling its 401(k) plan to the detriment of its employees.
The settlement comes the day a trial was scheduled to begin in the nine-year-old case. Terms weren’t disclosed. The two sides are expected to update the court on details of the talks next month and set a timeline for seeking final approval, according to a court order.
Filed on behalf of 190,000 Boeing employees and retirees, the class-action suit accused Boeing of failing to uphold its fiduciary duties to employees by allowing excessive 401(k) fees to go unchecked, choosing higher-cost retail mutual funds over cheaper options, and improperly making 401(k) plan decisions to benefit vendors receiving other Boeing business.
Boeing, which has defended its 401(k) practices and denied the claims, had no comment Wednesday on the settlement.
Attorney Jerome Schlichter, who represents the plaintiffs, said he was prepared to go to trial and is pleased to have reached a provisional settlement. He said his firm continues to be committed “to improving the 401k savings plans that millions of Americans rely on for a secure retirement.”
The Boeing suit is one of a string of similar class actions targeting major companies over the past decade for alleged violations of the federal Employee Retirement Income Security Act, or ERISA. Very few have gone to trial. In December, Lockheed Martin Corp.reached a $62 million settlement the week its trial was set to begin, the largest payout so far in a suit of this kind.
Mr. Schlichter also represented the Lockheed plaintiffs and negotiated a $27.5 million deal with Ameriprise Financial Inc. earlier this year. All told, settlements in eight of his suits have brought in $214 million, with about a third of that going to Mr. Schlichter’s law firm.
In addition to monetary recoveries, the settlements often require the companies to agree to permanent changes to their 401(k) practices.
One of Mr. Schlichter’s cases, against Southern California utility Edison International,went to a partial trial and earlier this year reached the U.S. Supreme Court. The court ruled unanimously that companies have a continuing duty under ERISA to monitor and remove imprudent investments included in a retirement plan.
Boeing’s $44 billion 401(k) plan is the second-largest in the nation after International Business Machines Corp., according to the Labor Department.
Regulation of the 401(k) industry falls to the Labor Department, which has sometimes filed briefs in support of cases brought by private attorneys. While the agency has pursued some companies on its own for allegedly excessive fees, it more often uses its resources to investigate fraudulent plans.
In 2012, the agency implemented new rules that require companies to clearly disclose all 401(k) fees to employees.