Northern Trust has been added as a defendant in a 2019 lawsuit brought against AutoZone by participants in the parts company’s 401(k) plan, recent court documents show.
Several plaintiffs in the class-action case filed in U.S. District Court for the Western District of Tennessee have alleged that the sponsor, AutoZone, and the plan’s investment adviser, Northern Trust, breached their fiduciary duties to participants. That allegation is tied to the selection of Prudential’s Goalmaker asset-allocation service, which plaintiffs’ lawyers claim involved excessively high fees. Prudential is not named as a plaintiff in the lawsuit, and the plaintiffs note in the complaint that the company was not acting as a fiduciary to the $675 million plan.
“AutoZone, advised by Northern Trust, could easily have stopped the kickbacks by replacing the high-fee, chronically underperforming Goalmaker funds with the reliable, low-fee Vanguard index funds already in the plan,” the amended complaint read.
Goalmaker was added as an investment option to the plan in 2009, replacing target-date funds, according to the lawsuit. However, Goalmaker was removed several years ago, after AutoZone replaced Northern Trust with Willis Towers Watson, the plaintiffs noted. At that time, the plan switched to an index-fund-based target-date series.
Northern Trust declined to comment.
The plaintiffs in the case are represented by the James White Firm, Wiggins Childs Pantazis Fisher & Goldfarb and the Law Office of Lange Clark.
In an unrelated case, Prudential secured a temporary win this week, in a suit filed in 2019 by a former employee over alleged fiduciary breaches and excessive fees in its own 401(k) plan.
On Monday, a judge in U.S. District Court in the District of New Jersey dismissed all claims against the firm without prejudice, meaning that the plaintiff has 30 days to file an amended complaint that addresses the lawsuit’s shortcomings.
The plaintiff, who is pursing class-action claims for participants who were in the plan since Nov. 5, 2013, alleged that the financial services and insurance company breached its fiduciary duty by including its own funds on the menu. Those investment options carried excessive fees and underperformed peer funds at certain times, the plaintiff claimed. Further, the company’s optional Goalmaker allocation service allegedly directed money disproportionately into funds managed by Prudential and its affiliates, court records state.
However, the plaintiff did not use the Goalmaker service, nor did he invest in some of the funds outlined in the complaint, the judge noted in the Sept. 27 opinion. The manager selecting investment options within Goalmaker was Mesirow, not Prudential, according to the order.
Additionally, an amended complaint cited erroneous data that were presented within the plan’s online portal, although the reported errors occurred in January 2020 – and the plaintiff stopped participating in the plan in March 2019, the judge noted.
The claim raised about investment management fees “for the most part relies on historical price and expense information in support of his allegations. Not only is hindsight 20/20, but it also does not meet the plausibility requirement,” the court’s opinion read. “Indeed, if a comparison to a single cheaper fund with ‘similar investment styles’ sufficed to create a reasonable inference of imprudence, ERISA plaintiffs could challenge any fund so long as they could identify one cheaper fund sharing some alleged similarities with the challenged fund.”
A lawsuit filed last year against Eversource Energy hit a roadblock Tuesday when the judge in the case dismissed many of the claims.
The problem, the judge noted in the order, is that none of the plaintiffs have shown the court that they were invested in any of the funds mentioned in the lawsuit.
However, the dismissal allows the plaintiffs in the class-action case to amend their complaint and refile it within 21 days.
A challenge by the defendants to plaintiffs’ claims over excessive record-keeping fees failed, and those remain active.
At the heart of the case is the $3 billion plan’s investments in Fidelity’s actively managed Freedom target-date series. The law firm representing the plaintiffs, Shepherd Finkelman Miller & Shah, alleged in the complaint that the plan sponsor breached its fiduciary duty by not opting for a lower-fee investment option, such as Fidelity’s Freedom Index target-date series. The plaintiffs also raised claims about other investments within the plan, which they said have underperformed other readily available funds, net of fees.
TriHealth late last week succeeded in getting excessive-fee claims dismissed. The system was sued in 2019 in U.S. District Court in the Southern District of Ohio over the costs in its $740 million 401(k).
The plaintiffs alleged that the plan sponsor breached its fiduciary duty by opting for share classes of mutual funds that had net fees higher than others available, failing to consider better-performing, lower-cost funds from different managers and not including lower-fee investment vehicles, such as collective investment trusts.
In an order issued Sept. 24, the judge overseeing the case stated that the plaintiffs failed to raise sufficient allegations supporting a claim that the health care system breached its fiduciary duty.
“[A]t its core, the amended complaint alleges only that the administrative fees were high – not that they were unjustifiably (or imprudently) high,” the order read. “And, alleging that a fund underperformed is insufficient.”