• Case settled shortly before trial date
• Deal covers about 17,000 people

BlackRock Institutional Trust Co. got early approval from a California federal judge for a $9.65 million class settlement in a lawsuit challenging the in-house funds in its employees’ 401(k) plan.

The deal, which represents nearly one-third of the class’s potential damages, provides relief to about 17,000 people covered by BlackRock’s $1.8 billion retirement plan. Judge Haywood S. Gilliam Jr. of the U.S. District Court for the Northern District of California signed the preliminary approval order on Monday.

The lawsuit accuses BlackRock—the world’s largest asset management company—of taking unreasonable profits from the collective investment trusts it offers to retirement plans, including the plan covering its own workers. Last year Gilliam certified a class of thousands of workers covered by the BlackRock plan, but declined to certify a larger class of investors in more than 250 other retirement plans that offer BlackRock’s collective trusts.

The parties reached a tentative deal in February, one month after Gilliam ruled the 401(k) investors could go to trial on their claims under the Employee Retirement Income Security Act. They were scheduled to begin a seven-day trial on March 1.

. . .

The class is represented by Feinberg Jackson Worthman & Wasow LLP and Cohen Milstein Sellers & Toll PLLC.

The complete article can be viewed here.

Benefits attorneys are hoping a Supreme Court ruling in a case against Northwestern University will restore certainty on what employees must show to plausibly allege their retirement plans are being charged excessive fees.

The justices agreed last week to hear the long-running fight in their next term starting in October. It’s a case that could either stamp out disputes over plan mismanagement or spark a whole new wave of challenges, attorneys say.

. . .

A proposed class of current and former Northwestern University employees who participate in the school’s retirement plans sued the school and its retirement plan committee for allegedly offering expensive retail class investments with excessive management fees when lower-cost funds were available and for allegedly failing to rein in unreasonable record-keeping costs.

Similar to 401(k) plans run by for-profit companies, defined-contribution plans offered by Northwestern and other tax-exempt employers are commonly called 403(b) plans. Under the Employee Retirement Income Security Act (ERISA), sponsors can be held liable for plan losses if they fail to prudently manage these plans.

Potential to Affect Every Plan

If the court sides with the Northwestern employees, it could clearly set out standards that plan sponsors must follow in selecting investments, monitoring those investments, and determining and monitoring the reasonableness of fees, said Jerry Schlichter, an attorney for the Northwestern employees and founding and managing partner of Schlichter Bogard & Denton LLP.

“This case has the potential to affect every 401(k) and 403(b) plan in America,” he said.

The U.S. Court of Appeals for the Seventh Circuit affirmed the district court’s decision to dismiss the proposed class action.

The appeals court said plans can offer a wide range of investment options and fees without breaching any fiduciary duty to act prudently, and a flat fee for record-keeping or a sole record-keeper isn’t required. The court noted Northwestern had explained it was sticking with multiple record-keepers in order to offer one particular type of investment option.

In a statement, Northwestern said it believes the lower courts were right to dismiss the lawsuit against it and that the school will continue to oppose the employees’ claims as legally and factually unmeritorious.

“The University stands by the management of its retirement benefits, and the talented and dedicated investment committee that administers its plans,” the university said.

Northwestern’s attorney, Craig Martin of Willkie Farr & Gallagher LLP, didn’t respond to a request for comment, but in the school’s reply to the court he said ERISA demands prudence not perfection.

“It does not subject plan administrators to lawsuits based merely on allegations that a negotiated mix of plan offerings (which included numerous options that petitioners deemed prudent) was not, by petitioners’ reckoning, optimal,” he wrote.

. . .

Higher Standard

The Northwestern employees argue the Seventh Circuit set the standard retirement plan participants have to meet for their case to survive a motion to dismiss so high “as to make it virtually impossible for participants of defined-contribution plans to plead a claim for imprudent management.”

. . .

The Seventh Circuit’s decision “really threw a wrench in the interpretation of ERISA’s pleading standard with respect to excessive fees in that circuit,” said Michelle Yau, a partner at Cohen Milstein who represents employees and plan beneficiaries.

“Before the Northwestern decision the law was pretty well settled,” she said.

Other circuits, including the Eighth, Third, and Ninth, have found that if you allege an ERISA plan, whether it be a 401(k) plan or a 403(b) plan, is being caused to pay more for the exact same investment through a more expensive share class, that those claims are meritorious, Yau said.

. . .

Though Lockman thinks reversing the Seventh Circuit’s decision could lead to more litigation, Yau disagrees that would be the impetus for new claims.

“Essentially the impetus is that the conduct underlying those claims is pretty egregious,” she said. “You have a plan that would be eligible for the cheapest share class, and the fiduciary doesn’t put the plan in the cheapest share class even though they qualify based on the asset size. That’s the reason for the number of cases that have been filed.”

• Suit alleges scheme to drive down pay for poultry workers
• Pilgrim’s will pay and cooperate, settlement motion says

JBS SA subsidiary Pilgrim’s Pride Corp. will pay $29 million to resolve antitrust claims over its alleged role in an industrywide scheme to depress pay for the largely immigrant workforce employed at poultry processing plants, according to a federal court filing in Baltimore.

The employees leading the lawsuit sought preliminary approval from Judge Stephanie A. Gallagher for the agreement, which would let Pilgrim’s exit the proposed class action moving forward in the U.S. District Court for the District of Maryland.

. . .

The $29 million figure comes to “roughly $2 million for each percentage point of Pilgrim’s relevant market share—a remarkable financial recovery for such an early-stage settlement,” the filing says.

In addition to the cash payment, the agreement calls for Pilgrim’s to cooperate against the other poultry processors accused of colluding to depress the pay of workers through unlawful exchanges of sensitive information and annual secret meetings.

The other defendants include Tyson Foods Inc., Hormel Food Corp., Sanderson Farms Inc., Perdue Farms Inc., Cargill Inc., Butterball LLC, Koch Foods Inc., ContiGroup Cos., Mountaire Farms Inc., Simmons Foods Inc., George’s Inc., Fieldale Farms Corp., Peco Foods Inc., and Webber Meng Sahl & Co.

The suit, filed in 2019, also targets Agri Stats Inc., which compiles the farm sector databases the poultry processors allegedly used to trade wage information. Gallagher let the case move forward in March.

It’s part of a wave of cartel cases involving livestock and protein, including beef, turkey, pork, tuna, salmon, and eggs. Most of the suits allege price-fixing schemes centering on the illegal laundering of price or wage data through Agri Stats.

The poultry industry has been particularly hard hit. Along with the price-fixing and wage-fixing claims, top processors are accused of a scheme to drive down pay for chicken farmers until they’re permanently indebted “modern sharecroppers.”

. . .

Cohen Milstein Sellers & Toll PLLC, Hagens Berman Sobol Shapiro LLP, and Handley Farah & Anderson PLLC are interim co-lead counsel for the poultry workers.

Benefits litigators have no shortage of cases to watch in 2021’s second half, as courts consider high-profile questions such as when a retirement plan’s investments are adequately diversified, how suits over plan fees can clear dismissal bids, and whether plans can make workers arbitrate claims of plan mismanagement.

Here, Law360 offers a guide to Employee Retirement Income Security Act litigation to keep an eye on for the rest of the year.

When Workers Can Sue

A war over when workers can sue over benefit plan mismanagement has raged in the courts for years, with the U.S. Supreme Court weighing in last year on the circumstances that must be present for workers to sue pension plans.

The lower courts have begun interpreting that decision, largely ruling that it doesn’t apply to suits against 401(k) plans, but it can be used to curtail litigation against health insurance plans.

These arguments over workers’ standing to sue have played out at the motion to dismiss stage of ERISA litigation. But the argument also arises at the class certification stage, when courts decide whether workers are adequately positioned to represent their coworkers in the lawsuit.

The defense bar has mounted the same argument at the class certification stage that it tried at the motion to dismiss stage, claiming workers don’t have standing to sue over a 401(k) plan investment unless they personally kept money in that fund.

An appellate court is set to weigh in on the validity of that argument now that the Third Circuit has taken up a case called Boley v. Universal Health Services Inc.

The plaintiffs bar has notched notable wins against the argument at the motion to dismiss stage, but if they lose it at the class certification stage, those victories could be for naught.

“If the court [accepts this argument], then it makes the standing holdings not that helpful,” said Karen Handorf, a partner at the plaintiff-side firm Cohen Milstein Sellers & Toll PLLC. “You win a battle, but you’ve lost the war.”

The case is Boley et al. v. Universal Health Services Inc. et al., case number 2:20-cv-02644, in the U.S. District Court for the Eastern District of Pennsylvania.

The Arbitration Question

Courts have already considered the question of when workers are compelled to arbitrate ERISA mismanagement suits this year, but they’re set to continue mulling this far-from-settled issue in 2021’s second half.

The Seventh Circuit will consider whether Triad Manufacturing Inc. was allowed to write a mandatory consent-to-arbitration provision into its employee stock ownership plan document, booting all ERISA mismanagement cases from court. The company is fighting an Illinois federal judge’s decision that it was not allowed to do so.

Meanwhile, a New York federal judge will consider whether the consent-to-arbitration provision in DST Systems Inc.’s 401(k) plan grants workers the right to arbitrate their claims against the company even if a class action advancing the same allegations has settled.

DST argues workers should be forced to drop their arbitrations and participate in the settlement — in the process, making the same argument against arbitration provisions’ power usually advanced by the plaintiffs bar.

“As plaintiffs attorneys, we read that brief with a fair amount of satisfaction,” said Mark Boyko, a partner at Bailey & Glasser LLP, adding that he’s looking forward to seeing how the Triad and DST cases play out.

The cases are Smith v. Board of Directors of Triad Manufacturing Inc. et al., case number 20-2708, in the U.S. Court of Appeals for the Seventh Circuit, and Ferguson et al. v. Ruane Cunniff & Goldfarb Inc. et al., case number 1:17-cv-06685, in the U.S. District Court for the Southern District of New York.

Fee Suits’ Foundation

Ever since the plaintiffs firm Schlichter Bogard & Denton LLP began filing suits challenging benefit plans’ administrative fees in the mid-2000s, litigation of this type has become common, hitting corporations, universities, and, more recently, health insurance plans and multiple employer plans.

Now, the U.S. Supreme Court is considering taking up the question of what’s needed to plead an ERISA fee suit, through a case called Hughes v. Northwestern University.

The justices asked the federal government to weigh in on whether it should take the case in October. In May, the government answered in the affirmative.

A Supreme Court ruling in the case could have a “big impact,” because “obviously, there’s a lot of fee cases out there,” Handorf said.

. . .

The case is April Hughes et al. v. Northwestern University et al., case number 19-1401, in the Supreme Court of the United States.

Manuel J. “John” Dominguez, a partner in Cohen Milstein’s Antitrust practice was featured in FSU Law Focus June 25, 2021 e-newsletter.

“Attending FSU College of Law was a life-changing event. The professors and my classmates were truly gifted and wonderful people who made the academic environment at the school special and unique. Being in Tallahassee also provided me with many chances to work and interact with several attorneys in that legal community and helped set the course of my career. While my practice is national, addressing antitrust and anticompetition claims on behalf of plaintiffs, I am still ‘local’ and practice out of Cohen Milstein’s Palm Beach Gardens Office. I will always be very grateful to have had the opportunity to attend FSU and will always look back at my time at the school with great fondness and admiration. Go ‘Noles!”

• COURT: D. Nev.
• TRACK DOCKET: No. 21-cv-1189
• JUDGE: Andrew P. Gordon

Two mixed martial arts fighters hit Ultimate Fighting Championship with federal antitrust claims in Las Vegas over its alleged scheme to cement its “iron-fisted control” over the sport—and drive down athlete pay—by acquiring rival promoters and locking top talent into long-term exclusive contracts.

The lawsuit was filed Wednesday in the U.S. District Court for the District of Nevada by Kajan Johnson and Clarence Dolloway, MMA fighters who participated in UFC bouts between 2008 and 2018.

. . .

The proposed class action accuses the organization of leveraging its 90% market share to force fighters into exclusive deals that starve competitors of talent unless they agree to become little more than its minor league affiliates.

“Multiple actual or potential rivals were forced to sell to the UFC, exit the market entirely, or be relegated to ‘feeder league’ status,” the complaint says. “The only remaining promoters of MMA bouts are either fringe competitors” or “entities that have essentially been conscripted by the UFC,” it adds.

As a result, the UFC makes roughly $900 million a year, at among the highest profit margins in all of sports, while its fighters “collectively earn less than 20% of the revenues generated by UFC events,” far less than the 50% share taken in by other major pro athletes, according to the complaint.

“UFC fighters are paid a mere fraction of what they would make in a competitive market,” going “substantially undercompensated despite the punishing—and popular—nature of their profession” and its “natural parallels” to boxing, which is orders of magnitude more lucrative for athletes, the suit says.

The organization’s leaders have even bragged publicly about driving rivals out of business, including in a promotional video featuring a “mock tombstone” and UFC president Dana White calling himself “the grim reaper,” according to the complaint.

As a result of the UFC’s stranglehold on MMA, fighters are allegedly forced to affiliate themselves with it—and accept its prevailing low pay rates—instead of striking out on their own.
The allegations echo an ongoing antitrust case brought by six MMA fighters in 2014. The complaint seeks to update the earlier suit, a proposed class action covering bouts only through mid-2017.

• Cause of Action: Section 2 of the Sherman Act.
• Relief: Treble damages, an injunction, costs, and fees.
• Potential Class Size: Anyone who has competed in a UFC bout since July 1, 2017.
• Attorneys: The fighters are represented by Kemp Jones LLP, Berger Montague PC, Joseph Saveri Law Firm Inc., Cohen Milstein Sellers & Toll PLLC, and Warner Angle Hallam Jackson & Formanek PLC.

Ultimate Fighting Championship has long dominated the world of mixed martial arts. But UFC’s effort to swallow up competitors has triggered a class action by fighters who claim it’s abusing its power. Now a key court victory threatens the organization’s very business model. Bloomberg’s Josh Eidelson investigates.

The antitrust class action discussed in this Bloomberg video is Cung Le, et al v. Zuffa, LLC, d/b/a Ultimate Fighting Championship and UFC, Case No. 2:15-cv-01045 (D. Nev.)  Cohen Milstein is Co-Lead Counsel in this case.

The U.S. Supreme Court’s decision on Monday to vacate certification for a class of Goldman Sachs investors is a temporary win for the bank, but may do little to prevent future securities claims from achieving class status, experts told Law360.

The majority opinion, penned by Justice Amy Coney Barrett, remanded the decade-old case to the Second Circuit for clarification on whether a split appellate panel properly considered the generic nature of Goldman’s alleged misstatements about avoiding conflicts of interest when it ruled that the bank failed to prove those statements did not impact its stock price.

Both the bank and the investors said they welcomed the ruling, as it simultaneously keeps Goldman’s challenge to the investors’ class certification alive and rejects the bank’s argument that it should not bear the burden of disproving the price impact of its alleged misstatements.

But according to law professors and attorneys, the narrow decision did not change the standard that defendants have to meet for defeating class certification or take away investors’ ability to claim a company’s corporate statements kept its stock price artificially inflated.

“It changes very little, and is not the dramatic decision that defendants sought and plaintiffs feared,” Columbia Law School professor John C. Coffee Jr. told Law360.

“The plaintiffs may have lost the battle, which they could still recoup on remand, but they did not lose the war — and that is a big victory,” he added.

. . .

‘Victory for Investors’

The bank had argued that the Second Circuit erred in finding that defendants bear the ultimate burden of persuasion, or the duty to convince the court of their side, in rebutting the Basic presumption by disproving price impact.

Goldman said the federal rules of evidence put the burden on investors to actually prove impact, an argument that three justices sided with but was rejected by the majority. The majority said Monday that both Basic and Halliburton II put the burden on the defendants to do more than merely present evidence that could disprove price impact.

Plaintiff-side securities litigators lauded that aspect of the high court’s decision. Korein Tillery LLC attorney Chad Bell said Monday that a finding to the contrary would have “made class certification in securities cases far more difficult.”

Defendants face a “very high burden” for disproving price impact at the class certification stage, according to Cohen Milstein Sellers & Toll PLLC partner Laura Posner, meaning the Supreme Court’s decision not to shift that burden toward plaintiffs marks “an important victory for investors.”

“I do not anticipate this decision having a significant — or quite frankly, even negligible — impact on class certification generally,” Posner told Law360. “[It’s] a big blow to defendants who had hoped to significantly water down the standard and make it easier to rebut the presumption of reliance.”

. . .

The Class Certification War

Still, several professors told Law360 that the decision doesn’t offer defendants many new tools for fighting class certification.

Georgetown University Law Center professor Robert Thompson said defendants “gained a small, additional space to argue” for a lack of price impact at the certification stage, but added that “it seems unlikely at this point to make a big difference one way or the other.”

“The chances of winning on this issue at class certification have gone up slightly for defendants, but [it’s] not likely to be decisive in very many cases,” he told Law360.

Thompson also noted that the relatively short opinions offered by the justices Monday “suggest this decision was not designed to make large changes,” and that the Basic presumption “seems more secure after this decision.”

Coffee said that on top of holding that defendants still bear the burden of disproving price impact, the ruling recognized the inflation maintenance theory, which had never before been considered by the court.

While Justice Barrett explicitly declined to comment on the validity of the theory, “there is enough discussion of inflation maintenance that lower courts are likely to treat it as established doctrine until if and when the court reconsiders it,” Coffee said.

“Those are both big victories, as a contrary result would have shifted the balance of advantage to defendants in securities litigation to a considerable degree,” he told Law360.

Fisch said that while the Second Circuit could issue more defendant-friendly decisions on remand, she doesn’t “expect something terribly damaging or problematic.”

“This isn’t really going to make it harder to bring class actions,” Fisch said of the opinion overall. “Anyone who was hoping for that from the Goldman decision isn’t getting it.”

Earlier this month, this website wondered aloud, “Why the hell is Joe Biden’s Justice Department defending Donald Trump?” The question arose from a bizarre, troubling pattern of late in which the DOJ, currently lead by Attorney General Merrick Garland, has gone to bat for the ex-president. In May, for example, the department filed a motion seeking to appeal a federal judge’s ruling that the agency had to release the memo that Bill Barr used to help clear Trump of obstruction in the Russia probe. Weeks later, Garland’s attorneys continued a push started by Barr to defend Trump in a defamation lawsuit brought by author E. Jean Carroll, with Barr’s DOJ arguing that Trump was acting in his capacity as POTUS when he responded to her rape allegations by saying: “Number one, she’s not my type. Number two, it never happened,” and then also: “[She’s] totally lying. I don’t know anything about her. I know nothing about this woman. I know nothing about her. She is—it’s just a terrible thing that people can make statements like that.” Obviously this was disturbing for a number of reasons, not the least of which being that (1) a federal judge already ruled last October that Trump was not, in fact, acting “within the scope of his employment” when he went after Carroll, leaving the DOJ under no obligation whatsoever to defend the guy (2) he is now a private citizen who claims to be very rich and can afford his own lawyers and (3) as Carroll’s attorney put it, such a position by the government “would give federal officials free license to cover up private sexual misconduct by publicly brutalizing any woman who has the courage to come forward.” Also, the department may have painted itself into a corner wherein it might have to defend Trump against lawsuits accusing him of inciting the January 6 attack on the Capitol.

According to a number of constitutional scholars and lawyers who spoke to Reuters, the DOJ’s decision to claim in the Carroll case that presidents enjoy basically boundless immunity for their comments in office will likely have “profound implications” for a number of ongoing suits, including ones concerning the insurrection Trump caused.

. . .

Attorney Joseph Sellers, who is representing U.S. Representative Bennie Thompson in his suit against the ex-president, told reporters Peter Eisler and Joseph Tanfani, “I don’t think anyone would think it’s within the scope of the president’s legitimate duties to encourage people to interfere with the functioning of another branch of government. He was promoting an insurrection and a riot.”

A proposed class-action lawsuit led by the $20.7 billion Arkansas Teacher Retirement System, Little Rock, against Goldman Sachs Group hit a roadblock Monday when the U.S. Supreme Court ordered the 2nd U.S. Circuit Court of Appeals in New York to reconsider allowing shareholders to pursue a class action over alleged misrepresentations made during the subprime mortgage crisis about its ethical principles and internal controls over conflicts of interest.

The 2011 lawsuit stemmed from Goldman Sachs’ Abacus collateralized debt obligation, a subprime mortgage-based financial instrument assembled with the help of hedge fund Paulson & Co. Goldman Sachs’ contrary bet against the CDO was not disclosed to investors, leading to its $550 million settlement with the Securities and Exchange Commission in 2010.

The Supreme Court’s 8-to-1 decision agreed with Goldman Sachs’ argument that its issuer statements may have been too generic to affect Goldman’s stock price. The appeals court will now reconsider the question.

. . .

The Supreme Court did agree with the appeals court that defendants, not shareholder plaintiffs, bear the burden of persuasion to prove a lack of price impact.

It is an important victory for investors, said Laura Posner, a partner with Cohen Milstein, who wrote an amicus brief for securities administrators supporting the plaintiffs. “The decision confirms that defendants bear the burden to demonstrate by a preponderance of evidence a lack of the price impact, including in cases where the price maintenance theory is alleged.”