• Prior pay targeted in Google class action lawsuit
• State equal pay cases can be easier to prove

A California judge’s order allowing a class of 10,000 women to pursue pay discrimination claims against Google Inc. offers a roadmap for other plaintiffs seeking to tackle gender inequity in the workplace, in contrast to other battles against technology giants that failed to gain traction.

The Google case follows a similar ruling last year in a case against Oracle Corp., which also received class action status. The women in that case also survived a motion to dismiss from the tech giant earlier this year. Trials will likely be set for both lawsuits in 2022.

While these suits have moved forward, others have faltered. Workers’ attorneys say that there is still a path to reaching the critical class certification stage, despite a high bar the U.S. Supreme Court set with a 2011 decision that blocked 1.5 million female workers at Walmart Inc. from pursuing their discrimination claims as a group.

. . .

In both the Google and Oracle cases, the attorneys sued under California’s equal pay laws, and targeted the companies’ use of job seekers’ prior pay to set compensation. This practice has been banned in a handful of states, advocates including the U.S. Equal Employment Opportunity Commission have said that because women are historically paid less than men, using their previous salary bakes in pay gaps.

‘Substantially Similar’

Female engineers at both Twitter Inc. and Microsoft Corp. failed to win class-action status for their gender-bias cases and those rulings were upheld on appeal in 2018 the U.S. Court of Appeals for the Ninth Circuit. Nike Inc. is facing an ongoing class action claim in Oregon federal court over pay and promotion practices, as well.

The Twitter and Microsoft cases were pursued under Title VII of the 1964 Civil Rights Act, and not federal or state Equal Pay Act statutes. Unlike the Google and Oracle cases, they also didn’t allege discriminatory pay based on a common policy of using prior salary history to set compensation.

Finberg said in some ways Equal Pay Act claims, both under federal and state law, are easier to certify than Title VII claims, which have a higher bar to prove discrimination took place. California’s law is more employee friendly, as well, he said, because it compares jobs that are “substantially similar” rather than “substantially equal.”

. . .

Class Commonality

There is no question there have recently been additions to some state equal pay laws that make them more protective against pay disparities, said Joe Sellers, a Washington, D.C.-based partner at Cohen Milstein Sellers & Toll, who isn’t connected to the Google or Oracle class actions. Sellers represented the plaintiffs in the Walmart Stores, Inc. v. Dukes class action that went to the Supreme Court.

Sellers said the issue of using prior pay has been gaining greater scrutiny, but courts vary and some are more comfortable allowing employers to rely on that practice to set pay rates.

He said when a company has a common system for setting pay, that is a very important feature essential to class certification—and that’s consistent under federal Equal Pay Act claims, as well.

“The key to the certification of the claims was the common system for setting pay rates and data available for making comparisons for workers holding same or similar jobs and accounting for the factors that otherwise explain pay rates apart from gender,” he said.

Class certification is a key step, and the advanced study that the attorneys put forward for Google and Oracle cases show that an individual plaintiff would likely have a hard time putting together those resources for an individual pay claim.

“The failure to get a class certified, for most members of the class, is the end of their claims,” Sellers said. “Class certification itself is not so easy and courts have been raising that burden over the last 15 to 20 years.”

GreenSky investors have reached a $27.5 million settlement deal over allegations the lending technology company made misleading statements ahead of its initial public offering, according to documents filed in New York federal court.

A group of investors on Monday asked the court for preliminary approval of the deal, saying the two-year litigation had been hard-fought and the settlement amount was fair. The investors are led by Northeast Carpenters Annuity Fund, El Paso Firemen & Policemen’s Pension Fund, and the Employees’ Retirement System of the City of Baton Rouge and Parish of East Baton Rouge.

“The settlement represents a substantial portion of the potential provable damages suffered by the class,” the filing said, adding the agreement was reached in mediation and “only after the settling parties and co-lead counsel were well informed as to the strengths and weaknesses of the claims and defenses.”

. . .

According to investors’ November 2018 complaint, GreenSky failed to adequately disclose that it was moving away from the more profitable solar-energy loans, where it was able to charge higher upfront transaction fees, and toward industries with lower fees.

An updated, consolidated complaint filed in June 2019 described the shift as “core financial information” that had a “seismic effect” on the company’s earnings, profitability and growth prospects.

. . .

U.S. District Judge Alvin K. Hellerstein kept investors’ claims alive in November 2019 following oral arguments, and the investors won certification as a class in June 2020.

The proceedings have included “extensive” discovery involving over 4.4 million pages of documents, six depositions, and subpoenas to outside parties such as auditors and consulting firms, Monday’s filing said. The sides also went through mediation, ultimately settling on the $27.5 million figure in April, according to the filing.

The settlement amount reflects the risk of pursuing further litigation, in which the investors would have to overcome significant hurdles, the filing said.

“Although lead plaintiffs defeated the motions to dismiss, this was no guarantee as to continued success in the case,” the filing said. “Even if lead plaintiffs established defendants’ liability, lead plaintiffs would encounter significant loss causation defenses,” in which the company and its executives would look to distinguish between losses caused by the allegedly false statements and losses due to other factors, the filing said.

Steven J. Toll of Cohen Milstein Sellers & Toll PLLC, who helped represent the investors, said Tuesday he hopes the court will greenlight the settlement.

“I believe this is a very good recovery for the class given the potential damages and risks of litigation, and hope the court will agree and ultimately approve the settlement later this year after notice is given to the class,” Toll told Law360.

. . .

The investors are represented by Steven J. Toll, S. Douglas Bunch, Jan Messerschmidt, Jessica (Ji Eun) Kim and Manuel J. Dominguez of Cohen Milstein Sellers & Toll PLLC and Max Schwartz and Tom Laughlin of Scott + Scott Attorneys At Law LLP.

GreenSky Inc. investors who accuse the fintech firm of misleading them about its 2018 initial public offering asked a federal judge in New York to grant preliminary approval to their $27.5 million settlement.

The deal represents almost 14% of the investors’ “estimated recoverable damages, discounted for certain potential defenses,” the class said in a memo filed in the U.S. District Court for the Southern District of New York in support of its motion for preliminary settlement approval.

“Settlements in this range of recovery (and indeed, well below this range) have routinely received approval,” the investors said. They pointed to other securities class suits describing average recoveries ranging from 3% to 7%.

The settlement class includes everyone who purchased GreenSky Class A common stock pursuant or traceable to the IPO, with some exceptions for those with close ties to the company, according to a stipulation and agreement of settlement filed Monday. Judge Alvin K. Hellerstein certified the investor class in June 2020.

A judge has denied Wells Fargo’s request to dismiss a class-action lawsuit that claims the mega bank mismanaged its more than $40 billion 401(k) plan.

Brought on behalf of participant Yvonne Becker in U.S. District Court for the District of Minnesota, the class-action lawsuit asserts that some high-level executives at Wells Fargo — who were named as the retirement plan’s fiduciaries — selected and retained 17 Wells Fargo proprietary funds, many of which performed below the benchmark that the bank had picked “as an appropriate broad-based market index for each Wells Fargo Fund.”

Becker further alleges that the Wells Fargo Funds included “newly launched funds that lacked a performance history necessary to evaluate them, and that the Wells Fargo Funds charged greater fees than similar non-proprietary funds.”

Michelle Yau, a partner at Cohen Milstein in Washington and chair of the firm’s Employee Benefits/ERISA practice group, who represents Becker and the other plaintiffs, told ThinkAdvisor in a recent interview that she’s “glad to see” that Judge Donovan Frank, in denying Wells Fargo’s request to dismiss the case, “understood why the case matters.”

Yau said: “You have 350,000 current and former Wells Fargo employees who, for many of them, their only retirement savings is their 401(k) plan. … They don’t get to pick the funds in the 401(k) plan, so they’re relying on the fiduciaries of their plan to pick prudent and loyal options; and ERISA requires it.”

. . .

More Allegations

The suit also asserts that because of the enormous size of the plan, Wells Fargo should have been able to obtain “superior investment products at very low cost but instead chose proprietary products to bolster their own salaries by increasing fee revenue and providing seed money to newly created Wells Fargo Funds.”

“Wells Fargo doesn’t have to have its high-level executives pick the funds for the plan,” Yau told ThinkAdvisor. “It decides to do that. It set up its plan so that the fiduciaries who pick the investment options are all high-level executives — their purpose in their day job is to maximize profits.”

Yau explained, “The problem is, when you’re managing a $50 billion plan and you pick Wells Fargo funds … you really have got to scrutinize your decision-making because of the vulnerability of a conflict of interest.”

Plaintiffs are seeking to have their losses restored that they suffered from being in funds that performed poorly, she said.

The next stage in the case is summary judgment and then trial, Yau explained, “which come up in pretty quick succession.”

A Massachusetts federal court on Friday certified classes for two groups of buyers accusing Ranbaxy Pharmaceuticals of delaying generic versions of three different drugs by manipulating the regulatory approval system.

U.S. District Judge Nathaniel M. Gorton issued an order granting class certification requests from direct purchasers, including drug wholesalers, and from end-payors, such as health care plans that indirectly paid for the treatments. The order certified separate classes for both groups of buyers covering each drug involved in the case — anti-AIDS drug Valcyte, high blood pressure drug Diovan and reflux medication Nexium.

. . .

Proposed class actions from the two groups of buyers were consolidated in Massachusetts federal court in April 2019. The case accuses Ranbaxy of filing new drug applications with the Food and Drug Administration in the early 2000s for generic versions of Valcyte, Diovan and Nexium that contained missing, incorrect or fraudulent information.

Ranbaxy allegedly filed the applications in order to secure valuable exclusivity periods, meaning it would be the only generics competitor to each of the branded drugs for a set period of time. But the company ultimately failed to gain approval for its generics because of the faulty information supplied to the FDA.

The buyers contend Ranbaxy wrongly obtained the exclusivity periods and that this delayed the eventual launch of generic versions of all three drugs by other manufacturers, resulting in higher prices. The suit includes claims for violation of the Racketeer Influenced and Corrupt Organizations Act, federal and state antitrust laws and state consumer protection laws.

The litigation followed investigations into Ranbaxy by the FDA and U.S. Department of Justice that resulted in guilty pleas and a $500 million fine against the drugmaker for lying to regulators and selling drugs that fell short of federal safety standards.

. . .

The direct buyers are represented by Hagens Berman Sobol Shapiro LLP, Hilliard & Shadowen LLP, Radice Law Firm, Sperling & Slater PC, Kessler Topaz Meltzer & Check LLP, Wexler Wallace LLP, Cohen Milstein Sellers & Toll PLLC and Nussbaum Law Group PC.

The complete article can be viewed here.

A federal court judge in Minneapolis rebuffed an attempt by Wells Fargo & Co. and other defendants to dismiss an ERISA complaint filed by a participant in a company 401(k) plan.

U.S. District Court Judge Donovan Frank on May 12 rejected every defense submitted in the case of Yvonne Becker vs. Wells Fargo Co. et al., on allegations ranging from charging excessive fees to offering poor-performing investments to engaging in prohibited transactions under ERISA. Ms. Becker, a plan participant and former employee, sued in March 2020.

. . .

The judge noted that Ms. Becker, in her complaint, provided benchmarks for assessing plan investments. These benchmarks “are sufficiently meaningful to provide proper comparison to the challenged funds with respect to both performance and fees,” Mr. Frank wrote.

The judge also rejected defendants’ request to dismiss Ms. Becker’s claim that they violated ERISA’s prohibited transactions rule.

She alleged they “caused the plan to repeatedly purchase property from Wells Fargo, Wells Fargo Bank or both, which hold legal title to Wells Fargo funds,” the judge wrote. She also alleged that these defendants plus another defendant, Galliard Capital Management, caused “the repeated transfer of plan assets directly, indirectly or both” to each other “in the form of various direct or indirect fees,” the judge wrote. Galliard is an investment adviser and fiduciary to the 401(k) plan, according to court documents.

Reviewing the complaint and the defendants’ response, the judge concluded that “Becker has plausibly pled that defendants engaged in transactions prohibited under ERISA.”

The Wells Fargo & Co. 401(k) Plan had assets of $48.2 billion as of Dec. 31, 2019, according to the latest Form 5500.

Read Judge denies Wells Fargo bid to dismiss ERISA suit.

A federal district court judge has moved forward a lawsuit alleging that Wells Fargo 401(k) plan fiduciaries should have been able to obtain superior investment products at a very low cost but instead chose proprietary products for their own benefit, increasing fee revenue for the company and providing seed money to newly created Wells Fargo funds.

The lawsuit, filed last March, claims that upon the creation of the Wells Fargo/State Street Target CITs (Target Date CITs) in 2016, the committee defendants added the collective investment trusts (CITs) to the plan even though the funds had no prior performance history or track record which could demonstrate that they were prudent. Despite the lack of a track record, the committee defendants “mapped” nearly $5 billion of participant retirement savings from the plan’s previous target-date option into the Target Date CITs.

In addition, the plaintiff alleges the committee defendants used the plan’s assets to seed the Wells Fargo/Causeway International Value Fund (WF International Value Fund), as evidenced by the fact that the plan’s assets constituted more than 50% of the total assets in the fund at year-end 2014. “Without such a substantial investment from the plan, Wells Fargo’s ability to market its new, untested fund would have been greatly diminished,” the complaint states.

The lawsuit further alleges that plan fiduciaries selected and retained for the plan 17 Wells Fargo proprietary funds, many of which underperformed the benchmark that the defendants selected as an appropriate broad-based market index for each fund.

. . .

“The court finds that [the plaintiff’s] allegations are far more than general assertions, and that accepted as true, show that defendants engaged in prohibited transactions,” Frank wrote in his opinion. “The court similarly finds that whether any prohibited transaction exemption applies to [the plaintiff’s] claims is an affirmative defense that cannot be resolved on a motion to dismiss.”

• Bank defeated similar suit in Eighth Circuit in 2018.
• But this lawsuit has more details, benchmarks, judge says.

Wells Fargo & Co. must face a proposed class action challenging the affiliated funds in its $40 billion 401(k) plan after a Minnesota federal judge on Wednesday ruled that plan participants provided meaningful benchmarks showing how the banking giant favored its own funds over cheaper and better-performing alternatives.

Yvonne Becker’s complaint relies on the same benchmarks set by Wells Fargo to argue that the bank kept its own funds in the 401(k) plan despite multi-year periods of underperformance, Judge Donovan W. Frank of the U.S. District Court for the District of Minnesota held. Becker’s “numerous and specific allegations” support her claim that Wells Fargo’s plan management was imprudent and disloyal under the Employee Retirement Income Security Act, he said.

. . .

Frank’s decision comes three years after Wells Fargo defeated similar allegations in the U.S. Court of Appeals for the Eighth Circuit. But unlike the allegations rejected by the Eighth Circuit, Becker’s complaint provides meaningful benchmarks by which to assess the Wells Fargo funds, because it relies on “the very benchmarks that Defendants themselves selected for comparison,” Frank said.

He also allowed Becker to move forward with claims under ERISA’s prohibited transaction rules based on the plan’s alleged purchase of affiliated funds from Wells Fargo.

Becker’s lawsuit challenges the Wells Fargo target-date collective investment trusts in the company’s 401(k) plan, which are the default options for participants who don’t select their own investments. Wells Fargo transferred about $5 billion worth of plan assets to these target-date trusts in 2016, even though the trusts were newly established and had “no prior performance history or track record which could demonstrate that they were appropriate,” Becker claims.

Becker is represented by Cohen Milstein Sellers & Toll PLLC and Zimmerman Reed LLP.

A proposed class of World Travel Inc. employees has accused Prudent Fiduciary Services and its owner of overpaying for a $200 million stock buyback from the company’s founders by saddling the employee ownership plan with “tens of millions” of dollars in debt.

The complaint, filed by employees of the travel agency on Tuesday in Pennsylvania federal court, claims plan manager Prudent and owner Miguel Paredes mishandled a 2017 stock buyback by allowing three stockholders, World Travel founders James A. Wells, James R. Wells and Richard G. Wells, to sell their shares back to Prudent at above market value while retaining control of the company board even though the transaction made World Travel entirely employee-owned.

Prudent purchased 19,860,000 World Travel shares from the founders — each of whom owned 10% or more of World Travel — for $200 million through a loan of the same amount to Prudent from World Travel to be paid off over 45 years with an annual 2.64% interest rate, according to the complaint, which alleges the buyback violated the Employee Retirement Income Security Act.

. . .

World Travel is a travel agency specializing in corporate travel management since 1983 and, according to the complaint, has remained privately traded since its founding.

The investors bring claims for causing and engaging in transactions forbidden by ERISA and U.S. Code 23 and for breach of fiduciary duty. They seek a declaration against Prudent and Paredes affirming the trustees’ conduct, confirmation of an ERISA violation and a range of financial damages intended to reimburse the employees for investment value and the cost of the suit

Two former employees of corporate travel company World Travel Inc. filed a lawsuit accusing the trustee of their employee stock ownership plan of mishandling a $200 million stock transaction that allegedly hurt workers’ retirement savings, according to a proposed class action filed in the Eastern District of Pennsylvania.

The lawsuit, filed Tuesday by Shari Ahrendsen and Barry Clement, challenges a 2017 transaction in which World Travel—which isn’t named as a defendant—became 100% employee-owned through an employee stock ownership plan. Ahrendsen and Clement say plan trustee Prudent Fiduciary Services LLC failed to conduct proper due diligence on the stock sale, which caused employees to overpay for World Travel’s stock while taking on hundreds of millions of dollars in debt.

The $200 million purchase price included a “control premium” meant to account for the plan’s 100% ownership interest in World Travel, but the plan was never given control of the company’s board of directors, Ahrendsen and Clement say. And the due diligence that Prudent Fiduciary conducted in connection with the transaction was “less extensive and thorough than the due diligence performed by third-party buyers in corporate transactions of similar size and complexity,” they say.

“Due to the Plan’s overpayment, the Plan’s participants, including Plaintiffs, received diminished stock allocations, saw their Plan take on excessive debt to finance the Transaction, and suffered losses to their individual Plan accounts,” according to the complaint.