September 03, 2019

 A California judge on Tuesday refused to toss a proposed Employee Retirement Income Security Act class action claiming BlackRock Inc. improperly filled its workers' retirement plan with poorly performing company-affiliated funds and cost plan participants more than $100 million, but agreed to slightly narrow the scope of the case.

U.S. District Judge Haywood S. Gilliam Jr. mostly denied the investment firm's bid to dismiss a suit from two former workers accusing the company of favoring its own proprietary funds in its workers' 401(k) plan, even though it allegedly led to poor returns.

The judge said that although the defendants might be able to put forth legitimate reasons the challenged funds were chosen, that isn't something the court should determine at this time. The judge said the workers' allegations back "a reasonable inference" that the company affiliated funds were improperly favored.

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"We are very pleased with the court's decision, which recognizes that retirement investors have the right to recover excessive securities lending fees," Michelle C. Yau of Cohen Milstein Sellers & Toll PLLC, an attorney for the plaintiffs, said in a statement. "We look forward to proving that BlackRock's excessive fees violate ERISA and that BlackRock enriched itself at the expense of the retirement investors whom it was bound to protect."

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Baird and Slayton are represented by Michelle C. Yau, Mary J. Bortscheller and Daniel R. Sutter of Cohen Milstein Sellers & Toll PLLC, and Todd F. Jackson and Nina Wasow of Feinberg Jackson Worthman & Wasow LLP.

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