An amended claim in an excessive fee litigation treads some new ground – including naming the plan’s investment advisor as a defendant. New York University was the target of one of the first of the university 403(b) excessive suits filed in August 2016.
A year ago, the NYU fiduciaries were able to persuade the court to reject some allegations, notably that there were too many investment options in the plan. But claims regarding excessive recordkeeping fees and failure to prudently monitor plan investment options by continuing to offer funds with high fees and poor performance remained. Then in November came a new filing, expanded to include the university’s hospital system, school of medicine, the retirement plan committee and 21 named individuals.
The new, amended complaint in the US District Court for the Southern District of New York, has new ground(s) that includes naming as a defendant Cammack LaRhette, which, according to the plaintiffs, has served as the plans’ investment advisor since 2009. “As a result of Cammack’s imprudent investment advice failing to recommend the removal of the imprudent TIAA Real Estate and CREF Stock Accounts despite their high fees and histories of abysmal performance, the Plans suffered tremendous losses,” according to the suit.
Arguments include the use of inappropriate benchmarks by LaRhette, and that Margaret Meagher, longtime Co-Chair of the Retirement Plan Committee, “admitted that she had never heard of the terms ‘float’ or ‘securities lending’ from anyone and did not even know what the terms mean despite the DOL’s requirement that plan fiduciaries must take into account a service provider’s float income as part of the service provider’s compensation for services to the plan. DOL Field Assistance Bulletin 2002-03,” and that “Cammack has never discussed with the Retirement Plan Committee terms such as float and securities lending and Cammack failed to take these forms of compensation into account when evaluating the reasonableness of the Plans’ recordkeeping fees.” Moreover, that “in failing to take this into account, Cammack provided flawed investment advice which the Retirement Plan Committee accepted without question.”
The complaint is only one side of the story, and here makes a number of charges and allegations that may well be disputed or rejected at trial. However, this case does make a number of extraordinarily detailed claims about what defendants have not only done, but said on the record. It will be interesting to see how this case – particularly in view of the expanding and evolving claims – develops.