Benefits & Executive Compensation News

Deutsche Bank Inks $21.9M Deal to End 401(k) Fee Class Action (1)

Aug. 15, 2018, 11:32 AMUpdated: Aug. 15, 2018, 12:51 PM

Deutsche Bank Americas Holding Corp. agreed to pay $21.9 million to settle claims that it mismanaged its employees’ retirement savings by offering proprietary, expensive, and underperforming investment options in its 401(k) plan.

The proposed settlement, if approved, would be the largest reached by a financial company facing similar claims.

More than two dozen financial companies have been sued in the past several years by workers accusing them of adding affiliated, high-fee, poorly performing funds in the 401(k) plans at their expense. Deutsche is the sixth company to settle similar claims, following American Airlines Group Inc. ($22 million), Allianz SE ($12 million), TIAA ($5 million), New York Life Insurance Co. ($3 million), and Principal Life Insurance Co. ($3 million). So far, Wells Fargo and Capital Group have been the only companies that have defeated these lawsuits.

The settlement would provide relief to approximately 34,700 Deutsche workers and allow class counsel to seek up to $6.57 million in fees. Each class member would receive $631, according to court documents filed Aug. 14.

The multimillion-dollar deal represents a recovery of more than 50 percent of the damages associated with the affiliated funds in the plan and approximately 38.5 percent of the total investment damages including nonaffiliated funds, the workers said.

The deal was reached one day before the parties were scheduled to start trial last month. Judge Lorna G. Schofield of the U.S. District Court for the Southern District of New York gave them one month to finalize the settlement terms and file their request for approval.

The agreement would provide significant prospective, non-monetary relief to the workers. Deutsche agreed to delegate all decisions regarding proprietary investments to an independent fiduciary. The bank also agreed to seek guidance from an independent fiduciary regarding whether any of the mutual funds in the plan should be replaced with alternative investments such as separate accounts or collective trusts.

Earlier this year, Schofield trimmed the workers’ lawsuit, allowing them to advance claims of fiduciary breach based on the offering of in-house funds that carried excessive fees and performed poorly. Last year, Schofield certified the class—a ruling Deutsche was unable to undo.

Nichols Kaster PLLP represents the class. Goodwin Procter LLP represents Deutsche.

The case is Moreno v. Deutsche Bank Am. Holding Corp., E.D.N.Y., No. 1:15-cv-09936, plaintiffs’ motion for preliminary approval of class action settlement 8/14/18

(Updated with additional reporting.)

To contact the reporter on this story: Carmen Castro-Pagan in Washington at ccastro-pagan@bloomberglaw.com

To contact the editors responsible for this story: Jo-el J. Meyer at jmeyer@bloomberglaw.com; Martha Mueller Neff at mmuellerneff@bloomberglaw.com

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