Goldman Sachs Denied Quick Appeal in Affiliated 401(k) Fund Suit

Goldman Sachs Group must continue defending a proposed class action challenging the affiliated mutual funds in its 401(k) plan after a Manhattan federal judge denied the bank’s request for a quick appeal of a decision allowing the case to move forward.

Goldman wanted to go directly to the U.S. Court of Appeals for the Second Circuit for a decision on two threshold issues in the Employee Retirement Income Security Act case: whether the 2019 lawsuit was untimely under the 401(k) plan’s two-year deadline for filing suit, and whether the case was blocked by plaintiff Leonid Falberg’s failure to first challenge the Goldman funds through the plan’s internal appeals procedures.

Judge Edgardo Ramos of the U.S. District Court for the Southern District of New York denied Goldman’s request Monday.

Ramos said it would be a “waste of judicial resources” to allow an immediate appeal on the question of timeliness, because most courts are in agreement that the deadline to file an ERISA fiduciary breach claim is set by statute and not by plan documents, as urged by Goldman.

Ramos also declined to allow an immediate appeal of the exhaustion issue, saying most courts agree that ERISA’s exhaustion requirement applies to benefit claims but not fiduciary breach claims like those brought in this case.

Goldman objects to Ramos’s July decision allowing Falberg to advance ERISA claims challenging the affiliated funds in the bank’s 401(k) plan, which Falberg says charge high fees that directly benefit Goldman.

The 150-year-old investment bank is among the dozens of financial companies that have been sued over the proprietary funds in their 401(k) plans.

The lawsuits claim the funds perform worse than unaffiliated options while charging higher fees. Several companies have signed multi-million dollar settlements, including McKinsey & Co. ($39.5 million), SunTrust Banks Inc. ($29 million), Fidelity Investments ($28.5 million), BB&T Corp. ($24 million), Deutsche Bank ($21.9 million), and M&T Bank Corp.($20.9 million).

Falberg is represented by Nichols Kaster PLLP. Goldman is represented by Steptoe & Johnson LLP and Sullivan & Cromwell LLP.

The case is Falberg v. Goldman Sachs Grp., Inc., 2020 BL 502839, S.D.N.Y., No. 1:19-cv-09910, 12/28/20.