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M&T Bank Workers Advance Suit Over In-House 401(k) Investments

Sept. 11, 2018, 7:55 PM

M&T Bank Corp. workers convinced a federal judge in New York to allow them, for the most part, to move forward with their lawsuit challenging high fee, poor performing proprietary mutual funds in the bank’s 401(k) plan.

The ruling is the latest to come among a string of lawsuits against financial companies accused of adding affiliated, high-fee, poorly performing funds in 401(k) plans at their workers’ expense.

For the most part, judges have allowed these lawsuits to move forward, except in cases against Wells Fargo, Capital Group, and Putnam Investments. Some companies have settled, including Deutsche Bank ($21.9 million), 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).

The latest ruling wasn’t a complete defeat for M&T and its subsidiaries as the judge dismissed the workers’ fiduciary claims against those entities.

Certain entities, including M&T Bank, M&T, Wilmington Trust Investment Advisors, and Wilmington Funds Management Corp., won’t have to defend the lawsuit, Judge Frank P. Geraci Jr. said Sept. 11. This is because these entities didn’t act as fiduciaries under the Employee Retirement Income Security Act and can’t be held liable under the statute, Geraci said.

Geraci, however, allowed the lawsuit to advance against the plan’s committee and its members.

They will have to defend claims that they violated ERISA by offering seven proprietary Wilmington Trust mutual funds to plan investors, even though these funds charged excessive fees and performed poorly. Wilmington Trust is a subsidiary of M&T Bank.

Geraci rejected, for now, the members’ argument that workers’ proprietary funds allegation were time-barred.

Geraci also refused to dismiss claims that the committee and its members failed to use their bargaining power to invest in the cheapest share class available. He also let the workers advance their claims that the members failed to consider collective investment trusts and separate accounts as alternatives to the mutual funds in the plan.

Nichols Kaster PLLP, Trevett Cristo Salzer & Andolina PC, and Kessler Topaz Meltzer & Check LLP represent the workers. Sullivan & Cromwell LLP represents M&T Bank.

The case is In re M&T Bank Corp. ERISA Litig., 2018 BL 326330, W.D.N.Y., No. 1:16-cv-00375-FPG, order granting in part defendants’ motion to dismiss 9/11/18.

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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