May 3, 2019

Consumer News Employee Benefits

Court Certifies ERISA Class Action Against Ivy League School

May 3, 2019 – Earlier this year, a federal judge in New York granted a motion to certify a class of current and former employees of Cornell University who are suing the university and its financial advisors for failing to properly manage their retirement plan in violation of the Employee Retirement Income Security Act.

May 3, 2019 – Earlier this year, a United States District Court in the Southern District of New York granted a motion to certify a class of current and former employees of Cornell University (“Cornell”) who are suing the university and its financial advisors for violations of the Employee Retirement Income Security Act (“ERISA”). The lawsuit claims that Cornell failed to properly manage the retirement plan and allowed excessive fees to accrue. Cunningham v. Cornell Univ., 2019 WL 275827 (S.D.N.Y. Jan. 22, 2019).

The Employee Retirement Income Security Act of 1974 (“ERISA”) is a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection to individuals in these plans. ERISA is important because it protects retirement savings from mismanagement and abuse by requiring those in charge of those savings to act in the best interests of plan participants. Subsequently, ERISA allows individuals to sue for any “participant, beneficiary or fiduciary” for “breaches [of] any of the responsibilities, obligations, or duties imposed upon fiduciaries” of a retirement plan.

The lawsuit alleged that two plans (“Plans”) were mismanaged: The Cornell University Retirement Plan for the Employees of the Endowed Colleges at Ithaca (the “Retirement Plan”) and also the Cornell University Tax Deferred Annuity Plan (the “TDA Plans”). Both plans are valued at well over $1 billion. Plaintiffs alleged that defendants failed to monitor and control the Plans’ recordkeeping fees, solicit bids from competing recordkeeping providers, and assess whether the Plans would benefit from moving to a single recordkeeper. As a result of these failures, the plaintiffs were charged excessive fees.

Importantly, United States District Court Judge P. Kevin Castel found that plaintiffs could bring class claims despite not showing investment into each of the hundreds of plan investments. Instead, the plaintiffs showed that they were charged high fees that resulted in loses and breaches of fiduciary duties on behalf of the university and their financial advisors. For claims involving specific investments only, the court found at least one plaintiff had invested in each of those investments.

Furthermore, the court found that by having more that 28,000 members, the suit satisfied the numerosity requirement. The commonality requirement was satisfied by the Court’s finding that the claims resulted from defendants’ fiduciary duties to the class as a whole. Therefore, since commonality was met, the typicality requirement was also met by the same basis. Additionally, the court found that plaintiffs and their counsel were adequate to advise and conduct this class action.

Lastly, the Court determined that a class action was necessary because multiple individual cases could risk incompatible results and issues of administration of the Plans that may have inconsistent effects across all plaintiffs. Thus, because damages are owed to the Plans and not individual plaintiffs, adjudication of the named plaintiffs’ suits would be dispositive of the interests of other participants in the Plans. In sum, because the management of the Plans has an effect on all Plan-participants, the class is properly certified under Rule 23(a) and Rule 23(b)(1)(A) or 23(b)(1)(B).

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Wanta Thome PLC is dedicated to protecting the rights of employees who have been treated unfairly by the illegal practices of their employers. If you believe your employer is mismanaging your retirement plan or violating your ERISA rights, our employment lawyers want to hear from you. Contact us for a free initial consultation.