WASHINGTON The Labor Department wants an appeals court to reverse a decision dismissing the 401(k) fee class-action lawsuit against Deere & Co. and Fidelity Investments.
The Labor Departments request, filed in a brief, gives a strong boost to the appeal by attorneys for participants in the $2.5 billion Deere 401(k) plan.
In June, a U.S. District Court judge in Madison, Wis., dismissed the suit against Deere, Moline, Ill., and Fidelity Investments, Boston, trustee and record keeper for the Deere plan.
Judge John C. Shabaz had said the Employee Retirement Income Security Act does not require plan sponsors or service pro¬viders to disclose revenue-sharing information to 401(k) plan participants. The suit alleged that plan executives failed to disclose these fees to participants, as required by ERISA. (Revenue sharing is the common practice of mutual funds and their investment managers making payments to other service providers.)
Jerome Schlichter, founding partner of Schlichter, Bogard & Denton, St. Louis, the law firm representing Deere participants, appealed the case; it is pending in the 7th U.S. Circuit Court of Appeals in Madison. The Labor Departments brief has breathed new life into the fight.
The brief carries a lot of weight in the appeal, said Michael Roche, a partner at Winston & Strawn LLP, Chicago. The plaintiffs are happy that the DOL weighed in. Having a brief filed on their behalf helps their cause, said Mr. Roche.
Edward A.H. Siedle, president, Benchmark Financial Services Inc., Ocean Ridge, Fla., said the brief speaks volumes and puts the appeals case back on track.
The defense bar (attorneys for Deere and Fidelity) and industry commentators have consistently taken the view that these (fee) cases are meritless, and I know that a lot of questionable fiduciary practices are surfacing through these lawsuits. Its encouraging that the DOL is weighing in here and it should tell plan sponsors that there is fire here, not just smoke, said Mr. Siedle.
Mr. Schlichter welcomed support from the Labor Department.
The brief follows the law, said Mr. Schlichter, adding that the plaintiffs are thrilled with the news.
Plan sponsors better roll up their sleeves and take a new look at their practices, said Mr. Siedle. Its amazing to me, the arrogance from the defense bar. Theyre being so dismissive when there are a lot of questionable practices.