International Paper Co., Memphis, Tenn., agreed to pay current and former employees a total of $30 million to settle a class-action lawsuit in which the company was alleged to have breached its fiduciary duties by charging “excessive fees” for two 401(k) plans, according to a settlement document released Tuesday.
In the proposed settlement, International Paper denies wrongdoing.
The agreement must be approved by a judge in the U.S. District Court in East St. Louis, Ill., where plaintiffs first sued the company in September 2006. The settlement document didn't cite a timetable for the judicial review.
In the case, plaintiffs alleged DC plan executives breached their fiduciary duties by investing “imprudently” in a company stock fund and a large-cap stock fund and paying “excessive” record-keeping fees, according to the settlement document. The plaintiffs also alleged that International Paper paid “excessive” management fees and “fraudulently report(ed) performance histories” for the plans' funds, the document said.
“We are pleased to be able to put this behind us,” Thomas Ryan, an International Paper spokesman, wrote in an e-mail. “Today's settlement agreement is not an admission of liability on behalf of the company.”
In addition to International Paper denying wrongdoing, the settlement document noted that the company contended that “the fees paid to plan service providers for various services provided to the plans are prudent and reasonable.” The document also cited the company's comment that its investments “have been prudent at all relevant times.”
According to the document, International Paper 401(k) plan executives will not prohibit employees from transferring investments out of the company stock fund and will not offer retail mutual funds. “Defendants contend these requirements are consistent with their existing practices,” the settlement document said.
The settlement document said International Paper will “competitively bid” its 401(k) plans' record-keeping services and “rebate to the plans relationship discounts offered as a result of plan investments.” The document said the company will “provide the plans with revenue earned from securities lending” and will add a passively managed large-cap stock fund. International Paper said all of these practices, except adding the index fund, “are consistent with … existing practices,” the document said.
Jerome Schlichter, lead attorney for the plaintiffs, could not be reached for comment. Mr. Schlichter is managing partner of the law firm Schlichter, Bogard and Denton.
