A federal judge in Los Angeles ruled Feb. 23 in favor of Wood Group U.S. Holdings and flexPath Strategies, an investment manager, saying the defendants didn't violate ERISA as claimed by former participants in a multiemployer 401(k) plan.
The original lawsuit was filed in February 2021 and amended twice against the defendants as well as NFP Retirement, an investment adviser doing business as 401(k) Advisors. U.S. District Court Judge James V. Selna ruled in November 2022 in favor of the plaintiffs in two of five allegations against Wood Group and one count against flexPath Strategies. NFP is no longer a defendant even though the case retains the formal title of Lauderdale et al. vs. NFP Retirement Inc. et al.
After conducting a bench trial, Selna on Feb. 23 rejected all allegations against the remaining defendants.
Plaintiffs had accused flexPATH of violating ERISA's duty-of-loyalty guidelines, which address self-dealing and putting interests above those of participants, in selecting a target-date series for the plan. The investment manager "did not financially benefit by selecting the flexPATH TDFs," the judge wrote. "Plaintiffs failed to prove that flexPATH's selection of its TDFs were the result of disloyalty."
Plaintiffs also accused flexPATH of violating ERISA's duty of prudence by allowing the target-date series to charge high fees and failing to replace it due to allegedly poor performance.
Selna ruled that the performance was due to a "risk-conscious strategy that was expected to provide downside protection and generate greater returns over a full market cycle," concluding that flexPATH satisfied ERISA's duty of prudence in selecting and retaining the target-date series.
The judge also ruled for Wood Group, saying the plaintiffs' allegations of violating the duty of prudence and prohibited transactions provisions of ERISA lacked evidence to support such claims. He rejected the allegation that Wood Group failed to properly monitor flexPATH's activities as the 401(k) plan's investment manager.
Wood 401(k) Plan, Houston, had $2.8 billion in assets as of Dec. 31, 2021, according to the latest Form 5500.
