A federal judge in Columbia, S.C, has rejected a $4.5 million settlement between Aon and participants in a Centerra LLC 401(k) plan because co-defendant Centerra objected.
U.S. District Court Judge Sherri A. Lydon rejected on Jan. 5 the settlement of an ERISA lawsuit because the agreement was "prejudicial" to Centerra and its fiduciaries, neither of which was involved in the settlement. The Centerra defendants' case remains pending.
Aon, Centerra and Centerra fiduciaries were sued by current and former plan participants in December 2020 claiming breaches of fiduciary duties.
They protested the replacement of a target-date series in the Centerra 401(k) plan by a target-date series created by Aon, formerly known as Aon Hewitt Investment Consulting. They alleged that the Aon investment performed worse than the one it replaced.
Aon, the plan's investment manager, announced on Oct. 27 it would pay a $4.5 million settlement, but the agreement required court approval in the case of Williams et al. vs. Centerra Group LLC et al.
The Centerra defendants petitioned the judge in November to reject the deal, saying it would "improperly and unfairly impair" their rights.
The sticking point in the settlement is a bar order, which would prevent the Centerra defendants "from bringing subsequent claims against Aon, including for contribution and indemnity," the defendants wrote.
The judge, in her Jan. 5 ruling, described as "unusual" the Centerra defendants' petition.
"On the one hand, (the court) cannot say it has ever before received such strong objections to a plaintiff's attempts to dismiss one defendant and settle its claims against another," she wrote. "On the other hand, it also cannot say it has ever been asked to bless an agreement between two parties that extinguishes a third party's contractual right to indemnification, particularly where that third party had no part in crafting the agreement extinguishing its rights." After reviewing the terms of the bar order, the judge wrote that its fairness to the Centerra defendants "is suspect." She opposed the settlement "without prejudice," meaning Aon and the Centerra participants could revise their agreement.
Centerra, which provides security services, is a subsidiary of Constellis, Herndon, Va.