A federal appeals court in New York has resurrected an ERISA lawsuit against Cammack LaRhette Advisors LLC, relating to its role as an investment adviser to a pair of 403(b) plans offered by New York University.
The Oct. 1 decision by the 2nd U.S. Circuit Court of Appeals vacated a New York federal District Court judge's ruling in March 2018 that had dismissed Cammack as a defendant in a fiduciary breach lawsuit against the 403(b) plans' fiduciaries.
"We do not comment on pending litigation," said Cara McAuley, a spokeswoman for parent company Cammack Retirement Group, in an email. Ms. McAuley's company provides investment advisory services through Cammack LaRhette Advisors.
The appeals court ruling — which sent the case back to the District Court — is the latest action in complex litigation involving the two NYU 403(b) plans.
Participants have argued that plan fiduciaries violated their duties under ERISA. Their complaint included allegations of excessive fees, poor-performing investments and failure to monitor co-fiduciaries.
The original lawsuit was filed in August 2016 only against New York University. Twelve months later, U.S. District Court Judge Katherine B. Forrest dismissed some of the complaints in Sacerdote et al. vs. New York University.
In November 2017, the participants filed a second lawsuit naming several other defendants — but not NYU. One month later, these defendants asked the judge to dismiss this complaint because it duplicated the first lawsuit. (Judges use the terms Sacerdote I and Sacerdote II to distinguish the cases.)
In January 2018, the plaintiffs amended their complaint, adding Cammack to the list of defendants in Sacerdote II. They maintained that the firm was a co-fiduciary to the plans and thus subject to ERISA's rules.
In January 2018 and again in March 2018, Ms. Forrest dismissed the claims in Sacerdote II, saying it duplicated Sacerdote I.
Ms. Forrest wrote that she dismissed the case because NYU and Cammack firm were "in privity," a legal term indicating that their interests were "aligned" because they had "a sufficiently close relationship."
However, the appeals court ruled against her interpretation. "Especially at the pleading stage, it was error for the district court to accept Cammack's argument that its interests were identical to those of NYU over plaintiffs' plausible assertions to the contrary," the appeal court judges wrote.
"The contractual and co-fiduciary relationships between NYU and Cammack are insufficient to find the parties in privity," they added.
The District Court judge's dismissal of Cammack in the Sacerdote II case "was legal error, and thus an abuse of discretion and a violation of the fundamental principle that a plaintiff has 'as many causes of actions as there are defendants to pursue,'" they wrote.
Meanwhile, plaintiffs in Sacerdote I have filed an appeal to the 2nd U.S. Circuit Court of Appeals. In July 2018, Ms. Forrest ruled, after a trial, that the plaintiffs failed to prove that the NYU fiduciaries acted imprudently.
Jerome Schlichter, the lead attorney for plaintiffs in both NYU cases, said in an interview that no timetable has been set for the appeals court's review of Sacerdote I. Mr. Schlichter is the founding and managing partner of Schlichter Bogard & Denton.