A federal court judge in Los Angeles has rebuffed a lawsuit by participants in a Westco Chemicals Inc. 401(k) plan who argued that executives breached their ERISA duties by offering only certificates of deposit in the plan menu.
U.S. District Court Judge Otis D. Wright II ruled the plaintiffs took too long to sue the company and its fiduciaries after they knew that the plan's investment strategy was imprudent by ERISA standards.
One plaintiff, Daniel Draney, filed an initial complaint in February 2019 alleging ERISA violations in the company 401(k) plan and a defined benefit plan. The complaint was later amended — and another plaintiff was added — but the court dismissed allegations involving the pension plan.
According to court documents, the parties reached a tentative settlement in May 2021 for the 401(k)-based complaint in which the company would pay $500,000.
However, Mr. Wright rejected the settlement twice — once in 2021 and again in 2022 — citing defects in the settlement terms that would be unfair to certain participants who would be affected by the agreement.
"The parties could not reach agreement on a settlement … and accordingly, the court restored the case to active status and re-set a trial date," said Mr. Wright's ruling Feb. 23 favoring the company in Draney et al. vs., Westco Chemicals Inc. et al.
Mr. Wright agreed to the company's request for summary judgment, saying a three-year statute of limitations had expired between the time plaintiffs were aware of the plan's investment strategy — as early as 2011 — and the initial lawsuit in 2019.
A motion for summary judgment is usually filed after the parties have completed discovery, giving a judge the opportunity to review details of a case. A motion to dismiss, usually requested soon after a complaint is filed, argues that the plaintiff has failed to state a claim.
Westco Chemicals Inc. Profit Sharing 401(k) Plan, North Hollywood, Calif., had $7.7 million in assets as of Dec. 31, 2021, according to the latest Form 5500.
