A federal judge in San Jose, Calif. has rejected a $2.5 million settlement of a 401(k) plan dispute between NVIDIA and plan participants, telling the parties to answer several questions before he reconsiders the agreement.
A settlement document was filed Dec. 3 by participants’ attorneys and was unopposed by the company and its fiduciaries. Plaintiffs had alleged ERISA violations based on the plan’s investment menu, fiduciaries' investment-selection strategy and the plan’s record-keeping practices.
“Plaintiffs have provided insufficient information for the court to evaluate the amount of the settlement,” U.S. District Judge Jon S. Tigar wrote Jan. 16. The plaintiffs offered only one paragraph describing the reasons for the settlement payment in Tobias et al. vs. NVIDIA Corp. et al., he wrote.
“The court has no basis by which to evaluate the reasonableness of counsel’s estimated potential recovery,” Tigar wrote, so he said he cannot determine whether the settlement is “fair, reasonable and adequate.”
The judge also asked the plaintiffs’ attorneys to justify their request for a fee of up to one-third of the settlement amount. He noted that the 9th U.S. Circuit Court of Appeals, San Francisco, has set a fee benchmark of 25% for settlements.
Plaintiffs originally sued in August 2020 and later amended their lawsuit. They said plan executives should have offered lower-cost investments and said executives should have issued an RFP to determine whether they could reduce record-keeping expenses.
In September 2021, U.S. District Court Judge Lucy H. Koh, San Jose, Calif., dismissed the lawsuit, but Tigar reversed the ruling in September 2023. NVIDIA unsuccessfully sought dismissal again.
The settlement was achieved through mediation. It covers participants and beneficiaries who participated in the plan at any time between Aug. 28, 2014, and the date of a judge’s preliminary approval.
NVIDIA Corp. 401(k) Plan, Santa Clara, Calif., had $3.5 billion in assets and 15,755 participants with account balances as of Dec. 31, 2023, according to the latest Form 5500.