A U.S. District judge in Los Angeles rejected the $12.4 million proposed settlement of an ERISA complaint against Northrop Grumman Corp. by participants in the company's 401(k) plan.
According to the preliminary settlement, the parties reached an agreement in principle on Oct. 15, just 14 minutes before a trial was scheduled to start. Terms of the settlement were revealed in January.
However, "the parties' proposed settlement agreement contains an overly broad release of liability," U.S. District Judge Andre Birotte Jr. wrote on June 30, referencing provisions in the settlement by which members of the class covered by the agreement promise not to sue.
The release-of-claims provision in the proposed settlement agreement "could extend to any cause of action" beyond what was alleged in the plaintiff's complaint, the judge wrote in the case of Marshall et al. vs. Northrop Grumman Corp. et al. "The proposed release of liability is impermissible."
The participants had accused the company and its fiduciaries of allowing "unreasonable" record-keeping fees. They argued that the fiduciaries failed to remove an underperforming emerging markets equity fund from the plan lineup.
The judge, who also denied the plaintiffs' motion for attorneys' fees, wrote that both parties should try again to reach a settlement — and request for attorney's fees — "that cures the deficiency identified in this order."
The court set an Aug. 20 hearing date.
The Northrop Grumman Savings Plan, Falls Church, Va., had $22.2 billion in assets as of Dec. 31, 2018, according to the latest Form 5500 filing.
