Participants in a 401(k) profit-sharing plan offered through DST Systems Inc., Windsor, Conn., reached an agreement in principle to settle a long-running dispute with the plan's fiduciaries and an investment advisory firm, according to a notice of settlement filed Nov. 10 in U.S. District Court New York.
The preliminary terms of the settlement were not disclosed.
The parties are "presently working to memorialize their agreement in the form of a formal settlement agreement to be submitted to the court for approval," the court filing said.
The complaint originally filed in September 2017 alleged that the defendants pursued "an exceptionally imprudent investment strategy with respect to a significant portion of the plan's assets." The lawsuit centered on the plan's mutual fund Sequoia Fund, which at one point invested 35% of its assets in what was then called Valeant Pharmaceuticals International.
The plaintiffs alleged that the investment advisory firm, which was an investment adviser to the 401(k) plan, violated ERISA by failing to diversify its holdings. The plaintiffs also accused the plan's fiduciaries of investing an inappropriate amount of plan assets in Valeant's stock.
The lawsuit was filed against the advisory committee of the company's 401(k) plan, the compensation committee of the company's board of directors and the investment advisory firm Ruane Cunniff & Goldfarb.
The anticipated settlement follows the rejection of an earlier $79 million settlement that was rejected by a U.S. District Court judge in New York, who opposed a provision that sought to "enjoin non-parties, including the secretary of labor, from bringing or prosecuting their claims."
Approving this provision, the judge wrote, "would circumvent the secretary's independent and unqualified right to sue and seek redress for ERISA violations on the basis that ERISA plans significantly affect the national public interest."
The parties will have 30 days to finalize a formal agreement, at which point they will move for preliminary approval of the agreement, the court filing said.
