Allianz ban, Wells Fargo DC settlement among top Q2 legal stories

During the second quarter of 2022, 33 ERISA-related lawsuits were filed and/or updated. Each event represents the involved parties either reaching a settlement or filing an appeal, or a court decision was made.

The parties involved in the ERISA lawsuits in the second quarter included two financial firms, three prominent health-care firms, one university, and other prominent companies such as IBM, United Parcel Service of America Inc., Juniper Networks Inc., Seventy Seven Energy Inc., and Salesforce.com Inc.

An ERISA lawsuit against Capital One Financial Corp. for charging high record-keeping fees and offering expensive investment options was dismissed because the plaintiff didn’t invest in the three options mentioned.

Wells Fargo & Co. reached a $32.5 million settlement with its participants for allegedly charging high fees and retaining poor-performing investments.

Universal Health Services Inc. was sued for offering imprudent investment options and charging excessive fees in DC plans. The defendant sought to challenge the class-action status by claiming the plaintiffs did not invest in 30 of the 37 options and that they should be treated as 37 separate claims instead. A federal appeals court upheld a lower court's ruling, granted the class-action status, and ruled that defendant’s flawed investment lineup and high expense ratios affected multiple funds in the same way.

Barnabas Health Inc. reached a $1.75 million ERISA settlement with its plan participants, who alleged that fiduciaries failed to maintain a prudent investment lineup and didn’t offer better and cheaper investment options.

Humana was sued for charging excessive fees and not offering cheaper investment options, and its petition to dismiss an ERISA lawsuit was denied.

Washington University agreed to pay $7.5 million to settle an ERISA lawsuit filed by its participants, who alleged that fiduciaries charged high fees and the investment lineup included poor-performing options. Non-monetary provisions including fiduciary training, annual investment statement review and stricter record-keeping management were included.

IBM was sued by a defined benefit plan participant for using 1984 mortality tables after the Society of Actuaries already replaced the old one with a 1994 mortality table. Plaintiff claimed that the wrong assumptions resulted in calculated pension benefits lower than actuarial equivalent amounts per ERISA’s standards.

UPS was sued by plan participants who took joint and survivor annuity benefits for using outdated mortality tables and receiving less than the actuarial equivalent of the single life annuity per ERISA’s requirements.

Juniper Networks Inc.’s petition to dismiss an ERISA complaint about charging unreasonably high record-keeping and managed account fees was rejected.

Seventy Seven Energy Inc. agreed to pay $15 million to settle a lawsuit filed by its participants who alleged that fiduciaries held concentrated positions in its former parent Chesapeake Energy Corp.’s stocks.

A federal appeals court reversed a lower court’s decision and allowed an ERISA lawsuit against Salesforce.com Inc. for offering expensive investment options and not monitoring fiduciaries to move forward.

Walgreens agreed to pay $105 million to settle a shareholder lawsuit filed by plaintiffs including Industriens Pensionsforsikring for misstating its earnings targets and concealing the impact of rising generic drug prices on its pharmacy business.

Allianz Global Investors agreed to pay more than $1 billion to settle with SEC and $5 billion restitution to victims over its abandoned Structured Alpha funds, which had caused massive losses to investors. Gregoire P. Tournant, lead portfolio manager for the strategies, was accused by the SEC of orchestrating a "multi-year scheme to mislead investors." Two associated portfolio managers, Trevor L. Taylor and Stephen G. Bond-Nelson, were terminated and pled guilty.

AllianzGI is banned from advising U.S. investment funds for the next 10 years.

The Financial Services Racial Equity, Inclusion and Economic Justice Act, which requires regulated financial firms to disclose diversity data, was passed in the House.

Jaime E. Lizarraga and Mark T. Uyeda were confirmed by the Senate as SEC commissioners.

Energy Capital Partners reached a $1 million settlement with the Securities and Exchange Commission for passing disproportionate private equity transaction expenses onto its fund investors without disclosures and agreed to pay back more than $3.3 million voluntarily.

BNY Mellon Investment Adviser Inc. agreed to pay $1.5 million to settle SEC charges for misstating all investments held in six mutual funds it manages have ESG quality review scores.

Sources said Goldman Sachs Group is being investigated by the SEC with a focus on two of its mutual fund offerings to see if they meet ESG criteria as promised in marketing materials.

The police searched Deutsche Bank asset management unit's Frankfurt office after its former chief sustainability officer, Desiree Fixler, made accusations that DWS funds were not ESG integrated as claimed on its sales prospectuses and only a minority of investments employed ESG factors.

A 401(k) plan administrator ForUsAll Inc., which offers cryptocurrency as an investment option in self-directed brokerage accounts, sued the Department of Labor regarding its recent cryptocurrency guidance. It claimed that DOL violated the Administrative Procedures Act and only exclusively focused on the risks of cryptocurrency, ignoring its potential benefits including diversification.

U.S. prosecutors charged Archegos Capital Management founder Bill Hwang and Chief Financial Officer Patrick Halligan with fraud and 11 criminal counts for inflating its portfolio to $35 billion before it collapsed.

Delaware Chancery Court ruled in favor of Elon Musk and Tesla Inc. in a fiduciary breach lawsuit regarding the company’s $2.6 billion acquisition of SolarCity Corp. The plaintiffs claimed that Mr. Musk acted in his own interest to move forward with the purchase, aiming to bail out his investment in SolarCity, but the court ruled that the price was fair.

A district judge in New York dismissed a class-action lawsuit against 10 banks alleging that they engaged in collusion to suppress competition in the U.S. Treasuries auctions from 2007 to 2015. The judge ruled that newly introduced evidence was not enough to prove the Treasury manipulation.

Medley Management and co-CEOs agreed to pay $10 million to settle SEC charges for overstating AUM, the growth potential as well as using projected positive future performance.

Lael Brainard was confirmed as Federal Reserve vice chairwoman by the Senate.

Emmanuel Macron was re-elected as President of France.