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Principal Remains as Defendant After CHS Settlement
The proposed agreement stipulates that the class counsel does not intend to seek recovery of any attorneys’ fees or litigation costs from Community Health Systems (CHS) in connection with the settlement.
The plaintiffs and the plan sponsor involved in the Employee Retirement Income Security Act (ERISA) lawsuit known as Kirk v. Retirement Committee of CHS/Community Health Systems Inc have filed a settlement motion in the U.S. District Court for the District of Tennessee, Nashville Division.
In the underlying lawsuit, the Community Health Systems (CHS) defendants are accused of breaching their fiduciary duties by maintaining excessively expensive and poorly performing index funds in the plan. Though these funds are managed by Principal, the fiduciary breach allegation only pertains to the employer, CHS. However, there are also allegations that the default target-date fund (TDF) suite provided by Principal performed poorly for an excessive period of time, without being adequately reviewed or removed from the plan. According to the complaint, because these TDFs are organized as separate accounts for the plan, Principal owes fiduciary duties to the plan and its participants with respect to the management of those accounts.
For its part, Principal has strongly denied these allegations and continues to fight the lawsuit.
Under the terms of the proposed settlement, the CHS defendants will pay a gross settlement amount of $580,000 into a common fund for the benefit of settlement class members, defined as those who invested in the standalone Principal index funds in the plan.
“This is a fair and reasonable recovery that represents approximately 50% of the damages (and 94% of the excess fees) that plaintiffs calculate to be associated with those standalone funds that were the focus of plaintiffs’ claim against the CHS defendants,” the settlement agreement states. “Further, the CHS defendants have agreed to provide certain further discovery related to the remaining claim against the Principal defendants relating to the management of the target-date separate accounts in the plan, which was asserted primarily against the Principal defendants.”
The proposed settlement agreement stipulates that the class counsel does not intend to seek recovery of any attorneys’ fees or litigation costs in connection with the settlement. Presumably, they will seek such compensation from the ongoing litigation involving Principal.
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