Settlement Proposed in BB&T ERISA Self-Dealing Litigation

After a year of mediated negotiations, BB&T Corporation has reached a proposed settlement with participants in the firm’s own retirement plan, who allege inappropriate self-dealing has damaged plan performance.

Back in 2017, a federal district court judge granted class certification in the consolidated complaint, in which participants in BB&T Corporation retirement plans accuse the company of breaching the Employee Retirement Income Security Act (ERISA) by favoring its own proprietary investment options and recordkeeping services at the expense of performance.

The settlement agreement would bring to an end two lawsuits—Bowers vs. BB&T Corporation from 2015 and Smith vs. BB&T Corporation from 2016. According to the text of the original Smith complaint, favoring its own proprietary investments options and recordkeeping services allowed BB&T and its subsidiaries to collect millions of dollars in revenues, “in an amount that greatly exceeded the value of the services to the plan, thereby enriching BB&T at the expense of plan participants.”

Details of the proposed settlement filed in court

According to the text of the proposed settlement agreement, the lawsuit brought about “contentious discovery proceedings that eventually included production of over 260,000 pages of documents, the designation and deposition of six experts, and over 16 fact depositions.”

In addition, the parties filed numerous discovery-related motions. BB&T defendants filed multiple dispositive motions, including a motion to dismiss and a motion for summary judgment. The motion to dismiss was denied, while defendants’ motion for summary judgment was granted in part and denied in part. Ultimately, with trial less than two weeks away, the parties notified the district court that they had reached an agreement in principle.

In terms of monetary relief, the settlement provides for a $24 million settlement fund, “returning significant money to current and former BB&T employees who were participants in the plan.”

As the text of the settlement states, “all of the money will be paid out; BB&T Defendant will not receive anything back.” Further, the “gross settlement fund will be used to pay the participants’ recoveries as well as class counsel’s attorneys’ fees and costs, administrative expenses of the settlement, and class representatives’ compensation as described in the settlement.”

Most class members will automatically receive their distributions directly into their tax-deferred retirement account. Those who already left the plan and no longer have an active account will be given the option to receive their distributions in the form of a check made out to them individually or as a roll-over into another tax-deferred account. As a result, most class members will receive their distributions tax-deferred, “further enhancing the significant monetary recovery.”

The settlement also provides “significant future relief in terms of scope and duration while also securing additional commitments for participants’ benefit.” In particular, the parties have agreed to the following additional terms: “The plan fiduciaries will engage a consulting firm to conduct a request for proposal for investment consulting firms that are unaffiliated with BB&T and engage an investment consultant to provide independent consulting services to the plan; the investment consultant will evaluate the plan’s investment options and provide the plan fiduciaries with an objective evaluation of the options in the plan; within two years after the entering of the final order, plan fiduciaries will participate in a training session regarding ERISA’s fiduciary duties; during the two year period following entry of the final order, BB&T will rebate to the plan participants any 12b-1 fees, sub-ta fees, or other monetary compensation that any mutual fund company pays or extends to the plan’s recordkeeper based on the plan’s investments; and if, during a two-year time period following the entry of the final order, BB&T decides to charge plan participants a periodic fee for recordkeeping services, the plan fiduciaries will conduct a request for proposal for the provision of recordkeeping and administrative services.”

Significant attorneys’ fees awarded

As stipulated in the proposed agreement, the class counsel will request attorneys’ fees to be paid out of the gross settlement fund “in an amount not more than one-third of the gross settlement amount, or $8,000,000, as well as reimbursement for costs incurred of no more than $1,100,000.”

“A one-third fee is consistent with the market rate in settlements concerning this particularly complex area of law,” the proposed agreement states. “In addition, a one-third fee to class counsel is also provided for in the contract with the class representatives. Further, although class counsel will not request a fee greater than one-third of the monetary recovery, the additional terms of the settlement add meaningful value in addition to the monetary amount. This results in the requested fee being lower than a one-third award. In addition, class counsel will not seek fees from the settlement class for the following: the interest earned on the gross settlement amount; communications with class members or BB&T defendants during the settlement period and review of related documents; and work required if mediation or enforcement of the settlement is necessary.”

The full text of the proposed settlement agreement is available here.