Northwestern University – 1, Jerry Schlichter – 0
The prestigious Chicago-based university was able to fend off a lawsuit from noted tort-terror Jerome Schlichter, which had accused it of “violating federal benefits law by offering imprudent investments and allowing excessive fees in its workers’ retirement plans.”
“The workers’ allegation over the TIAA-CREF investment option—that it underperformed and carried unreasonable fees—doesn’t amount to a breach of fiduciary duty under the Employee Retirement Income Security Act, Judge Jorge L. Alonso of the U.S. District Court for the Northern District of Illinois held May 25,” according to Bloomberg BNA. “Alonso also dismissed the workers’ claims of fiduciary breach based on allegations that they paid excessive record-keeping fees and were burdened with a range of investment options that was too broad.”
The news service added that the decision is a “complete victory for the university,” as Alonso also denied the workers’ request to amend their lawsuit to include four additional claims.
Schlichter and his firm, St. Louis-based Schlichter, Bogard and Denton, originally filed a complaint in federal court in Chicago on behalf of two Northwestern plan participants alleging the university “retained high-cost and poor-performing investments compared to available alternatives.”
It was part of a larger litigation effort against prominent universities and corporations in the wake of Schlichter’s win in Tibble v. Edison International, a case heard before the supreme court that’s largely seen as a bellwether case in the fight against high 401k and defined contribution plan fees.
Complaints have been filed against Princeton University, Duke University, Johns Hopkins, The University of Pennsylvania, Vanderbilt, Massachusetts Institute of Technology, New York University, Yale and the University of Chicago.
Like Northwestern, the University of Pennsylvania also emerged victorious last October.
In the UPenn case, plaintiffs had alleged excessive fees and fund underperformance in bringing the action, among other fiduciary-related claims, which District Judge Gene Pratter didn’t buy.
“[T]he plaintiffs claim that select funds were outperformed by the rest of the market, claiming that 60 percent of the Plan’s investment options ‘underperformed their respective benchmarks over the previous 5-year period,’” Pratter wrote in the opinion. “To begin, there is no cause of action in ERISA for ‘underperforming funds.’”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
