In Tussey v. ABB, Inc., Case No. 2:06-CV-04305-NKL (W.D. Mo. 2012), the plaintiffs had brought a class action law suit on behalf of present and former employees of ABB, Inc. who are participants in two retirement plans offered by the Company (the “Plans”). The Plans are 401(k) defined contribution plans which are subject to ERISA, and in which the participants can direct the investment of their accounts into certain pre-selected investment options (the “Investment Platform”). The plaintiffs’ complaint named the following defendants: ABB, Inc., John W. Cutler, Jr., the Pension Review Committee of ABB, Inc., the Pension & Thrift Management Group of ABB, Inc., the Employee Benefits Committee of ABB, Inc. (collectively “ABB Defendants”), Fidelity Management Trust Company (“Fidelity Trust”), and Fidelity Management & Research Company (“Fidelity Research”) (together “Fidelity Defendants”). The plaintiffs sought to recover damages and injunctive relief for breaches by the defendants of their ERISA fiduciary duties to the Plans.
The district court (the “Court”) found that the defendants had breached their fiduciary duties to the Plans as follows: (1) the ABB Defendants violated their fiduciary duties to the Plans by failing to monitor recordkeeping costs, failing to negotiate rebates for the Plans from either Fidelity or other investment companies in the Investment Platform, selecting share classes for the Investment Platform that had higher expenses than other available share classes, and replacing the Vanguard Wellington Fund with Fidelity’s Freedom Funds (violating duties of prudence and loyalty); (2) ABB, Inc. and the Employee Benefits Committee violated their fiduciary duties to the Plans when they agreed to pay to Fidelity an amount that exceeded market costs for Plan services in order to subsidize the corporate services provided to ABB, Inc. by Fidelity, such as ABB, Inc.’s payroll and recordkeeping for ABB, Inc.’s health and welfare plan and its defined benefit plan; (3) Fidelity Trust breached its fiduciary duties to the Plans when it failed to distribute float income solely for the interest of the Plans; and (4) Fidelity Research violated its fiduciary duties when it transferred float income to the investments in the Investment Platform instead of the Plans.
The Court said that, as to each of these breaches, the Plans must be compensated for its losses and any ill-gotten gains by defendants when they used the Plan’s assets for their own benefit. As such, the ABB Defendants are jointly and severally liable for $13.4 million lost by the Plans due to the failure to monitor recordkeeping fees and negotiate for rebates, and $21.8 million lost by the Plans due to the mapping of the Vanguard Wellington Fund to the Fidelity Freedom Funds. The Fidelity Defendants are jointly and severally liable for compensating the Plans $1.7 million for lost float income.