New York, NY – On June 7, 2021, a New York federal court issued an Order denying Defendants’ motion to dismiss an excessive fee class action lawsuit on behalf of participants in the company’s 401(k) retirement plan. Only a few weeks after the court denied Esteé Lauder’s motion to dismiss, Defendants asked the court to reconsider its decision.
What Are the Facts in the Esteé Lauder ERISA Class Action?[1]
The Esteé Lauder Companies 401(k) Savings Plan is a defined benefit savings plan that is supposed “to make it easy” for Esteé Lauder employees “to save for … future financial security.” In such plans, “[b]eneficiaries subject to higher fees … lose not only the money spent on higher fees, but also ‘lost investment opportunity;’ that is, the money that the portion of their investment spent on unnecessary fees would have earned over time.” Tibble v. Edison Int’l, 843 F.3d 1187, 1198 (9th Cir. 2016). Accordingly, every penny saved matters.
Plaintiffs allege that the Esteé Lauder Defendants’ imprudence cost the Plan millions of dollars in excessive fees. Such fees included high-cost mutual funds that underperformed their respective benchmarks. As of 2018, nearly half of the funds in the Plan were much more expensive than comparable funds found in similarly-sized plans. The expense ratios for funds in the Plan were up to 57% above the median expense ratios of other funds in the same category.
Further, a series of JPMorgan target retirement date funds in the Plan had identical lower share counterparts that were never selected by the Plan’s fiduciaries. Additionally, Defendants employed an imprudent process in their selection and retention of the Vanguard Federal Money Market Fund, when a better performing alternative in the same fund family was available in the form of a stable value fund.
Finally, Plaintiffs allege that the Defendants failed to monitor the Plan’s recordkeeping costs and seek competitive pricing for recordkeeping services. (“Recordkeeping” is a catchall term for the suite of administrative services typically provided to a defined contribution plan by the plan’s “recordkeeper.”) Plaintiffs allege that Defendants’ failure to control recordkeeping expenses caused the Plan’s participants to pay administrative fees that were well above market rates.
Why Did the Court Deny Defendants’ Motion for Reconsideration?
On July 22, 2021, the Esteé Lauder Defendants filed a motion for reconsideration of the Court’s June 7, 2021 Order, arguing that the U.S. Supreme Court’s recent decision in TransUnion LLC v. Ramirez, 141 S. Ct. 2190 (2021), required dismissal of Plaintiffs’ claims with respect to funds in which they did not personally invest.
However, the court was “unpersuaded” by Defendants’ arguments. In TransUnion, the Supreme Court reaffirmed the well-established proposition that a plaintiff who has suffered no “concrete harm” lacks standing to sue in federal court under Article III of the U.S. Constitution. 141 S. Ct. at 2200. By contrast, “[i]f a defendant has caused physical or monetary injury to the plaintiff, the plaintiff has suffered a concrete injury in fact under Article III.” Id. at 2204 (emphasis in original).
The court stated: “Here, there is no question that Plaintiffs allege a concrete injury-in-fact given their allegations that they lost money as a result of Defendants’ mismanagement of the defined contribution retirement plan in which they invested.” The court summed up by saying: “Put simply, Ramirez does not speak to the issue decided by this Court in its oral ruling: whether Plaintiffs, having alleged an injury-in-fact, may bring claims for mismanagement of the plan as a whole or merely of the funds within the plan in which they invested.”
The case is Bilello v. Estee Lauder Inc., case number 1:20-cv-04770, and is pending in the U.S. District Court for the Southern District of New York.
Do I Have Similar Claims for Mismanagement of My 401(k) or 403(b) Plan?
You may have similar claims for mismanagement (also called “breach of fiduciary duties”) against the sponsor of your defined benefit retirement plan.
Participants in 401(k) and 403(b) retirement plans often ask themselves, why does it seem like my account isn’t growing? If you recently opened the account and you are starting at zero, it’s going to take some time before you see substantial growth in your savings. But in some cases, the problem stems from mismanagement of the plan by the fiduciaries who are tasked with overseeing the plan.
How do you know if your 401(k) or 403(b) plan is being mismanaged? Often it is difficult to find out – it takes a certain level of financial sophistication to determine if the sponsor of a retirement is engaged in improper or illegal conduct. If you suspect that
What should I do if I Think My Retirement Plan is being Mishandled?
Please call us at 844-696-7492 (toll-free) to learn more about your rights concerning your 401(k) or 403(b) retirement account or click here to submit your info.
Edelson Lechtzin LLP is a national class action law firm with offices in Pennsylvania and California. In addition to cases involving employee retirement plans, our lawyers focus on class and collective litigation in cases alleging violations of the federal antitrust laws, securities and investment fraud, wage theft and unpaid overtime, consumer fraud and consumer protect, and dangerous and defective drugs and medical devices.
[1] “ERISA” stands for the Employee Retirement Income Security Act of 1974.