$4.3M Sutter Health ERISA Lawsuit Settlement Details
Table of Contents
Case Background
A group of former and current employees of Sutter Health, who participated in the Sutter Health 403(b) Savings Plan (the Plan), initiated this lawsuit in the United States District Court for the Eastern District of California. The Plaintiffs, including Obaleet Sargony, Ronald Hudson, and others, filed the class action complaint in July 2020 against Sutter Health, its Board of Directors, and the Retirement Benefits Investment Committee.
The core of the dispute revolved around the management of the Plan, which served as the retirement vehicle for thousands of Sutter Health workers. The Plaintiffs contended that the Defendants, as fiduciaries, mismanaged the Plan’s investments, resulting in significant financial losses for the participants. The claims stemmed from alleged violations of a key federal law governing employee retirement plans: the Employee Retirement Income Security Act of 1974 (ERISA).
Cause
The Plaintiffs asserted that the Defendants had breached their fiduciary duties under ERISA. Specifically, they claimed the Defendants did not act solely in the best interest of the Plan participants, which is a fundamental requirement of the law. They stated that the Defendants had allowed the Plan to incur unreasonably high administrative and investment management fees compared to similar plans.
Excessive Fees
The lawsuit argued that the Plan retained expensive retail share classes of mutual funds when identical institutional share classes, which carried significantly lower fees, were readily available. The Plaintiffs claimed that prudent fiduciaries would have investigated and chosen the lower-cost options, thereby conserving millions of dollars in retirement savings for the employees.
Investment Underperformance
Furthermore, the Plaintiffs challenged the performance of several specific investment options offered within the Plan. They alleged that the Defendants kept certain underperforming funds on the menu for too long, instead of removing or replacing them with better-performing alternatives, a decision they characterized as a breach of the duty to monitor the investments prudently.
Injury
The direct result of the alleged breaches, according to the complaint, was economic injury to the Plan participants. The Plaintiffs claimed that the Plan's assets were diminished because of the unnecessary fees and the inferior performance of selected investments. This meant that the employees' retirement accounts accrued less interest and investment returns than they would have had the Plan been managed responsibly. The retirement savings of the class members suffered a loss of millions of dollars over the course of the violation period.
Damages Sought
The Plaintiffs sought several forms of relief on behalf of the class members. Primarily, they demanded that the Defendants fully restore all losses the Plan suffered due to the alleged breaches of fiduciary duty, including the excessive fees paid and the investment underperformance. They also requested that the Defendants disgorge, or turn over, any profits they had gained as a result of the breaches. Finally, the Plaintiffs requested the Court to impose structural changes to the Plan’s governance to prevent similar breaches in the future, along with an award for their attorneys’ fees and litigation costs.
Key Arguments and Proceedings
The Defendants, including Sutter Health and the Retirement Benefits Investment Committee, filed an Answer to the Amended Consolidated Class Action Complaint, vigorously denying all allegations of wrongdoing.
Legal Representation
Plaintiff(s): Obaleet Sargony | Ronald Hudson | Adam Blackburn | Robert L. Hackett | Tabitha Hoglund | Stephanie C. Chadwick.
· Counsel for Plaintiff(s): | Daniel L. Germain | Alec J. Berin | Christopher A. Miller | Donald R. Reavey | Edward H. Glenn | James E. Miller | John T. Crutchlow | Kolin C. Tang | Mark K. Gyandoh | Casey Therese Yamasaki | Daniel Lawrence Germain | James C. Shah |
Defendant(s): Sutter Health | The Board of Directors of Sutter Health | The Retirement Benefits Investment Committee | various John Does.
· Counsel for Defendant(s): Adam Reid Carlisle | Charles F. Seemann | Donald Patrick Sullivan | Howard Shapiro | Lindsey H. Chopin | R. Bradford Huss | Stacey C.S. Cerrone | Sung Cheol Sam Park | Andrew Thomas Will
Key Arguments or Remarks by Counsel
Claims
The Plaintiffs’ counsel consistently asserted that the Defendants’ failure to manage the Plan with the sole focus on the participants' financial well-being constituted a clear violation of ERISA. They argued that the high-cost investment options and the Plan’s flawed administrative structure demonstrated a lack of prudence and loyalty required by law.
Defense
Sutter Health's legal team maintained that the Defendants had acted responsibly and within their obligations as fiduciaries. They argued that the Plan's structure and investment options were appropriate, citing various affirmative defenses, including that the losses resulted from market forces or that the Plaintiffs had failed to state a valid claim. They countered that the Plan's performance was reasonable when considering the market conditions and the diversity of investment choices offered to the participants.
Settlement
Instead of proceeding to a trial that would have culminated in a jury verdict, the parties engaged in extensive negotiations and reached a Class Action Settlement. The resulting agreement required Sutter Health to pay $4.3 million to resolve the claims.
The United States District Court for the Eastern District of California issued an Order Granting Preliminary Approval of Class Action Settlement on October 8, 2025. This order formally recognized that the proposed settlement terms were fair, reasonable, and adequate enough to warrant notifying the entire class of participants.
The total settlement amount of $4.3 million created a common fund intended to compensate approximately 73,000 employees who participated in the Plan during the class period. The Court certified the Settlement Class, defined as all individuals who participated in the Sutter Health 403(b) Savings Plan between specific dates and whose accounts held investments managed by the Plan. The Court approved the form and manner of the Settlement Notice, ensuring that all class members would receive information about the terms, their rights, and the upcoming Fairness Hearing.
The Court scheduled a Fairness Hearing to determine the final approval of the settlement, the proposed Plan of Allocation for distributing the funds, and the award of attorneys’ fees and costs to the Plaintiffs’ counsel. The settlement, though not an admission of liability by Sutter Health, brought an end to the protracted litigation and provided financial relief for the thousands of employees who had relied on the Plan for their retirement savings. Pending the final decision at the Fairness Hearing, the Court temporarily barred all class members from commencing any other lawsuit against Sutter Health concerning the claims resolved by the settlement.
Court documents are available upon request at jurimatic@exlitem.com