Samantha Gotta, et al. v. Stantec Consulting Services, Inc., et al

Case Background

In September 2020, former Stantec 401(k) Plan participants Samantha Gotta and Michael De Sena filed an ERISA lawsuit in the U.S. District Court for the District of Arizona. They sued Stantec Consulting Services Inc., its board of directors, and members of the 401(k) Plan Fiduciary Investment Committee.

The plaintiffs alleged mismanagement of their retirement plan and breach of fiduciary duty of prudence. They also claimed that the plan failed to offer lower-cost mutual funds and cheaper collective investment trusts instead of similar mutual funds.

Judge G. Murray Snow presided over this lawsuit. [Case number: 20-1865]

Cause

In September 2020, former Stantec 401(k) Plan participants Samantha Gotta and Michael De Sena filed a complaint against Stantec Consulting Services Inc., its board of directors, and members of the 401(k) Plan Fiduciary Investment Committee in the U.S. District Court for the District of Arizona. The lawsuit was based on the Employee Retirement Income Security Act (ERISA).

The plaintiffs challenged the plan’s decision to offer more expensive shares, arguing that lower-cost institutional shares of the same funds were available. They also criticized the choice to offer mutual fund versions instead of collective investment trusts. Additionally, they contended that the plan retained certain actively managed funds despite their consistent underperformance compared to benchmarks.

The plaintiffs pointed out that the plan’s record-keeping fees were covered by a combination of direct fees and revenue sharing. They noted that direct fees increased from $15 per participant annually in 2012 to $55 in 2018. According to the plaintiffs, the total cost per participant exceeded $75 annually, though they argued a reasonable fee should not surpass $25.

To support their claims, the plaintiffs provided comparisons showing that, as of December 31, 2018, at least 18 out of the 26 funds in the plan had lower-cost alternatives that would have saved participants money.

Damages

The plaintiffs sought compensation for high fees and poorly performing funds, as well as attorney fees, expenses, and case contribution awards.

Key Arguments and Proceedings

Legal Representation

  • Plaintiff(s): Samantha Gotta | Michael De Sena
    • Counsel for Plaintiff(s): Marc H. Edelson | Eric Lechtzin | Michael C. McKay
  • Defendant(s): Stantec Consulting Services Inc. | Stantec’s board of directors | Stantec 401(k) Plan Fiduciary Investment Committee | Doe defendants
    • Counsel for Defendant(s): Charles M. Dyke | Dawn Valentine

Claims

The plaintiffs brought a claim against the company and committee defendants for breaching the fiduciary duty of prudence. They also filed a claim against the company and board defendants for failing to properly monitor other fiduciaries. According to the plaintiffs, the plan held $1,125,689,446 in assets and had 12,152 participants with account balances as of the end of 2018.

Defense

The defendants unsuccessfully sought dismissal, with Judge G. Murray Snow issuing a May 2021 denial. In May 2023, Judge Snow ruled in favor of the plaintiffs’ motion for class certification and the defendants’ motion for partial summary judgment regarding prospective injunctive relief. He stated that the motions were “effectively unopposed” and confirmed the class had 10,639 members.

Settlement

In November 2023, the plaintiffs filed a motion for preliminary settlement approval. They reported that both parties had retained and deposed five expert witnesses before reaching the settlement with the help of mediator Morton Denlow.

The defendants agreed to pay $2 million, along with $30,000 for an independent fiduciary to assess the proposal on behalf of the plan. The plaintiffs clarified that class members with current accounts would automatically receive payments. Others would receive payments through a tax-qualified distribution process with assistance from the Retirement Clearinghouse.

The plaintiffs defined the settlement class under Federal Rule of Civil Procedure 23(b)(1), which included all persons who were participants or beneficiaries of the Plan from September 24, 2014, through the date of preliminary approval, excluding defendants and their immediate families.

American Legal Claims Services LLC was selected as the settlement administrator. The defendants denied any fault, liability, or wrongdoing in the settlement agreement.

Judge Snow granted preliminary approval on November 3, 2023. On February 9, 2024, the plaintiffs filed for final approval of the settlement, stating the $2 million settlement represented about 35% of the estimated losses of $5.6 million.

The plaintiffs proposed an allocation plan based on the average account size during the class period, with those receiving less than $10 being excluded. They requested attorney fees of one-third of the settlement fund and reimbursement for $117,620 in expenses. They also sought $10,000 for each named plaintiff as case contribution awards. On February 26, 2024, the plaintiffs informed the court that the independent fiduciary had approved the settlement.

On March 14, 2024, the final approval for the settlement was passed.

Court Documents:

Documents are available for purchase upon request at jurimatic@exlitem.com

Press Release:

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