Posted February 11th, 2019.
By Adam Lidgett
Law360 (February 11, 2019, 7:48 PM EST) — A proposed class of General Electric Co. workers urged a Massachusetts federal judge on Monday not to rethink her decision allowing a claim that GE improperly invested workers’ retirement savings in subpar company-affiliated funds to move forward.
The workers opposed a January motion to reconsider from GE, which had argued that U.S. District Judge Indira Talwani misinterpreted the conditions under which an exemption to the Employee Retirement Income Security Act’s self-dealing rules — Prohibited Transaction Exemption 77-3 — applies.
The workers said on Monday that the court has already rejected the argument that PTE 77-3 should have been the reason to dismiss count IV of their suit — a claim that GE violated ERISA’s ban on self-dealing — on the pleadings. The workers said that there wasn’t any error in the judge’s decision that needs correcting.
“In a last gasp, defendants assert that the court should correct its purported ‘error without delay,’” the workers said. “Plaintiffs have shown that there was no error.”
In December, Judge Talwani trimmed one claim from the proposed class’s suit in response to GE’s motion to dismiss, but preserved allegations that the company flouted ERISA by offering certain proprietary funds even though they were expensive and performed poorly. The class alleged that GE kept those funds in the 401(k) plan’s lineup in order to amass fees for a subsidiary and inflate the subsidiary’s value before it was sold.
In January the company argued that Judge Talwani mistakenly thought PTE 77-3 couldn’t apply to the company because its workers successfully pled an ERISA fiduciary-breach claim. GE said the exemption should apply regardless of whether the company committed a fiduciary breach when it placed five of its own funds in the company’s 401(k) plan lineup even though four of those funds allegedly underperformed and one allegedly charged excessive fees.
The participants initially sued GE, GE Asset Management and other related affiliates and individuals in October 2017, revising their pleadings multiple times before their most recent complaint in March. The participants alleged, among other things, that GE breached its fiduciary duties under ERISA by not acting in the best interests of the plan and instead used the plan to garner fees and “prop up” mutual fund business for GE Asset Management.
The company moved to toss the case, saying, among other things, that the participants’ claims were erroneously based on hindsight and that the U.S. Department of Labor distinctly allowed the practice of offering affiliated mutual funds. But in August, Judge Talwani allowed six of the participants’ eight claims to proceed, taking the other two under advisement. Those two were the claims ruled on in December.
“The judge had ruled in our favor at the hearing and now GE is looking to get another bite at the apple and we’ve opposed that,” Charles H. Field, an attorney for the proposed class of GE workers, said to Law360 on Monday.
Another attorney for the proposed class, Orin Kurtz, said in a statement that “the defendants’ motion seeks relief from a well-reasoned decision and I don’t believe it has merit.”
“We look forward to moving ahead with the case,” Kurtz said.
A GE representative did not immediately respond to a request for comment.
The participants are represented by Jason M. Leviton and R. Joseph Barton of Block & Leviton LLP, Mark C. Gardy and Orin Kurtz of Gardy & Notis LLP, Lee Squitieri of Squitieri & Fearon LLP, Evan J. Kaufman and Jordan D. Mamorsky of Robbins Geller Rudman & Dowd LLP, and Andrew Miller, Charles H. Field and David Tracey of Sanford Heisler Sharp LLP.
GE is represented by James O. Fleckner, Alison V. Douglass and Jaime A. Santos of Goodwin Procter LLP.
The case is In re: GE ERISA Litigation, case number 1:17-cv-12123, in the U.S. District Court for the District of Massachusetts.
–Additional reporting by Danielle Nichole Smith, Alison Noon and Emily Brill. Editing by Jack Karp.