On Wednesday in the Northern District of Texas, Patrick E. Walker and Lisa Henshaw filed a class-action complaint against iHeart Communications regarding their iHeart Media 401(k) Savings Plan, claiming that the defendants violated the Employee Retirement Income Security Act (ERISA) and breached their fiduciary duties.
The plaintiffs alleged that the defendants failed to use the lowest cost share class for the funds within the plan and failed to consider alternatives to the mutual fund. Subsequently, the plaintiffs claimed that the defendants mismanaged the plan, harming the participants and beneficiaries.
ERISA “imposes strict fiduciary duties of loyalty and prudence upon employers and other plan fiduciaries. Fiduciaries must act ‘solely in the interest of the participants and beneficiaries.’” Specifically, it “must give substantial consideration to the cost of investment options,” so as to not waste the beneficiaries’ money. The plaintiffs added that the Department of Labor holds employers to a “high standard of care and diligence” and they must “establish a prudent process for selecting investment options and service providers” and continue to monitor these investment options and providers, while also evaluating fees.
The plaintiffs averred that during the class period, from August 19, 2014, to the present, the plan “had at least $890 million dollars in assets under management” at all times. The plan had more than $1.1 billion and $1 billion at the end of 2017 and 2018, respectively. The plaintiffs stated that the plan qualifies as a jumbo plan, so it “had substantial bargaining power regarding the fees and expenses that were charged against participants’ investments.” However, according to the plaintiffs, the defendants “did not try to reduce the Plan’s expenses or exercise appropriate judgment to scrutinize each investment option that was offered in the Plan to ensure it was prudent.”
As a result, the plaintiffs claimed that the defendants breached their fiduciary duties because the failed to “objectively and adequately review the Plan’s investment portfolio to ensure that each investment option was prudent, in terms of cost” and they failed to “[maintain] certain funds in the Plan despite the availability of identical or similar investment options with lower costs and/or better performance histories.” The defendants’ conduct purportedly cost the class millions of dollars; the plaintiff proffered that this constitutes a breach of the fiduciary duties of prudence and loyalty in violation of ERISA.
The plaintiffs asserted two counts against the defendants: breach of the fiduciary duties of loyalty and prudence, and failure to monitor fiduciaries. The plaintiffs have sought to certify the class and for the plaintiffs and their counsel to represent the class, declaratory judgment, an order compelling the defendants to make good to the plan all losses from their alleged conduct, disgorgement of profits, injunctive and equitable relief, an award for damages, and other relief.
The plaintiffs are represented by Munsch Hardt Kopf & Harr, P.C. and Capozzi Adler, P.C.
