Fidelity Management Trust Co. and the U.S. unit of generator-maker ABB Ltd. won an appeals court decision that upends a trial judge’s finding that breaches of their legal obligations cost ABB retirement plan participants more than $35 million.
A 2-1 majority of the U.S. Court of Appeals in St. Louis ruled Fidelity had no obligation to recapture for plan participants $1.7 million in overnight “float” income because the funds weren’t a plan asset as defined by federal law. The panel unanimously agreed ABB breached its duty by failing to monitor plan record-keeping costs.
Still, the appeals court faulted U.S. District Judge Nanette Laughrey’s methods for computing damages and returned the case to her Jefferson City, Missouri, court for further consideration. The judge’s 2012 ruling came after a 16-day trial without a jury.
The group lawsuit was filed in December 2006 on behalf of a class of more than 12,800 participants, according to the complaint. It was tried before Laughrey without a jury in January 2010.
At issue was the management of ABB Inc’s. Personal Retirement Investment Savings Management -- or PRISM -- plans. Fidelity Trust acted as a trustee and record keeper.
“This is a victory not just for ABB employees but for all 401(k) plan employees and retirees who have and continue to pay excessive record-keeping fees,” Jerome Schlichter, a lawyer for the plaintiffs, said in an e-mailed statement.
Monitoring Duty
“It affirms that plan sponsors have a fiduciary duty to monitor these costs and make sure they are reasonable,” said Schlichter, a partner in the St. Louis law firm Schlichter Bogard & Denton LLP.
Barry Dillon, a spokesman for ABB’s Cary, North Carolina- based U.S. unit, didn’t immediately respond to a voice-mail message seeking comment on today’s decision. ABB Ltd. is based in Zurich.
Fidelity’s media relations department didn’t respond to an e-mail seeking comment on the ruling. The company is a unit of Boston-based FMR LLC.