In her 2012 ruling, Laughrey said ABB had breached its fiduciary duty to to set up 401(k) plans in the best interests of its employees.
High Fees
Workers paid high fees in the 401(k), which were used to he subsidize ABB’s costs for other corporate benefits administered by Fidelity, the judge found. ABB also violated its duty to employees when eliminating Vanguard Group Inc.’s Wellington Fund for target-date mutual funds managed by Fidelity in the 401(k), according to her ruling.
Laughrey found the ABB defendants liable for $35.2 million in damages and Fidelity liable for the lost float income. Both firms appealed the decision. Oral arguments were heard before three appeals court judges in September.
Reversing the trial court’s float finding, the panel majority said suing plan participants failed to show it was a plan asset and that the judge erred in finding Fidelity breached its duty.
They unanimously agreed with Laughrey’s conclusion ABB breached its duty to the plan by failing to diligently monitor Fidelity and its record-keeping costs. Laughrey was directed to reexamine damages she awarded on challenges to ABB’s election of investment options and “mapping” for participants who don’t choose a new option when an existing one is removed.
“The district court’s opinion shows clear signs of hindsight influence,” the appeals court said. “While it is easy to pick an investment option in retrospect (buy Apple Inc. at $7 a share in December 2000 and short Enron Corp. at $90 a share), selecting an investment beforehand is difficult.”
The case is Tussey v. ABB Inc., 06-cv-04305, U.S. District Court, Western District of Missouri (Jefferson City).