The Yale University case is one of the first excessive fee suits filed against a university 403(b) plan, and it has finally been decided, in favor of the university. The plaintiffs in this case alleged Yale’s management of the plan resulted in excessive recordkeeping fees, imprudently retaining long-underperforming funds, and the use of multiple recordkeepers (again, resulting in excessive or duplicate fees).
The case went to a jury trial, which is uncommon and resulted in a unique and somewhat confusing outcome. The jury determined that Yale did breach their duty of prudence by allowing what they determined to be unreasonable fees for recordkeeping and administrative services. However, they also determined that prudent fiduciaries could have arrived at the same decisions as it related to the recordkeeping and administrative fees. As a result, they determined that the plaintiffs did not prove any damages as a result and therefore found in favor of the defendants. The jury also found for Yale on three other claims, failing to appropriately monitor the plan’s investments, failure to select appropriate share classes, and agreeing to offer certain investments required by the recordkeeper. The plaintiff’s attorney, Jerry Schlichter, has indicated they intend to appeal the decision.
This outcome seems favorable for other defendants facing similar excessive fee lawsuits. However, it may also show the complexity and nuance involved in these cases. This is especially true when presented to a jury. Determining that a breach of the duty of prudence occurred, but that other fiduciaries could arrive at the same decision seems very inconsistent. A further determination that there was no proof of damages despite a finding that there were excessive fees is also inconsistent. It is unclear what impact, if any, this decision may have as similar suits navigate the legal system.
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