A federal judge has denied a motion to dismiss a lawsuit that claims financial services giant Nationwide Insurance Company is charging excessive fees for recordkeeping for 401(k) plans.
The lawsuit, filed in June 2017 by Denver law firm Franklin D. Azar & Associates, alleges that Nationwide charged the Andrus Wagstaff, PC 401(k) plan and other similarly situated 401(k) plans excessive fees for recordkeeping and other services, resulting in charges as high as $625 per participant in 2014 and $500 per participant in 2015. The lawsuit alleges that those fees are almost ten times the reasonable charge for recordkeeping and other services, as reflected in a survey of 113 retirement plans by an independent investment consulting group. The plaintiff in the case is seeking class certification on behalf of participants in “all other plans enrolled in the Nationwide Retirement Flexible Advantage Retirement Plans Program.”
Nationwide moved to dismiss the case, claiming disgorgement was not an appropriate equitable remedy against a non-fiduciary service provider under the Employee Retirement Income Security Act (ERISA). But on August 24, 2018, U.S. District Judge Algenon L. Marbley of the Southern District of Ohio ruled that disgorgement, accounting, and surcharges are appropriate equitable remedies against a service provider.
“This order allows plaintiff to seek disgorgement of excessive record-keeping fees by Nationwide so she and other plan participants can be made whole,” said FDAzar attorney Paul R. Wood.
Judge Marbley also ruled that Andrus Wagstaff, a law firm, was an indispensable party to the lawsuit because “this Court could theoretically determine at a future state of litigation that Andrus Wagstaff breached its fiduciary duty to [plaintiff] and similarly situated retirement plan beneficiaries.”
The case is Alana Schmitt, et al., v. Nationwide Life Insurance Company, et al., No. 2:17-CV-558. Plaintiff is represented by Paul R. Wood and Keith Scranton of FDAzar and John Smalley of Dyer, Garofalo, Mann & Schultz. Nationwide is represented by O’Melveny & Myers and Ice Miller.