Kohari v. MetLife Group, Inc.

Background

Rita Kohari, John Radolec, and Mohani Jaikaran brought the action individually, as representatives of a proposed class, and on behalf of the MetLife 401(k) Plan. They alleged that MetLife Group, Inc., Metropolitan Life Insurance Company, the MetLife Group Benefit Plans Investment Advisory Committee, the Employee Benefits Committee of MetLife Group, Inc., and unidentified committee members breached fiduciary duties under the Employee Retirement Income Security Act of 1974. The alleged breaches involved favoring MetLife’s proprietary index funds, failing to investigate less expensive alternatives, and failing to monitor the plan’s fiduciaries.

The proposed settlement class consisted of participants and beneficiaries who were invested in the MetLife Index Funds at any time from July 19, 2015, through December 31, 2021, excluding people responsible for the plan’s investment or administrative functions. The parties reached a settlement after discovery, motion practice, and mediation. The settlement was reached while the plaintiffs’ motion for class certification was still pending.

Class Certification

The court certified the settlement class under Federal Rule of Civil Procedure 23. It found that the estimated 36,000 to 42,000 current or former plan participants satisfied the numerosity requirement. It also found commonality and typicality because the class members’ claims involved the same alleged conduct and common questions about whether the defendants were fiduciaries and breached their duties by favoring the MetLife Index Funds.

The court found that the lead plaintiffs and their counsel adequately represented the class. It also concluded that certification under Rule 23(b)(1) was appropriate because separate cases could result in inconsistent standards for the defendants and could affect the rights of other plan participants.

Settlement Terms and Fairness Review

The settlement provides a gross fund of $4,500,000. After approved fees, costs, administrative expenses, and incentive awards, the remaining amount will be distributed to eligible class members. The allocation is based on each member’s average aggregate quarter-ending account balance invested in the MetLife Index Funds during the relevant period. Current plan participants will generally receive an automatic credit to their plan accounts, while former participants will generally receive checks. No claim form is required, and amounts calculated below $10 will be reduced to zero under the agreement’s allocation terms.

In exchange, the lead plaintiffs, the plan, and the settlement class will release specified claims against the defendants and affiliated persons and entities. The released claims concern the facts alleged in the complaint, the selection and oversight of plan investments, investment-related fees and expenses, alleged self-dealing or prohibited transactions, compliance with plan documents concerning the MetLife Index Funds, allocation and administration of the settlement, and the Independent Fiduciary’s approval. The release does not include claims to enforce the settlement agreement or individual claims for denial of plan benefits.

The court found the settlement procedurally fair because experienced counsel negotiated it at arm’s length after investigation, discovery, motion practice, and mediation. Notice was sent to approximately 48,817 current and former plan participants, about 1% of the notices were returned as undeliverable, and no potential class member objected. Newport Trust, acting as Independent Fiduciary, reviewed the settlement and concluded that its terms were reasonable.

The court also found the settlement substantively fair, reasonable, and adequate. It considered the complexity and duration of the case, the risks of proving liability and damages, the risks related to class certification, the proposed allocation method, and the settlement’s relationship to the estimated losses. The plaintiffs’ damages models estimated total class losses of $16.3 million to $23.5 million, making the $4.5 million settlement approximately 19% to 27% of those estimated losses. The court emphasized that settlement approval did not require it to decide the ultimate factual or legal merits of the underlying allegations.

Fees, Costs, Expenses, and Incentive Awards

The court granted the Motion for Attorneys’ Fees in its entirety. It approved attorneys’ fees equal to 33 1/3% of the settlement fund, or $1,500,000, along with $212,031.12 in litigation costs. The court also approved $160,000 in administrative expenses, consisting of $145,000 for settlement administration and $15,000 for the Independent Fiduciary.

The court approved a $15,000 incentive award for each of Rita Kohari, John Radolec, and Mohani Jaikaran, for a total of $45,000. It found that the lead plaintiffs had assisted the litigation by providing information, producing documents, participating in depositions, and reviewing and signing interrogatory answers.

Disposition

The Motion for Final Approval was GRANTED. The Motion for Attorneys’ Fees was also GRANTED. The court approved the settlement, settlement-class certification, the allocation plan, attorneys’ fees, litigation costs, administrative expenses, and the three incentive awards. The opinion did not determine whether the defendants committed the alleged ERISA violations; it resolved the matter through approval of the class settlement.