Randall v. GreatBanc Trust Company

Background

Aryne Randall, Scott Kuhn, and Peter Morrissey brought a class action under the Employee Retirement Income Security Act (ERISA). They alleged that Wells Fargo & Co., GreatBanc Trust Company, and Timothy J. Sloan breached fiduciary duties, violated ERISA's anti-inurement provision, and engaged in prohibited transactions involving the Wells Fargo & Company 401(k) Plan, which included a leveraged employee stock ownership plan.

The plaintiffs alleged that Wells Fargo used dividends and common stock released from a suspense account to offset required employer matching contributions and discretionary profit-sharing contributions. They also advanced a theory that the Plan paid more than fair value for preferred stock. The court previously ruled that the plaintiffs lacked constitutional standing to pursue the overpayment theory but could pursue claims concerning the use of dividends and released stock to offset Wells Fargo's contribution obligations. The court later certified the class, and the parties filed cross-motions for summary judgment before reaching a settlement.

Settlement Terms and Notice

Under the settlement, Wells Fargo will deposit $84,000,000 into a Qualified Settlement Fund. After deductions for approved attorneys' fees, litigation expenses, service awards, and settlement-administration expenses, the remaining funds will be distributed to class members on a proportional basis. The allocation will generally depend on the total number of vested Wells Fargo shares allocated to each class member during the class period for which released common stock was used to fund part of Wells Fargo's employer contributions.

Class members without active Plan accounts may receive their distributions by check or through a direct rollover to a tax-qualified retirement account. No payment will be issued to a class member whose allocation is less than $10; those amounts will instead be distributed to other class members on a per-person basis. Notice was sent to 425,851 class members, with additional efforts for notices that were undeliverable or unopened. The court received no objections to the settlement or the requested fees.

Final Approval of the Settlement

The court found that the notice program satisfied Federal Rule of Civil Procedure 23, constitutional due-process requirements, and the Class Action Fairness Act. Applying the factors used to evaluate class settlements, the court concluded that the settlement was fair, reasonable, and adequate.

The court emphasized that the plaintiffs' ERISA theory was novel, the relevant law was unsettled, and continued litigation could involve extensive expert discovery, a costly trial, appeals, and a risk that the plaintiffs would recover nothing. The court found that the $84 million settlement fell within the range of possible successful outcomes, which the plaintiffs' damages expert estimated at approximately $11 million to $480 million before any potential offset. The court also considered the absence of objections, the arm's-length negotiations conducted with a mediator, the adequacy of class representation, and the equitable allocation method.

The court therefore granted final approval of the class-action settlement and approved the methods and forms of notice. It directed the parties to carry out the settlement agreement and plan of allocation.

Attorneys' Fees and Litigation Expenses

The court granted class counsel's request for $20,160,000 in attorneys' fees, equal to 24% of the $84 million settlement fund. The court found that the requested amount was supported by the substantial benefit to the class, the risks and novelty of the litigation, counsel's skill, the time and labor invested, the lack of objections, and fee awards in similar cases.

Class counsel reported spending 3,894 hours on the case. As a cross-check, the court calculated a lodestar—the hours worked multiplied by reasonable hourly rates—of $4,366,995. The requested fee represented a 4.6 multiplier of that amount, which the court found reasonable under the circumstances.

The court also approved $173,995.58 for litigation expenses, including travel, document management, mailing, court fees, expert fees, transcripts, and computerized research.

Service Awards and Administration Expenses

The court granted service awards of $25,000 each to Aryne Randall, Peter Morrissey, and Scott Kuhn. It found that the representatives had reviewed pleadings, responded to written discovery, prepared for and attended depositions, and assisted with mediation. The court also found that their efforts helped produce a settlement benefiting more than 425,000 class members.

The court authorized payment of $260,681.25 from the Qualified Settlement Fund for settlement-administration expenses already incurred and permitted $157,555.75 to remain in the fund for future administration expenses.

Disposition

Judge Laura M. Provinzino granted the motion for final approval of the class-action settlement and granted the motion for attorneys' fees, costs, and service awards as specified in the order. The action was dismissed with prejudice, and judgment was ordered to be entered.