PLANSPONSOR - April/May 2019 - 10

Rules & Regulations
Tussey v. ABB Draws to a Close
T
he parties in the long-running case
of Tussey v. ABB reached a $55 million
settlement-the final result
of more than a decade of litigation, court
ordered nonmonetary remedies and multiple
appellate court rulings.
Word of the settlement first came
from the plaintiffs' lead attorney, Jerry
Schlichter, of the law firm Schlichter
Bogard & Denton.
In the original lawsuit, filed in 2006
in the U.S. District Court for the Western
District of Missouri, plaintiffs alleged
multiple breaches of fiduciary duty under
the Employee Retirement Income Security
Act (ERISA), arguing in sum that ABB
subsidized its corporate expenses with fees
paid out of its employees' retirement assets.
Among other claims, the plaintiffs
alleged that ABB engaged in self-dealing
by using Fidelity for recordkeeping both
the 401(k) and additional corporate benefit
plans-viz., a corporate pension plan and
a health and welfare plan-and for payroll
processing. Plaintiffs suggested that
Fidelity provided ABB's corporate plans
10 PLANSPONSOR.com April - May 2019
at a loss, while turning a strong profit on
the 401(k) plan-saying this arrangement
amounted to a form of disloyalty and selfdealing
that ERISA prohibits.
For its part, ABB has strongly denied
the many allegations leveled by participants
and has fought the case up and down
the federal court system. Fidelity also
pushed back and received a favorable appellate
court ruling in 2014. In short, the 8th
U.S. Circuit Court of Appeals agreed with
Fidelity and ABB that the District Court
had relied on hindsight in an earlier ruling
that determined the switch from certain
Vanguard funds to Fidelity funds violated
ERISA. Fidelity was also found not liable
for alleged breaches concerning its use of
" float " income.
A Complex Lawsuit
A release sent out by the plaintiffs' attorneys
summarizes the settlement and
recalls the many twists and turns the
case has taken over the years. In 2012,
the plaintiffs obtained a $36.9 million
judgment, which was eventually appealed
Art by Suharu Ogawa
once-and unsuccessfully-to the U.S.
Supreme Court and twice to the 8th U.S.
Circuit Court of Appeals, which itself
twice remanded the matter to the Missouri
District Court for further proceedings.
The attorneys note that the plaintiffs
previously obtained a court order " extensively
reforming " the 401(k) plan, to reduce
fees. In particular, ABB was previously
ordered by the courts to use a competitive
bidding process, including a request for
proposals (RFP), to select a new recordkeeper.
ABB was also ordered to choose the
available share class of investments that
has the lowest expense ratio, rather than
more expensive retail share classes.
" In this settlement, the plaintiffs'
losses will [for the first time] be addressed
with damages, " the attorneys wrote.
One of the earliest in a spate of 401(k)
plan fee and disloyalty lawsuits filed by
the Schlichter firm, Tussey v. ABB also
proved to be among the most convoluted.
In the most recent appellate ruling
in the case, the 8th U.S. Circuit Court
of Appeals found that the District
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