Duke and Emory 403b Lawsuits Moving Forward

Two of the 12 lawsuits against prominent US universities are moving ahead based on rulings by federal judges in the cases against Duke and Emory. The lawsuits alleged excessive fees and poor performing funds. The issues in these cases are important because they provide guidance to smaller 401k and 403b plans about how courts are interpreting regulations and legislation.

Beyond the monetary settlements, the 401k and 403b lawsuits are creating the third leg of the legal stool which include rules by agencies like the DOL, laws from Congress and caselaw from courts. In the US legal system, courts have the final say so these lawsuits are providing important guidance for plan sponsors in a burgeoning area of the law.

Though no final decisions were rendered, the judges in the Duke and Emory lawsuits differed.

Along with high fees and poor investments, the plaintiffs, both represented by the Schlichter law firm, alleged that too many funds in the plan hurt the participants because of increased fees and decision paralysis. This claim was rejected in the Emory suit but allowed to proceed in the Duke case. In addition, the judges in both cases refused to dismiss claims that multiple record keepers led to higher than necessary fees.

By including too many funds, the claim is that the plan will not be able to get better share classes with lower fees available only at certain asset levels. Behavioral science shows that presented with too many choices, people are likely to make poor decisions or no decision at all.

The suits against 10 other prominent academic institutions including MIT, Northwestern, Yale, Cornell, Vanderbilt and NYU are still pending all represented by Schlichter. Unlike private companies, experts are predicting that these organizations are unlikely to settle which will provide rich caselaw and precedence which other defined contributions will have to follow.



Fred Barstein

Fred Barstein

Founder & Editor-in-Chief at 401kTV | TRAU | TPSU
Fred Barstein is the Founder & Editor-in-Chief of 401kTV. Fred is also the Founder and CEO of The Retirement Advisor University (TRAU), a collaboration with UCLA Anderson School of Management Executive Education and The Plan Sponsor University (TPSU).Mr. Barstein was also Founder and Editor-in-Chief of NAPA Net.
Fred Barstein

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