Gucci America’s 401(k) plan fell victim to allegations regarding its investment strategy recently, ending in a $1.2 million settlement against claims that it doesn’t always shoot for the cheapest investment strategies.
Plaintiffs in the case alleged that Gucci exhibited a lack of oversight on the plan’s service provider, TransAmerica Retirement Solutions, leading to the “unreasonable” use of the provider’s proprietary funds and subsequently to conflicts of interest when making investment decisions.
The plaintiffs also alleged that the plan’s management exhibited “particularly egregious” behaviors, typically selecting relatively expensive investment options when cheaper, comparable alternatives were widely available “without any justifiable reason.” The plan also reportedly retained certain investments despite its prolonged underperformance.
Additionally, the plaintiffs claimed there were “misleading and inaccurate disclosures” regarding their asset values and performance. The widespread allegations ultimately won them $1.2 million from the $96.5 million retirement plan.
Of the settlement, $800,000 will be paid out to class members in the case, with $395,000 in attorney’s fees and $5,000 in class representatives’ compensation. The gross settlement represents approximately 33% of the maximum amount of financial damages incurred by the plaintiffs, and over 94% of the full amount of potential economic damages.
Gucci America, along with co-defendant Kering America, the conglomerate who owns the luxury brand, disputed the allegations and denied liability for any alleged violations of the Employee Retirement Income Security Act. They filed a motion to dismiss the allegations, which was denied in October 2018.
The plaintiffs then mediated the case with a neutral party, which allowed the parties to reach a settlement.
Excessive-fee lawsuits have been making the rounds lately. Health insurer Anthem Inc. just agreed to pay out $23.7 million in a similar case where plaintiffs made comparable allegations to the ones brought against Gucci.The settlement is awaiting final court approval.
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