On October 25, 2023, U.S. District Judge Andrew L. Carter, Jr. granted final approval of a $124.6 million settlement reached in a class action lawsuit against Ruane, Cunniff & Goldfarb Inc., DST Systems, Inc., the Advisory Committee of the DST Systems, Inc. 401(k) Profit Sharing Plan, the Compensation Committee of the Board of Directors of DST Systems, Inc., and Robert D. Goldfarb (collectively, âDST Systemsâ). The settlement resolves allegations that DST mismanaged the DST Systems, Inc. 401(k) Profit Sharing Plan (âPlanâ).
The original lawsuit was first brought by lead counsel Miller Shah LLP under the Employee Retirement Income Security Act (âERISAâ) in March 2016 by former DST Systems employee, Clive Cooper, against DST Systems, an information processing software provider based in Kansas City. The ERISA serves as a legal framework safeguarding retirement savings by setting standards for plan management and holding fiduciaries accountable for fulfilling their duties to protect participantsâ financial security. Plaintiffs Michael L. Ferguson, Myrl C. Jeffcoat, and Deborah Smith asserted breach of fiduciary duty under ERISA by certain fiduciaries of the Plan related to over-concentration of Valeant Pharmaceuticals International Inc. (âValeantâ) stock in the Planâs profit-sharing account. Miller Shah LLP brought Olivier & Schreiber in as co-counsel, and Monique Olivier represented the Plaintiffs in the Second Circuit appeal which led to a published appellate decision on the arbitrability of ERISA breach of fiduciary claims.
In October 2019, the Department of Labor (âDOLâ) also filed suit, alleging that DST Systemsâ fiduciaries violated ERISA by âfailing to diversify the planâs assets to minimize the risk of large losses and failing to act prudently and loyally in managing these assets when the investment manager invested the planâs assets on a highly concentrated basis in a select number of securities.â
The DOL likewise highlighted the concentration of Valeant stock, which grew to account for more than 45% of the Planâs assets. Soon after, Valeantâs stock fell dramatically in 2015 following a fraud scandal. As a result, the Planâs participants experienced significant losses to their retirement savings because of the Planâs concentrated portfolio. An investigation by the DOL identified ERISA violations and found that DST Systems failed to monitor the investment managerâs activities properly.
In July 2023, all parties agreed to settle to avoid the cost and risk of further litigation. The proposed settlement was preliminarily approved by the U.S. District Court for the Southern District of New York on August 8, 2023, following years of complex litigation and negotiations. Following the final approval granted on October 25, 2023, the settlement provides $124,625,000.00 to the Plan, which will be divided among eligible Settlement Class members after certain deductions, including attorneyâs fees and civil penalties paid to the Department of Labor. The settlement resolves litigation by the DOL and private plaintiffs against DST Systems.
The case caption for this lawsuit is Ferguson et al. v. Ruane Cunniff & Goldfarb Inc. et al., case number 1:17-cv-06685, filed in the U.S. District Court for the Southern District of New York. The published appellate opinion is Cooper v Ruane Cunniff & Goldfarb Inc., 990 F.3d 173 (2nd Cir. 2021).
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