M&T Bank sued over retirement plan

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A federal complaint that plaintiff’s counsel hopes to get certified as a class-action lawsuit was filed Sept. 1 against M&T Bank, which is based in Buffalo, and several connected financial institutions, claiming mismanagement of retirement accounts.

The suit is the latest in a deluge of complaints filed in the aftermath of the May 2015 U.S. Supreme Court decision in Tibble v Edison International Inc. and new Department of Labor rules requiring the disclosures of fees related to employee retirement plans.

In the past two years, numerous complaints similar to the M&T suit have been filed, including cases involving several major universities and major corporations.

“It’s kind of a snowball effect. You see reports about it in the news, which seems to trigger more suits, which then trigger more suits after that. It’s just kind of an exploding area of the law right now,” said Daniel Gocek, a tax law expert at Underberg & Kessler LLP in Rochester.

“We believe the claims raised in this case are unsubstantiated and intend to dispute them in court,” said M&T spokesman Chet Bridger.

Lawyers from the plaintiff’s counsel, Kessler Topaz Meltzer & Check LLP, based in Radnor, Pennsylvania, a suburb of Philadelphia, cited the Tibble case in their complaint, pointing out that, according to the Supreme Court, “a trustee has a continuing duty to monitor trust investments and remove imprudent ones.”

In Tibble, the lower courts dismissed the case because the suit was brought eight years after the investment funds in question were added and the federal Employee Retirement Income Security Act of 1974 has a six-year statute of limitation starting when the fiduciary breech allegedly occurred.

The Supreme Court agreed with the plaintiff’s argument that the six-year limit starts when fiduciaries failed to prudently monitor investments, not when the investments were first chosen.

Under the old rule, it was much more difficult for employees to file a timely complaint because they often weren’t aware of the problems with investment choices within that six-year period.

Paul F.Keneally, a partner at Underberg & Kessler, said the theory underlying the suits is not new, but many have been filed since the decision in the Tibble case.

“More firms are filing them and more people are pursuing them because that case made them easier to win,” he said.

Keneally said his firm is continuing to give clients the same advice they provided before the Tibble decision.

“When you set up the plan and you choose the company that’s going to administer it for you, you have a process, you document that process, you have a reason for who you selected and why,” he said.

And if a company doesn’t select one of the lower-priced administrators they should have a reason why, which could be because of expertise or experience, Keneally said.

The one named plaintiff in the M&T suit is Jacqueline Allen, of Wilmington, Delaware, who was enrolled in the M&T Bank Corporation Retirement Savings Plan.

The M&T suit claims that since May 11, 2010, “fiduciaries breached their duties of loyalty and prudence to the Plan and its participants by including higher cost and poorly performing proprietary investment options in the Plan to the detriment of Plan participants.”

“An employee participating in a 401(k) plan is limited to the investment options selected by the plan’s fiduciaries. In selecting and maintaining proprietary funds, investment options that both cost more than and severely underperformed other mutual funds, in the Plan, Defendants engaged in self-dealing, costing the Plan participants millions of dollars,” the complaint claims.

The suit claims the “fiduciaries” of the Plan “breached their duties owed to them and to the other participants and beneficiaries of the Plan.”

Failing to offer better-performing mutual funds and investment options with lower fees cost plan participants millions of dollars, the suit claims.

The suit also claims the defendants didn’t live up to their responsibility by failing to adequately monitor people who directly managed and administered plan assets.

“Not only did the Defendants include these investments out of self-interest, they failed to disclose the conflict of interest to Plaintiff and members of the Class,” the suit claims.

“Defendants selected investments for the Plan with higher administrative fees than were available on the market for similar or identical investment products from other providers. Defendants also failed to monitor the performance of these investments and refused to remove the investments which performed well-below their benchmarks and their competitors,” the suit claims.

The suit seeks to have the employees’ funds restored to what they would have been if they were offered more prudent options. The exact amount would be determined at trial.

Mark K. Gyandoh, lead attorney for the plaintiff, did not return telephone messages seeking comment.