On August 5th, 2022, the Hon. Judge Elizabeth S. Chestney, United States Magistrate Judge for the Western District of Texas, granted final approval of the settlement agreement reached in a class action lawsuit against Zachry Holdings, Inc. (“Zachry”), the Compensation and Benefits Committee of Zachry (“Committee”), and Does 1-20 (collectively, “Defendants”). The lawsuit was brought on behalf of participants and beneficiaries of ZHI 401(k) Retirement Savings Plan (“the Plan”).
According to the settlement agreement, Zachry will pay $1.875 million to resolve the class action lawsuit filed by four former employees, James R. Blackmon, Justin M. Rozelle, Eric A. Myers, Jared Munson, and participants in the ZHI 401(k) Retirement Savings Plan (the “Plan”) in August 2020. The settlement agreement further requires Zachry to take certain actions in connection with monitoring the Plan’s investments and fees.
Zachry is a private corporation that provides construction engineering services. Zachry offers the ZHI 401(k) Retirement Savings Plan (“the Plan”), a defined contribution plan governed by the Employee Retirement Income Security Act of 1974 (“ERISA”), a federal statute that establishes fiduciary duties for plan administrators to ensure that investments offered to employees are prudently selected and monitored.
Plaintiffs, represented by Miller Shah LLP, Capozzi Adler, P.C., and the Law Office of Dan E. Martens, alleged that Defendants, represented by Morgan, Lewis, and Bockius LLP and Dykema Gossett PLLC, breached their fiduciary duties under ERISA, failed to monitor fiduciaries and co-fiduciaries, and are liable for knowing breach of trust by selecting and maintaining an underperforming and unreasonably expensive fund lineup. Plaintiffs allege that inclusion of the Active Suite of the Fidelity Freedom Funds, which were the Plan’s QDIA, was imprudent because (1) the Freedom Funds are too high-risk and unsuitable for the plan participants; (2) they charge higher fees than comparable funds; and (3) other plan fiduciaries and investors lost faith in the Active Suite. Plaintiffs additionally allege that the record-keeping and administrative costs of the plan were excessive.
In consideration of the risks inherent in litigation and to conserve resources on both sides, just days after Plaintiffs filed the Second Amended Complaint in August 2021, parties subsequently agreed to proceed with neutral, well-respected mediator Hunter R. Hughes III. The parties exchanged briefs and follow-up information prior to and during the two mediation sessions, and in November 2021, jointly filed a status report notifying the court that the parties reached an agreement in principle to resolve the Action.
On February 18, 2022, the Court granted preliminary approval of the Settlement Agreement and conditionally certified the following class (“Class” or “Settlement Class”) for settlement purposes. The Class includes all participants and beneficiaries in the Plan at any time on or after August 21, 2014, to present, including any beneficiary of a deceased person who was a participant in the Plan during this period.
Plaintiffs and Defendants filed motion for final approval of the class action settlement on January 21, 2022. Following a Fairness Hearing on July 14, 2022, the Court issued final approval of the Settlement amount as “fair, reasonable, and adequate, taking into account the costs, risks, and delay of trial and appeal.”
The case caption for this lawsuit is James R Blackmon, et al. v. Zachry Holdings, Inc., et al., Case No. 5:20-cv-988-DAE, filed in the United States District Court for the Western District of Texas. A previous blog post on this matter can be viewed here.
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