On March 30, 2023, U.S. District Judge Mark Kearney granted final approval of a $12.5 million settlement (“Settlement”) reached in a class action lawsuit against Universal Health Services, Inc., the Universal Health Services Retirement Plans Investment Committee (“Investment Committee”), and Does No. 1-10, who are members of the Investment Committee or other fiduciaries of the Universal Health Services, Inc. Retirement Savings Plan (“Plan”) (collectively, “Defendants” or “Universal”). The Settlement resolves allegations that Defendants mismanaged the Plan, to the detriment of over 60,000 Plan participants and beneficiaries.
Defined contribution plans like the Plan are governed by the Employee Retirement Income Security Act of 1974 (“ERISA”), a federal statute establishing standards—known as fiduciary duties—requiring plan administrators to ensure that investments offered to employees in a plan are prudently selected and monitored. In this action, Plaintiffs Mary Boley, Kandie Sutter, and Phyllis Johnson (collectively, “Plaintiffs”) alleged that Universal breached these fiduciary duties by (i) retaining high-cost and poor-performing investment options in the Plan instead of better-performing alternatives, (ii) failing to disclose the risks and expenses of those investment options, and (iii) allowing Plan participants to pay recordkeeping fees that were in excess of true administrative costs.
The lawsuit, filed in the United States District Court for the Eastern District of Pennsylvania, was vigorously litigated for almost three years. On October 9, 2020, Universal moved to dismiss the action, arguing that Plaintiffs lacked standing for want of concrete injuries. Three weeks later, the Court denied the motion to dismiss and held that Plaintiffs had standing to bring each of their claims because Defendants’ challenged conduct applied uniformly to all investments offered through the Plan to Plaintiffs and potential class members.
Defendants attempted to raise a similar argument at the class certification stage, asserting that the Plaintiffs could not be proper class representatives because they did not invest in each of the challenged funds. On March 8, 2021, the Court certified a class of all participants in the Plan during the relevant period over Defendants’ opposition. Defendants subsequently appealed that decision to the United States Court of Appeals for the Third Circuit.
On June 1, 2022, following oral argument on the issue in February 2022, the Third Circuit upheld the District Court’s decision to certify the class, thereby permitting collective resolution of the claims of “all participants and beneficiaries in the Plan at any time on or after June 5, 2014 to the present” (the “Class”).
After constructive discussions, including a full-day mediation and weeks of subsequent negotiations, the parties were able to reach agreement on the $12.5 million Settlement, which was preliminarily approved by Judge Kearney on October 31, 2022.
At the March 30, 2023 final approval hearing, the Court affirmed its prior description of the Settlement as “fair, reasonable, and adequate, and in the best interest of Plaintiffs and [the] putative Settlement Class.” Out of the $12.5 million Settlement, Class Counsel was awarded 33% of the total Settlement plus approximately $300,000 in litigation expenses, and Plaintiffs Boley, Sutter, and Johnson were awarded $8,000, $7,000, and $7,000, respectively, for their time and efforts representing the Class.
The case caption for this lawsuit is Boley et al. v. Universal Health Services Inc. et al., No. 2:20-cv-02644-MAK, filed in the Eastern District of Pennsylvania. A previous blog post on this matter can be viewed here.
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