Miller Shah LLP Finalized $11.8 Million Settlement with MedStar Health Inc.

On September 5, 2024, Judge James K. Bredar of a Maryland federal court approved an $11.8 million settlement reached in a class action lawsuit against MedStar Health, Inc. (“MedStar”), the Board of Directors of MedStar Health, Inc. (“Board”), and the MedStar Health, Inc. Retirement Savings Plan Committee (“Committee” and collectively, “Defendants”). The settlement resolves allegations that MedStar mismanaged the MedStar Health, Inc. Retirement Savings Plan (“Plan”), to the detriment of over 25,000 Plan participants.

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. Under ERISA, plan administrators, trustees, and investment committees become fiduciaries, obligated to act solely in the best interests of beneficiaries. That obligation includes offering prudent and diverse investment options, keeping expenses fair, and always prioritizing participant well-being.

In this action, Plaintiff Elsa Reed alleged that MedStar mismanaged the Plan’s $1.8 billion in assets and breached its fiduciary duties by (1) failing to fully disclose the expenses and risk of the Plan’s investment options to participants; (2) allowed unreasonable expenses to be charged to Plan participants; and (3) selected, retained, and/or otherwise ratified high-cost and poorly-performing investments, instead of offering more prudent alternative investments when such prudent investments were readily available at the time.

Following several years of active litigation, the settlement was the result of vigorous negotiation by the parties, which initially included a full-day mediation held in March 2023. The parties had a full opportunity to evaluate the strengths and weaknesses of their respective positions, resulting in the $11.8 million settlement. In light of the inherent complexity of trying ERISA cases, the reality of a unique situation where an ERISA case would be tried by a jury, and the convoluted case facts, Miller Shah and co-counsel decided that settlement was in the best interest of Plan participants and beneficiaries. In turn, MedStar agreed that it was in the company’s best interest to reach a settlement agreement rather than face the significant cost and time a jury trial in this action would require.

Ultimately, as part of the settlement approval process, an Independent Fiduciary was engaged on behalf of the Plan to review and authorize the Settlement. This allows the Court an independent viewpoint from which to assess the fairness of the Settlement and distribute the settlement proceeds accordingly.

The settlement agreement was preliminarily approved by Judge James K. Bredar on March 8, 2024, after the parties amended the release terms to comport with Fourth Circuit precedent. Following the lack of substantial objections from class members or Plan participants, the $11.8 million settlement was reviewed by the Court in a final approval hearing and given final approval as a “fair, reasonable, and adequate” settlement on September 5, 2024.

The case is Elsa Reed et al. v. MedStar Health Inc. et al., case number 1:20-cv-01984, filed in the U.S. District Court for the District of Maryland.

The legal team at Miller Shah LLP has extensive experience representing class action and ERISA matters. If you have any questions regarding this subject or this post, please contact Alec Berin (ajberin@millershah.com) or Jonathan Dilger (jadilger@millershah.com). The firm can also be reached toll-free at (866) 540-5505.