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Home/Settled Cases/Novitex ERISA: Miller Shah Secures a $750,000 Settlement

Novitex ERISA: Miller Shah Secures a $750,000 Settlement

On September 17, 2021, U.S. District Judge Michael P. Shea granted final approval of a proposed $750,000 Settlement (the “Settlement”) in a class action against Exela Enterprise Solutions, Inc. (“Exela” or the “Company”) and the Novitex Enterprise Solutions Employee Benefits Committee (collectively “Defendants”). The Settlement resolves allegations that Exela breached their fiduciary duties to participants in the Company’s defined contribution 401(k) plan (the “Plan”).

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, for plan administrators to ensure that investments offered to employees are prudently selected and monitored. In this action, Plaintiff alleged that Novitex Holdings, Inc. (“Novitex”) (now Exela Technologies, Inc.) breached these fiduciary duties by failing to use the least expensive share class for its investment options and by charging excessive and unreasonable recordkeeping fees.

This lawsuit was vigorously litigated for approximately four years. After Plaintiff initiated the action on behalf of Plan participants, Novitex filed a motion to dismiss the complaint, arguing (1) that Plaintiff did not plausibly allege the selection of the Plan’s investment options or service providers was imprudent, and (2) that Plaintiff alleged no facts to support his derivative claims. Ultimately, on November 20, 2018, the Court partially granted and partially denied Defendants’ motion to dismiss. Claims alleging an over-concentration of actively managed investment options, an excessively expensive stable value fund, and excessive compensation to plan service providers were dismissed, but the Court maintained the expensive share classes claim.

Following the Court’s decision on Defendants’ motion to dismiss, the parties engaged in a comprehensive discovery process, retaining experts and exchanging expert reports on October 30, 2020. After constructive discussions throughout the litigation, including a one-day mediation with a respected neutral mediator, the parties were able to reach an agreement-in-principle in January 2021, which they memorialized in a written agreement on February 18, 2021.

On April 26, 2021, the Court preliminarily approved the Settlement agreement and conditionally certified the class for settlement purposes. At a final approval hearing held on September 14, 2021, the Court affirmed the reasonableness of the Settlement and a recovery of $750,000, excluding attorneys’ fees and litigation expenses.

Plaintiff is represented by Miller Shah LLP and the Law Offices of Sahag Majarian. The case caption in this matter is Sandoval v. Novitex Enterprise Solutions, Inc. et al., Case No. 3:17-cv-1573, filed in the United States District Court for the District of Connecticut.

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

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