Yale workers have countered the University’s efforts to resolve their 2016 suit without trial. The suit seeks millions in damages for the University’s handling of its retirement plan. The workers filed opposition papers to Yale’s motion for summary judgment in the U.S. District Court for the District of Connecticut last week.
The class action suit, Vellali et al. v. Yale University et al., represents more than 20,000 Yale employees who claim that the University breached its fiduciary duty in failing to adequately oversee the plan and cost them millions by keeping underperforming investments in its 403(b) retirement plan. Specifically, the plaintiffs allege that Yale acted imprudently by delegating responsibility for its multi-billion dollar retirement plan to one individual in charge of the Benefits Office. They claim the University failed to monitor the individual, Hugh Penney. The suit also claims that the third-party retirement plan manager, a financial services organization named TIAA, charged faculty excessive record-keeping fees. The plaintiffs filed an opposition to Yale’s Dec. 4 motion asking that the court make a decision on the claims without holding a trial.
“There are many facts and documents that demonstrate that Yale employees and retirees paid excessive fees and had imprudent investments as a result of fiduciary breaches by the people writing the plan,” said Jerome Schlichter, an attorney representing the plaintiffs. “The fiduciary responsibility is the highest duty under the law and to work for the sole benefit of Yale employees and retirees. We say that was breached and the evidence supports it.”
The class, represented by six Yale employees, alleges that the University breached its duty under the Employee Retirement Income Security Act. The law safeguards the interests of participants in employee benefit plans. It lays out standards of conduct for plan managers and requires that plan managers work for the sole benefit of employees and retirees.
For its part, Yale defended its conduct in legal filings, arguing that its handling of the retirement plan was “prudent” and “exemplary.” The University claimed it regularly reviewed the investment options in the retirement plan.
The University also noted that the named plaintiffs did not invest in the options that the plaintiffs said were underperforming. Therefore, the “performance of plaintiffs’ retirement investments would not have changed one cent if Yale had done what plaintiffs say was necessary,” the University wrote in court filings.
Attorney Brian Netter, part of the team representing Yale, referred the News to University spokesperson Karen Peart. Peart said that the University declined to comment as the suit is pending litigation. Penney did not immediately respond to email and phone requests for comment.
The plaintiffs specifically claim that Yale did not remove investment options that had been underperforming for years from its retirement plan. Additionally, Yale allowed employees to be charged “excessive” fees for record-keeping, administrative and investment services, the suit claims.
“We allege that they breached their duty by allowing their employees and retirees to be charged excessive fees beyond reasonable levels,” Schlichter said. “Those fees and those investments could have been invested in prudent investments which would have meant that the employees and retirees of Yale would have substantially more retirement assets now.”
Yale has filed a motion for summary judgment — requesting that the court make a decision on the suit without going to trial.
The University argued that it exercised regular oversight over the investment options available in its plan, that it had a single record-keeper to reduce expenses and improve employees’ experiences and that it was a leader in negotiating record-keeping discounts.
“The parties in this case have now taken over 20 depositions and exchanged hundreds of thousands of pages of documents concerning Yale’s fiduciary process,” the memorandum in support of the motion for summary judgment reads. “This material shows that Yale consistently led the pack when it came to designing, monitoring, and implementing retirement solutions for its employees.”
Schlichter said that the plaintiffs plan to go to trial if the court sets a date. Expert witnesses will determine the total sum the plaintiffs will seek in damages, but it will be millions of dollars, he said.
The University is represented by lawyers from Mayer Brown LLP. The plaintiffs are represented by lawyers from Schlichter Bogard & Denton LLP and Cohen & Wolf PC. The plaintiff’s attorneys are part of a spate of similar lawsuits against Yale’s peer institutions, including New York University and the Massachusetts Institute of Technology.
The judge in the case is U.S. District Judge Alvin W. Thompson.
Rose Horowitch | rose.horowitch@yale.edu
Correction, Feb. 12: An earlier version of this story said that Yale filed a motion for summary judgement requesting the court dismiss the suit. In fact, the University is seeking a judgement on the suit without going to trial through the motion for summary judgement. In addition, the story referred to the plaintiffs’ original filing as a “brief.” In fact, it is a class-action complaint. The story has been updated.