After several bumps in the road, a class action ERISA suit against the auto parts supplier Magna International has finally reached a settlement. The suit, which alleges that approximately 20,000 workers were adversely affected by underperforming funds and high fees, took the long road in reaching its destination. While details of the settlement are still pending, the plan in question had more than $1.6 billion in assets under management at the time of filing.
Dangerous Curve Ahead?
Four former employees brought the initial complaint against the auto parts company, claiming Magna International’s plan included imprudent options and that its fiduciaries failed to properly monitor its investment lineup. Plaintiffs also asserted that recordkeeping fees were unreasonably high for the services provided.
Although Principal Trust company, the plan’s trustee, is not a named defendant, the plaintiffs allege that fiduciaries didn’t properly vet the funds Principal Trust placed in the investment menu. The suit states, “Defendants abdicated their fiduciary oversight, allowing Principal Trust Company ... to lard the plan with funds managed by the trustee and/or its affiliates.” Of the 20 funds, 17 were “funds bearing Principal’s name,” which raised concerns about a potential conflict of interest.
Detours in the Case
Plaintiffs first filed the lawsuit against Magna International in 2020, and it reached the U.S. District Court in 2021. Magna International tried to pump the brakes on the suit in 2023, and their efforts initially seemed successful. In March of that year, the court denied the plaintiffs’ motion for class certification due to former criminal convictions against some of the plaintiffs and a lack of knowledge about the suit itself and its core claims. New representatives were named 30 days later, and the suit moved forward.
In January 2024, the lawsuit was officially granted class certification; four months later, the auto parts manufacturer agreed to settle.
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