Compass Lexecon Client Banner Health Obtains Near Total Victory in ERISA Trial

Court Relies on Testimony of Compass Lexecon Expert Dr. Adel Turki

Plaintiff in this litigation claimed that Banner Health failed to fulfill certain fiduciary obligations under ERISA by, among other actions, failing to prudently monitor the Mutual Fund Window offered under the Banner Health Employees 401(k) Plan, retaining the Fidelity Freedom Funds investment options for too long, and paying excessive recordkeeping fees.

After an eight-day bench trial, Judge William J. Martínez rejected in their entirety Plaintiffs’ claims regarding the Mutual Fund Window and the Fidelity Freedom Funds and found Plaintiffs’ damages claims with respect to recordkeeping fees to be unreliable. Judge Martínez awarded only a small damages amount (unrelated to Plaintiffs’ expert’s testimony) totaling less than three percent of the overall damages claimed by Plaintiffs.

Compass Lexecon Senior Managing Director Dr. Adel Turki was retained by Banner Health to provide expert rebuttal testimony concerning the alleged damages from the Mutual Fund Window and the Fidelity Freedom Funds. At trial, Dr. Turki opined that there was “no evidence whatsoever that [the Mutual Fund Window funds analyzed by Plaintiffs’ expert] systematically underperformed their benchmarks or . . . created any loss to the participants [who] chose to invest in those options.” The Court agreed with Dr. Turki’s conclusion. Citing Dr. Turki’s testimony, the Court found that “there is simply no credible evidence (in the form of expert opinion or otherwise), that Plan Participants who invested in these four selected funds suffered any economic loss as a result.” Also crediting the opinions of Dr. Turki, the Court further found that Plaintiffs’ expert “made a large number of unjustified assumptions and serious calculation errors, and that as a result [Plaintiffs’ expert’s] loss calculations are so unreliable and unsupportable that they cannot form the basis for any finding in favor of Plaintiffs…”

Dr. Turki was also retained by Banner Health to provide expert rebuttal testimony concerning the alleged excessive recordkeeping fees calculated by Plaintiffs’ experts. At trial, Dr. Turki opined that Plaintiffs’ expert’s damages model was unreliable as the expert had not provided any empirical evidence to support his allegedly reasonable recordkeeping fees. Therefore, Dr. Turki opined that the claimed expected per-participant fees and related damages calculations were unverifiable. The Court agreed with Dr. Turki concluding that Plaintiffs’ expert’s “estimate of the losses incurred by the Plan as a result of the excessive recordkeeping and administrative fees charged to the Plan by Fidelity to be unreliable…” Nonetheless, the Court concluded that the Plan’s recordkeeping and administrative fees should have been more closely monitored and that this breach of the duty of prudence caused economic losses to the Plan. Given that the Court found Plaintiffs’ expert’s damages analysis unreliable, the Court fashioned its own method for calculating damages unrelated to Plaintiffs’ expert’s testimony.

Compass Lexecon worked closely with counsel from McDermott Will & Emery LLP. Including, Margaret H. Warner, Jennifer B. Routh, Theodore M. Becker and Richard J. Pearl. Dr. Turki was assisted by a team in Compass Lexecon’s New York office that included Michael Kwak and Nicholas Fasano.

The case is LORRAINE M. RAMOS, et al., v. BANNER HEALTH, et al.,(DCO, 1/6/2020).