NYU petitions Supreme Court over faculty retirement plan suit
A lawsuit filed against the university by six professors could set a precedent for similar retirement plans across the United States.
December 14, 2021
A $350 million lawsuit alleging that NYU failed to responsibly oversee faculty retirement plans may be revisited by the U.S. Supreme Court. The ruling could set a precedent for similar retirement plans across the country.
The suing professors claimed that the university’s retirement plans, including those for the Grossman School of Medicine, offer high-cost retail mutual funds instead of the available lower-cost options. The case would determine whether the 1974 Employment Retirement Income Security Act, or ERISA, which sets minimum pension plans for private institutions like NYU, allows for plan participants to claim the university is engaging in financial mismanagement by charging additional fees.
NYU won in an initial ruling on the case, which was previously heard at a Manhattan federal district court in 2018. However, that ruling was nullified after the law firm representing the NYU employee plaintiffs found a procedural irregularity. The university is now asking that the Supreme Court hear the case.
“[The] plaintiffs’ suit is one of roughly 20 lawsuits brought across the country alleging that universities breached their fiduciary duties under ERISA by, among other things, paying excessive fees for recordkeeping and other services,” NYU wrote to the Supreme Court on Nov. 16. “Consequently, many of the complaints are nearly identical.”
In August, the lawsuit filed against NYU was partially reinstated in a 2nd U.S. Circuit Court of Appeals ruling after Schlichter Bogard & Denton, LLP, the law firm representing the six professors, appealed the verdict. The appeals court found that the court incorrectly dismissed a claim before the start of the trial.
NYU’s attempt to bring the case before the Supreme Court comes after the court found no ERISA violation in a similar case against Northwestern University on Dec. 6 — just one of 150 class action suits filed about ERISA violations in recent years. The Northwestern professors are being represented by the same law firm as NYU.
Jerome Schlichter, the lead attorney on both cases, said that raising the price of pension plans drastically impacts employees — not NYU. He believes that both the Supreme Court and the 2nd Circuit will rule in favor of his plaintiffs.
“NYU has no financial incentive to make sure fees are reasonable and investments prudent, since it’s the employees’ money at risk,” Schlicter said. “Both sides are agreeing this will affect every retirement plan in America. The Supreme Court should follow the only precedent of the only other case in the Supreme Court involving a retirement plan like this [in 2015], and in which the court ruled unanimously in our favor.”
In a statement to WSN, NYU spokesperson John Beckman said that the claims against the university have been without merit.
“Since the matter is going to be examined by the Supreme Court, the District Court agreed that it makes sense for that matter to be adjudicated in the Supreme Court first, since it may resolve whether the issue, in fact, needs to be re-tried,” Beckman wrote. “NYU has and continues to follow a prudent process in providing fund options in its retirement plans.”
Contact Michael Morris at [email protected]