Caterpillar Inc. (CAT) and the law firm of Schlichter, Bogard & Denton announced they have reached a tentative settlement of Martin, v. Caterpillar Inc. The case involves a dispute over the administration of four 401(k) plans for Caterpillar employees and retirees and is currently pending before Judge Joe Billy McDade of the U.S. District Court for the Central District of Illinois.
Under the tentative settlement, Caterpillar will pay $16.5 million. The net proceeds of the settlement, after court-approved attorney's fees and expenses of settlement administration have been deducted, will be allocated to participant accounts and former participants based generally upon the number of years a participant maintained an account balance in one or more of the plans.
The Martin plaintiffs alleged that the fiduciaries responsible for overseeing the plans breached their duties under ERISA by allowing the plans to pay excessive investment management and other fees, by maintaining excessive cash in the company stock investment fund and by offering the Preferred Group of Mutual Funds as plan investment options between 1992 and 2006, which were advised by a wholly-owned Caterpillar subsidiary - Caterpillar Investment Management Ltd.. In 2006, before the Martin case was filed, Caterpillar Inc. made a strategic business decision to exit the investment management business. As a result, in May 2006, the Preferred Funds were replaced with other investment options, including separate accounts.
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