A North Carolina federal judge denied Labcorp's motion for an early win Friday in a class of employee 401(k) participants' suit alleging their retirement savings were mismanaged, citing the parties' factual disputes over whether recordkeeping fees and investment offerings violated federal benefits law.

Judge Rules Disputes Must Be Resolved in Court

U.S. District Judge Loretta C. Biggs entered a memorandum opinion and order denying a motion for summary judgment from Laboratory Corporation of America Holdings in the Employee Retirement Income Security Act class action from Labcorp worker Damian McDonald.

McDonald first sued in 2022, alleging Labcorp breached ERISA's fiduciary duty of prudence by retaining high-fee investment offerings in its 401(k) plan and by allowing its plan recordkeeper, Fidelity Workplace Services LLC, to charge excessive fees.

Judge Biggs said in her order Friday that the court found that genuine issues of material fact remained regarding whether Labcorp breached its ERISA fiduciary duty of prudence by allowing Fidelity's recordkeeping fees. The parties' experts also disputed whether higher-cost share classes of mutual funds offered to retirees were imprudent in violation of ERISA, Judge Biggs said.

"This court cannot choose a side in the 'battle of the experts' at the summary judgment stage," Judge Biggs stated.

Disputes Over Recordkeeping Fees and Float Compensation

Regarding the recordkeeping fees, Judge Biggs cited numerous disputes between the two sides' experts, including a disagreement about whether Labcorp should have monitored float compensation that Fidelity received on plan participants' money. The parties also disagreed on exactly how much money Fidelity earned regarding that compensation, Judge Biggs said.

McDonald's amended complaint filed in November 2022 describes float compensation that LabCorp agreed to allow Fidelity. Labcorp agreed to route plan participants' money through a Fidelity clearing account whenever it was deposited or withdrawn and agreed to let Fidelity keep interest or other investment returns earned on plan participant money while the money sat in the clearing account that was typically for a period of two to three days, the complaint said. Labcorp said in a reply brief filed in December in defense of its recordkeeping fees that following negotiations with its investment consultant Captrust, Fidelity had agreed to rebate all revenue sharing and float compensation back to the plan beginning in July 2018.

Class Action Status and Expert Testimony Rulings

The denial of summary judgment comes after 401(k) plan participants won class certification in October, certifying a group of approximately 55,000 beneficiaries who participated in the 401(k) plan from November 2016 to the present.

In addition to denying the motion for summary judgment, Judge Biggs sorted through two motions from Labcorp to exclude expert opinions submitted by the class. Judge Biggs granted Labcorp's motion to exclude an expert's testimony regarding float compensation received by Fidelity but denied Labcorp's motion to exclude another expert's opinions about recordkeeping and administrative fees after finding that expert's methodology was reliable.

Counsel for the parties and a Labcorp spokesperson didn't immediately respond Friday to requests for comment on the decision.

McDonald is represented by Matthew J. Norris of Norris Law Firm PLLC, by Brandon J. Hill, Luis A. Cabassa and Amanda E. Heystek of Wenzel Fenton Cabassa PA and by Michael C. McKay of McKay Law LLC.