Final Approval of Settlement in General Dynamics 401k Lawsuit
FAIRFAX, VA, November 23, 2010 -- General Dynamics Corporation (NYSE: GD), Fiduciary Asset Management, LLC (FAMCO), and the law firm of Schlichter, Bogard & Denton of St. Louis, Missouri, today announced they have received final court approval for the proposed settlement of Will, et al. v. General Dynamics Corp., et al., Case No. 06-698. Mr. Will and others, represented by Schlichter, Bogard & Denton, filed a putative class action on behalf of all participants in two General Dynamics 401k Plans in the U.S. District Court for the Southern District of Illinois in 2006. The putative class action involved disputes over the fees and management of the 401k Plans, which have approximately 85,000 participants and combined assets worth approximately $6 billion.
General Dynamics and FAMCO maintain that they have complied with the Employee Retirement Income Security Act of 1974 (ERISA), which governs the Plans. However, the parties have determined that it is in their best interest, and General Dynamics has determined that it is also in the best interest of General Dynamics' employees, 401k Plan participants and shareholders, to resolve the lawsuit by settlement. General Dynamics, FAMCO, and FAMCO's parent company will not contribute to the settlement fund. Rather, pursuant to the terms of the settlement, a $15.15 million settlement fund will be created by General Dynamics' insurers, and FAMCO's insurers and other sources. After a deduction for plaintiffs' attorneys fees and administrative costs for settlement, the settlement fund will be allocated to the accounts of 401k Plan participants and authorized former participants based generally upon the number of years a participant maintained an account balance in one or both of the 401k Plans.
Under the settlement, the parties also will implement certain practices designed to maximize the returns plan participants receive from their 401k Plan investments by continuing to keep the costs of those investments low, including the use of an outside consultant to review certain aspects of the 401k Plans and report to General Dynamics and an independent fiduciary, and enhanced disclosures to participants regarding fees and expense associated with their investments. In addition, the settlement provides that General Dynamics will continue its long-standing practices of paying for the Plans' recordkeeping services on a per-participant, rather than an asset, basis, and not providing subsidies to other benefit plans through the 401k Plans. General Dynamics also will provide credit to the 401k Plans for volume discounts from investment managers who also provide services to other General Dynamics benefit plans. Finally, the settlement precludes FAMCO from recommending itself as investment manager or recommending the allocation of money to investment accounts it manages.
Because the lawsuit is a class action filed under ERISA, the settlement was subject to a statutory notice period after it received preliminary approval from the court. In addition, it was approved by an independent fiduciary retained to represent the interests of 401k Plan participants. The settlement also establishes a dispute resolution procedure with binding arbitration to enforce its terms. Final court approval means that distribution of settlement payments to Plan participants can begin in the near future, and the lawsuit has been dismissed with prejudice.
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