Fidelity Investments operates a consolidation of mutual funds and gives investment advice in asset custody, life insurance retirement services, wealth management, and securities execution and clearance. The American company is home to more than 300 funds which offer investment funds at the most competitive prices. Most recent reports indicate that the firm holds investments worth almost $11.8 million. Fidelity Investments offers loans through cooperation with several banks, the most notable being US Bank, Goldman Sachs Bank USA, and Bank of Oklahoma. The company’s history has been embroiled in several lawsuits, and in this article, we shall be examining the ten biggest lawsuits the company has ever been involved in.
10. Emily and Malcolm Fairbairn vs. Fidelity Investments Charitable Funds
According to the National Law Review, the Fairbairn went to court in Northern California Federal Court, 2022, alleging that Fidelity Charitable failed to abide by promises made to them in a series of conversations which were aimed at winning donation in a competitive process against other commercial DAF options. The case is expected to shape how different companies to source for donor contributions. The plaintiffs claim that due to actions by the defendant, their contributions of $100 million terms of charitable shares.
The base of the case is that due to internal policies by Fidelity to sell shares immediately after they get them, the donation had lost value by $20 million. The plaintiff contended that the defendant was aware of this scenario despite pursuing them to make the contributions. The matter is awaiting determination by the judges. However, regardless of its outcome, it will shape how donations should be treated by the receiving party, especially in determining whether a donation can lose value because the stock m market value of the receiving company has done so.
9. Elizabeth Evans vs. Fidelity Investments, A Racial and Workplace Discrimination Case
On January 5, 2021, Elizabeth Evans sued Fidelity Investments and its two other employees, Brian Milliken and Brenton Sadowski. She accused the parties of discrimination and a hostile workplace where women were highly disparaged and faced insensitive comments by their workmates. In the case, which attracted high media coverage, Evans alleged that male colleagues denigrated Islam and praised the U.S economic impacts of slavery. Graphically, they would discuss the impact of childbirth on women in her presence. Evans would go ahead to state that the environment was like a “locker room,” but she picked two male employees whom she strongly accused of the racist comments. When she reported to her seniors, she alleged that she was retaliated against, which forced her to file the lawsuit. In 2017, the company fired two senior finance managers over the same issues.
8. Board of Trustees of UFCW Local 23 & Giant Eagle Pension Fund vs. Fidelity Investment, A Case of Subsidiaries against the Parent Company
In one of the cases in which Fidelity Investments won against other funds for accusing it of violating the ERISA fiduciary duties, the 1st US Circuit Court of Appeals upheld a ruling that dismissed a lawsuit against the company. The plaintiff alleged that Fidelity had ‘infrastructure fees’ that it charged on third mutual funds (such as the plaintiffs) on its FundsNetwork investment platform. The plaintiffs alleged that the fee is a ‘pay-to-play” charge for access to Fidelity’s retirement plan investors, violating the ERISA fiduciary duties. The appellant court dismissed the case because the plaintiff’s theories had no factual basis in law. The court found that its contract terms with the funds allowed it to make unilateral changes if doing so did not impact the total costs.
7. Green vs. Fidelity Investments, A Case of Potential Interference with Prospective Employment and Defamation
The case is one of the few in which Fidelity won against its former employees. Fidelity Investments hired Larry Green as a financial service representative on September 14, 1999, and offered him a contract agreement acknowledging his employment was at will. Green was one of the best performing employees who earned him several accolades from the company, including a paid holiday. However, on different occasions between 2004 to 2006, he was issued several warnings over several misconducts.
In 2006, his supervisor established that he had been falsifying leads, which resulted in his alleged high performance. The bone of contention was that the line manager indicated in the U5 forms the actual conduct of his misconduct after being dismissed. Green went ahead and sued for defamation and alleged that employers had used the comments on the U5 forms to deny him a job opportunity. The matter was dismissed because Green failed to prove any employers had denied him a job opportunity because of the comments. The judge hearing the matter, dismissed and closed the case simultaneously.
6. Jackie Lawson vs. Fidelity Investments, A Case by a Former Whistleblower Employee
In 2007, Jackie Lawson, a former senior management employee at Fidelity (Director of Finance), resigned from the company and sued the mutual funds in Federal Court in 2008 that the former had violated whistleblower laws by retaliating against her. The matter had gone all the way up to the Supreme Court, which had reviewed, in 2014, those who were protected by the Sarbanes-Oxley Act to include the grounds on which Lawson had brought her case.
Delivering its ruling in Boston in 2017, as reported by Reuters, the Jury hearing the matter dismissed her case because she had failed to prove how Fidelity Investments had attempted to defraud investors by incorrectly calculating expenses. In its defense, the company alleged that Lawson’s complaints were baseless, and they came after they bypassed her in a position Lawson had an interest in. In addition, they alleged that she had on several occasions been involved in errors that the company had attempted to resolve.
5. Micron Technology Shareholders Class Lawsuit Versus Fidelity Investments, A Case of Foul Statements Made by a Manager 1n 1995 ($10 million)
According to The New York Times, Fidelity Investments agreed to $10 million to settle a class lawsuit filed in 1995 against the company and one its former managers at the Magellan Fund. The plaintiffs alleged that the manager, Jeffrey N. Vinik, had alleged that the shares of Micron Technology were “still relatively cheap.”
The suit contended that Mr. Vinik made the statement to manipulate stock prices to allow his fund to sell more by creating uneven grounds. While agreeing to pay the money, the leadership of Fidelity Investments said that the settlement was intended to get rid of the ligation which had accrued its litigation costs. However, at the same time, they did not acknowledge any wrongdoing. The parent company, Fidelity Investments, took up the cost and had no financial complications on the Magellan Fund.
4. Nichols Kaster PLLP & Block & Leviton LLP vs. Fidelity Investments ($10.5 million)
After successfully representing the plaintiffs in the Motion and Others Versus Fidelity, they went back to court and demanded to be paid a total of $10.5 million as a litigation fee. The Jude hearing of the matter agreed with the two law firms that they were entitled to at least a third of the total amount paid to the plaintiffs. The matter was concluded on February 236, 2021, by the honorable Judge William G. Young of the U.S District Court for Massachusetts. Among the $10.5 million and $1.5 million were the administrative costs the law firms claimed they incurred, plus interests. The case was made to benefit 41,000 participants. In the matter, Fidelity Investments was represented by Goodwin Procter LLP.
3. Former Employees vs. Fidelity Investments, A Case of Offering Employee High-Cost Fund Retirement Plan Option ($12 million)
In September 2014, Fidelity agreed to pay $12 million as a settlement for two class lawsuits brought forward by its former employees. They accused the company of providing them with a self-dealing retirement plan, enabling the company to make money at their expense. They alleged that, though the company was aware of other cheaper plans, it imposed the high-cost ones on them. The affected number of employees was over 50,000.
The employees specifically cited that the company failed to use an impartial process when choosing investment options for its employees. Despite agreeing to settle the matter, it continued to deny any wrongdoing. In the deal, Fidelity was instructed to allow its employees to choose between non-Fidelity and Fidelity mutual funds, increase auto-enrollment to 7 %, and allow those who participated in non-Fidelity mutual funds to benefit from revenue sharing.
2. 3 Investors vs. Fidelity National Financial Inc. & Board Members, a Case of manipulating a Business Acquisition ($20 million)
Fidelity National Financial is an incorporated entity of Fidelity Investments. In one of the most severe legal suits against the company, three investors sued it, alleging that it pushed the U.s top insurer to sell one of its affiliates at $2.7 billion. The plaintiffs sued the company, its Chairman, William Foley II, and other board members. After a long push and pull to maintain their public image, the defendants agree to pay $20 million to settle the matter. Among the $20 million paid, $4.4 million was meant for the law firms hired by the plaintiffs.
The deal was docketed at the Delaware Chancery Court in May 2022. Moreover, Fidelity Financial Inc. agreed to undertake oversight reforms where the company agreed to undertake “a series of meaningful corporate governance reforms.” The reforms included but were not limited to creating a new board committee overseeing related-party transactions. Further contents of the proceedings can be found in Bloomberg Law.
1. Moitoso and Others vs. Fidelity, ERISA Violations Case ($28.5 million)
In 2020 Fidelity agreed to pay $28.5 million to settle a case where its former participants had accused it of violating the company’s 401 (K) plan. In their suit, the plaintiffs alleged that the plan was filled with proprietary products and that the company did no investigations to determine whether similar investments were cheaper and were performing better in the market. The settlement also required that
Fidelity undertake a serious market study, improve on record keeping and monitor the existing plan’s performance before they would introduce new ones in the market. Fidelity alleged that the litigation costs would accrue to unprecedented levels if it were not for the offer. While acknowledging the settlement offer, the company’s spokesperson, Michael Aalto, stated that they only conceded not because they were guilty but because they felt that there was a need to protect their image and address the desires of their clients.
What Can Fidelity Do To Minimize Lawsuits Against the Company?
An analysis of the Fidelity lawsuits reveals that most cases are class lawsuits. To minimize them, the company must work on improving its internal dispute resolution mechanisms. Efficient internal mechanisms will increase investors’ and participants’ need not to incur litigation fees when they are going to court, for they believe that the company can handle the differences when they are on the table. Decisive actions must be taken against those with positions of responsibility and are found to suppress complaints raised by employees to avoid embarrassing cases like the one of Elizabeth Evans.
There is also the need to review and educate all the parties on the employer to employee relations concerning each party’s rights. Fidelity Investments should also emphasize training managers and line supervisors on how to conduct themselves when talking to participants and investors to avoid the scenario of Microtron Technologies. The ruling on letting employees choose their preferred retirement plan must be implemented fully, for it touches on ensuring that potential participants are convinced that they are not being given a raw deal.
Litigation is an expensive affair. Other than the actual costs paid to law firms, it has hidden costs in that it affects the public image of Fidelity Investments. Though it is almost impossible to avoid lawsuits, Fidelity Investments should take the appropriate measures to ensure that it minimizes them and, when they arise, settles them out of court. It’s also necessary to review the company’s legal strategic plan to ensure that it matches and addresses the emerging trends in its field of specialization.
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