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An MGM lawsuit that has been ongoing for more than two years looks like it could start to move toward a resolution. Last week, a federal court in Nevada authorized class-action status for the case.
The complaint alleges that MGM Resorts neglected its duty to appropriately manage employees’ retirement funds. Depending on how many eligible people the class and the court’s decisions, a win for the plaintiffs could mean financial liability for MGM.
MGM is one of the largest gambling and hospitality companies operating several casinos in the US and around the globe.
MGM lawsuit gets class-action status
On Oct. 19, US District Judge Jennifer A. Dorsey partially granted the request of the lead plaintiff, Eboni D. Lucas, to certify a class-action status for her complaint against MGM.
MGM did not oppose the motion to certify the class after its second amendment. The class consists of all MGM Resorts employees who invested part of their earnings in MGM’s 401(k) Savings Plan from Sept. 2014 onward with a few exceptions. Those exceptions are:
- of the Board of Directors of MGM Resorts International
- any otherwise eligible employees who opt out of the class
- of the Internal Compensation Committee of MGM International
- of the istrative Committee of MGM Resorts International (and their immediate family)
Currently, the potential size of the class is unknown. Much of that will depend on how successful the plaintiffs are in spreading awareness about the litigation.
Now that this matter is settled, the court can get back to adjudicating the merits of the case.
What is the lawsuit about?
The first group of plaintiffs, including Lucas, filed their amended complaint on Dec. 4 of 2020. Their main allegations were that MGM Resorts violated the Employee Retirement Income Security Act of 1974. Specifically, in its handling of employees’ retirement fund contributions and that mismanagement deprived their s of value.
More specifically, the main charge is:
“Plaintiffs allege that during the putative Class Period Defendants, as ‘fiduciaries’ of the Plan, as that term is defined under ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A), breached the duties they owed to the Plan, to Plaintiffs, and to the other participants of the Plan by, inter alia,
(1) failing to objectively and adequately review the Plan’s investment portfolio with due care to ensure that each investment option was prudent, in of cost; and (2) maintaining certain funds in the Plan despite the availability of identical or similar investment options with lower costs and/or better performance histories.”
The complaint states that MGM’s failure as the plan’s fiduciary “cost the Plan and its participants millions of dollars.”
In its March 2021 request for the court to dismiss the lawsuit, MGM said the legal standard for a breach of fiduciary duty is higher than simply producing a smaller return than they could have by making different decisions.
Essentially, the plaintiffs can’t judge their past actions in hindsight when MGM had to make its decisions without foreknowledge of the ramifications of those decisions.
“Poor performance, standing alone, ‘is not sufficient to create a reasonable inference that plan fiduciaries failed to conduct an adequate investigation…ERISA requires a plaintiff to plead some other indicia of imprudence.”
With class certification now settled, the court can start to consider the merit of these and other arguments. To understand the case, it’s important to comprehend why MGM didn’t oppose class-action status.
An efficient end to the dispute
From MGM’s point of view, allowing the class certification to move forward uncontested is all about efficiency. Instead of litigating potentially dozens of similar cases individually, MGM handles all these complaints in one fell swoop.
If relatively few eligible employees the class, even a loss, in this case, could represent a lesser financial liability. MGM maintains the option to offer the class a settlement. Which may be a good option should it look like the situation is playing out poorly as well.
The court does not actively seek out potential class . That is on the plaintiffs and their attorneys to undertake. ing the class requires action on behalf of the potential as well.
While MGM will likely still try to avoid all liability, the class certification is a way to limit the size of that potential damage. The strength of the plaintiffs’ arguments and the size of the class will now determine those limits.
