Caliber Collision 401(k) plan participants, including at least one former employee, have sued the company, alleging that over $4 million in retirement funds were used to offset employer contributions.
Specifically, the suit argues Caliber breached the fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA) and violated its prohibited transaction rules and anti-inurement provision. Ten unnamed plan fiduciaries are defendants in the case.
The suit claims that from 2019 through 2022, Caliber used only $112,238 to offset plan expenses while plan participants paid plan expenses, directly and indirectly, of over $6 million to third-party service providers.
“This lawsuit is about ensuring that retirement plan fiduciaries follow their duties under ERISA and act in the best interests of employees,” wrote Seth Bloom, one of the plaintiffs’ attorneys, in an emailed statement to RDN. “Mr. Fordyce believes that the legal process will fairly examine the facts and provide the relief the law requires. Beyond that, we’ll let the case speak for itself in court.”
The plaintiffs’ attorneys are based in five states: Texas, Tennessee, Illinois, Louisiana, and Florida.
According to the suit, the Caliber Holdings Corp. Retirement Savings Plan was created by Caliber “for the sole benefit of its eligible employees.”
“In accordance with ERISA, the plan’s operating documents provide that assets of the plan should not be ‘used for, or diverted to, purposes other than the exclusive benefit of participants or their beneficiaries and for defraying reasonable expenses of administering the plan,’” the suit states.
“[T]he plan fiduciaries have consistently chosen to utilize essentially all forfeited plan assets to benefit Caliber by reducing Caliber’s contractually obligated declared contributions to the plan and paying plan expenses from plan assets other than forfeited plan assets, i.e., participants’ accounts.”
The suit includes a breakdown of the amounts that Caliber allegedly “flowed directly to its bottom-line profit” out of the retirement plans, saving it the respective amounts in contributions:
In 2019, $621,634;
In 2020, $625,248;
In 2021, $1,499,053; and
In 2022, $1,362,338.
“From 2019 through 2023, the plan fiduciaries caused plan participants to pay plan expenses through deductions from their accounts and indirectly through revenue sharing or similar methods,” the suit states. “The minimum direct amounts paid by participants were: (1) in 2019, $1,197,846; (2) in 2020, $1,291,101; (3) in 2021, $1,409,746; (4) in 2022, $1,305,257; (5) and in 2023, $1,664,834.”
Rather than “loyally and prudently” acting in the best interest of plan participants and avoiding prohibited transactions, “defendants chose to use plan assets almost exclusively to benefit Caliber, to the detriment of the plan and its participants.”
“Defendants’ conduct, at the very least, necessitates the inference that they either did not have processes in place to weigh the benefits to participants in allocating forfeitures, or that they ignored their duty to act exclusively for the plan participants because the plan fiduciaries were motivated by self-interest and/or the interest of Caliber when allocating forfeited plan assets,” the suit states.
The suit notes that ERISA requires plan fiduciaries to use forfeited plan assets to provide benefits and defray plan expenses as soon as administratively practicable.
As of December 31, each year from 2019 through 2022, unallocated forfeited plan assets allegedly remained unused in the following amounts:
In 2019, $634,123;
In 2020, $1,191,429;
In 2021, $232,428; and
In 2022, $197,388.
[T]hroughout the class period, defendants used less than 2% of the forfeited plan assets to defray plan expenses,” the suit states. “A prudent and loyal fiduciary presented with this scenario would not have applied millions of dollars to offset future company contributions and left millions of dollars unused each year when plan participants shouldered millions of dollars in administrative expenses. These actions by the fiduciaries, at a minimum, necessitate the inference that imprudence or disloyalty was at play in their decision-making process.”
Caliber didn’t respond to a request for comment regarding the lawsuit by the publication deadline. Only one former employee, Roy Fordyce, is named in the suit and is the proposed class representative.
According to Fordyce’s LinkedIn profile, he worked at a Maryland Caliber location as an autobody estimator for nine months in 2023. He declined to comment on the suit.
Other recent Caliber news
In July, Caliber Holdings Inc. confidentially submitted a draft registration statement with the Securities and Exchange Commission (SEC) for a proposed initial public offering of its common stock, according to a press release.
Caliber said at the time that the number of shares offered and the price range for the offering hadn’t yet been determined.
Earlier this month, Caliber announced its acquisition of Car Body Lab, a mobile auto body repair company currently servicing 20 cities across Arizona, California, Florida, Georgia, Nevada, North Carolina, and Texas.
Terms of the acquisition were not disclosed, and Car Body Lab will continue to operate as a standalone business, according to a Caliber press release.
Caliber said the acquisition is expected to expand the auto body repair capabilities of Caliber Fleet Solutions, a specialized division of large volume fleet and business auto body and glass repair.
Images
Featured image: Caliber Collision body repair tech works in a shop. (Provided by Caliber)
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