Whataburger hit with suit over 401(k)
Employees say burger chain did not ensure investments were most profitable choices
Whataburger has joined the list of San Antonio businesses hit by potential class-action lawsuits over losses in their employee retirement plans.
A former San Antonio employee of the burger chain alleges in a complaint filed Wednesday that its plan has “suffered millions of dollars in losses due to Defendants’ fiduciary breaches and remains vulnerable to continuing harm.”
Whataburger disagrees with the allegations.
“The company takes seriously its duties and obligations to the plan participants and will vigorously defend itself in this litigation,” a spokesperson said.
The suit is similar to ones filed in recent years against H-E-B, Zachry Group and Southwest Research Institute. They’re among numerous employers around the country that have been sued for alleged breaches under the Employee Retirement Income Security
Act of 1974.
Whataburger’s 401(k) retirement plan had more than 36,000 participants and about $215 million in assets at the end of 2022, the restaurant chain said in a federal filing in October.
According to the lawsuit filed by Manuel Esquivel in federal court in San Antonio, Whataburger’s plan ranks among the top 0.9% of all U.S. defined contribution plans by total assets. In a defined contribution plan, employees contribute to their retirement and, generally, a portion of their contribution is matched by the employer.
Esquivel accuses Whataburger Restaurants LLC, its board, the committee that administers the 401(k), and various unnamed members of the board and committee of failing to appropriately monitor the plan’s investments,
“resulting in the retention of unsuitable investments in the Plan instead of prudent alternative investments that were readily available at all times.”
A Whataburger representative didn’t respond to a request for comment Thursday.
The class period may cover about the past six years. The plan’s assets were held in trust by trustee Charles Schwab Bank through Jan. 2, 2022, when it was replaced by Fidelity Management Trust Co.
Esquivel’s lawsuit singles out two mutual funds he alleges trailed their benchmarks — the Mainstay Winslow Large Cap Growth Fund Class R1 and the Janus Henderson Triton Fund Class T.
At the end of the first quarter of 2019, Mainstay’s five-year results trailed the Russell 1000 Growth Index by 0.2%, while the Janus fund’s five-year results trailed the Russell 2500 Growth Index by 0.58% at the end of the first quarter of 2020, according to the lawsuit.
Those funds’ “consistently poor results” caused investors to recognize the “red flags” and withdraw their assets over the years, Esquivel’s suit says. Mainstay’s assets under management fell from about $20 billion at the end of 2014 to about $11 billion at the end of 2022, the suit adds. The Janus fund’s assets tumbled from $12 billion at the end of 2019 to about $7 billion at the end of 2022.
Financial services firm Morningstar Inc., which conducts investment research and rates fund performance on a five-star scale, currently has four-star ratings for Mainstay and the Janus fund.
The suit says Whataburger failed to monitor the funds and neglected to replace the “underachieving investment option (s) in a severe breach of fiduciary duty.”
A lawyer for Esquivel didn’t respond to an email seeking comment. Of the other notable local retirement plan lawsuits, two have been settled and one against HE-B is pending.
This month, SWRI entered into a preliminary settlement that calls for it to pay $500,000 to resolve the suit against it. Assuming the plaintiff lawyers receive onethird of the settlement amount, the 7,840 class members will pocket less than $43 each. A longtime SWRI employee of the science and technology research institution filed the complaint in June.
In 2022, engineering and construction company Zachry Group agreed to pay nearly $1.9 million to settle a lawsuit brought by four participants in its retirement plan. Attorneys for the plaintiffs received $625,000, or a third of the settlement. Thus, each member of the class — almost 33,700 participants — stood to receive about $37.
The case against H-E-B has been pending for more than 4⁄2
1
years but has been on hold for 3 ⁄
1
2
awaiting a judge’s ruling on the San Antonio grocer’s motion to dismiss it. Last month, the three plaintiffs filed court papers to lift the stay so discovery can begin. H-E-B has opposed the request, saying the stay should remain until the judge rules on dismissal request.