April 2021 ERISA Litigation Update:

Given the continuing wave of ERISA litigation, this article has become a mainstay of The Speed Reader. A sample of recent cases is provided below.

The most common type of ERISA case for approximately the past fifteen years has involved retirement plan participants’ allegations that plan fiduciaries caused participants to pay excessive recordkeeping and investment fees and included poorly-performing investment options in the plan. Recent cases in this category include the following:

  • Baird v. BlackRock Institutional Trust Company (settlement agreement submitted to the U.S. District Court for the Northern District of California on March 23, 2021).

Other types of recent ERISA cases are as follows:

Becker v. U.S. District Court for the Northern District of California (procedural ruling issued on April 1, 2021 by the U.S. Court of Appeals for the 9th Circuit):  This stage of the case involves a 401(k) plan document’s forum selection clause. Under that clause, plan participants’ benefits disputes must be filed in Minnesota federal court. The plaintiff (a participant in the main defendant’s 401(k) plan) filed a lawsuit in a California court, in which she alleged certain ERISA violations. The main defendant then successfully petitioned that court to transfer the case to a Minnesota court.
The appeals court considered whether forum selection clauses are valid in ERISA plan documents. The court began its reasoning by looking to ERISA’s applicable language. Under that language, a lawsuit “may be brought” where: (1) the plan is administered; (2) the breach took place; or (3) a defendant resides or may be found. The court interpreted Congress’s use of “may” as meaning that Congress chose to open three venues for these lawsuits, but not to require them. The court noted that the plan document in this case picked one of those venues (i.e., where the plan is administered).
The court then opined that “ERISA does not bar forum selection clauses.” In addition to relying on the above-referenced ERISA language, the court reasoned that an ERISA plan’s forum selection clause “does not undermine ERISA’s goal of allowing “ready access to the Federal courts.” To the contrary, the clause guarantees venue in a federal court.” Therefore, this case must be tried in Minnesota federal court.
Harmon v. Shell Oil Company (procedural ruling issued on March 30, 2021 by the U.S. District Court for the Southern District of Texas):  The plaintiffs here are participants in the defendant plan sponsor’s 401(k) plan, but the plaintiffs also named several other parties as defendants. In this stage of the case, the court considered the defendant recordkeeper’s motion to dismiss the plaintiff’s complaint against it.
The plaintiffs contend that the recordkeeper improperly used participant data such as contact information, financial information, age, income, and marital status. Specifically, the plaintiffs contend that the recordkeeper shared that data with some of its affiliates, who used the data “to solicit the purchase of nonPlan retail financial products and services” and derived substantial revenue from the use of that data. In this connection, the plaintiffs allege that the participant data are “plan assets” under ERISA, which makes the recordkeeper a plan fiduciary by virtue of its exercise of authority and control over the data. Therefore, the recordkeeper’s profiting from the data arguably violated its fiduciary duties.
The court began its analysis by stating that the plaintiffs’ contention that the recordkeeper is a fiduciary here can be tenable only if the participant data are “plan assets” under ERISA. The court then turned to ERISA’s regulations defining plan assets. Under those regulations, “the plan’s assets include its investment,” but the court noted that those regulations do not mention any “data.” The court also stated that the portion of those regulations focusing on “participant contributions” to a plan likewise fail to mention “data.” Thus, the court concluded that “Neither of the promulgated regulations either expressly or by any plain-language interpretation includes participant data as plan assets under ERISA,” and the court granted the recordkeeper’s motion to dismiss the case against it.
Nolan v. Detroit Edison Company (procedural ruling issued on March 23, 2021 by the U.S. Court of Appeals for the Sixth Circuit):  The plaintiff’s employer, which is the defendant plan sponsor, originally sponsored a traditional defined benefit plan. However, when the defendant decided to establish a cash balance plan for all new employees, the defendant invited existing employees to transfer from their traditional defined benefit plan to the cash balance plan. The plaintiff accepted that invitation. When the plaintiff subsequently retired, the defendant explained to her how her retirement benefits would be calculated. The plaintiff thereafter filed this lawsuit, alleging that the defendant “made misleading promises and failed to explain her benefits properly.
The court began its analysis by noting that ERISA plans must provide a Summary Plan Description (“SPD”) to plan participants and beneficiaries, which must describe the plan’s main provisions in clear and understandable terms. That includes the requirement that the SPD must reasonably apprise participants and beneficiaries of their rights and obligations under the plan. The court then noted that a plaintiff can plead factual allegations showing that a plan-related communication had the effect of “misleading, misinforming or failing to inform participants and beneficiaries” of the plan’s main provisions. The court then concluded that the defendant’s communications at issue “do not plainly contradict [the plaintiff’s] allegations that the [communications] failed to adequately inform her of the potential downsides of the cash balance formula.” Therefore, the court mainly denied the defendant’s motion to dismiss the case and remanded the case to the lower court for further litigation.
This case serves as a reminder that all plan-related communications to participants and beneficiaries, such as the SPD, must clearly and accurately describe the plan’s provisions. The failure to do so can result in costly litigation and, potentially, court judgments in participants’ and beneficiaries’ favor.