Given the continuing wave of ERISA litigation, this article has become a mainstay of The Speed Reader. Cases that were filed or resolved recently are outlined below, although please note that this list is not exhaustive.
- Abrams v. Life Insurance Company of North America (decided on March 7, 2018 by the U.S. Court of Appeals for the Ninth Circuit): The plaintiff in this case, a participant in the defendant plan sponsor’s long-term disability plan, also named the plan’s claims administrator as a defendant. The plaintiff asserted that the defendants violated the plan’s terms by offsetting his monthly benefit by 50% of his monthly wages, as opposed to providing him with the maximum monthly benefit for the life of the insurance policy without any offsets. The case mainly focused on language in the SPD, and the court concluded that the SPD did not violate ERISA’s requirements for an SPD’s content. As support for that conclusion, the court stated that: (1) the SPD reasonably apprised an average plan participant of the circumstances under which his or her monthly plan benefit would be offset; and (2) the SPD did not minimize, render obscure or otherwise make to seem unimportant the offset at issue, because the benefit and its offset “are described in the same style, typeface, and type size as the rest of the SPD…” Therefore, the defendants properly applied the offset at issue to the plaintiff’s situation.
- McLain v. Poppell (settlement agreement submitted on March 12, 2018 to the U.S. District Court for the Northern District of Florida): This is another case in the slowly- growing trend of cases involving small 401(k) plans. (The plan in this case only had approximately 25 participants and under $500,000 in assets during the period involved in this lawsuit.) In this case, the defendants are the plan sponsor and the plan’s fiduciaries who selected the investments that comprised the plan’s portfolio. The defendants allegedly invested ”significant portions” of the plan’s assets in one stock and, consequently, the plan “suffered significant losses between 2014 and 2015.” Under the settlement agreement, the defendants will pay $180,000 to the plaintiffs. Notably, the damages in this case substantially exceeded that amount. However, that is the settlement amount because the defendants already reached an agreement with the DOL under which the defendants paid the plaintiffs’ out-of-pocket losses (plus interest). Thus, the majority of the damages sought in this case have already been paid to the plaintiffs. It is now up to the court to approve or deny the settlement agreement.
- Glazing Health and Welfare Fund v. Lamek (decided by the U.S. Court of Appeals for the Ninth Circuit on March 21, 2018): The trustees of an ERISA health and welfare fund sued a plan sponsor’s owners and officers for unpaid contributions owed under the contracts governing the benefit plans that the trustees managed for the plan sponsor. The trustees argued that pursuant to those contracts, the unpaid contributions were trust assets over which the defendants exercised control and, therefore, the trustees could sue the defendants as fiduciaries to collect those contributions. Mainly relying on the reasoning of a bankruptcy case, the court held that “parties to an ERISA plan cannot designate unpaid contributions as plan assets,” and thus the defendants cannot be held liable under ERISA for their alleged conduct in this case because they were not ERISA fiduciaries. In other words, “[u]ntil the employer pays the employer contributions over to the plan, the contributions do not become plan assets over which fiduciaries of the plan have a fiduciary obligation.” The court reached that conclusion despite the fact that the trust agreements at issue stated that unpaid contributions constituted plan assets.
- Quatrone v. Gannett Company, Inc. (complaint filed on March 22, 2018 in the U.S. District Court for the Eastern District of Virginia): The plaintiff in this proposed class action lawsuit, who is a participant in the defendant plan sponsor’s 401(k) plan, has also named the plan’s committee members as defendants. The plaintiff mainly states that the defendants’ decision to “concentrate” plan investments in “massive amounts” of one company’s stock constituted a breach of their ERISA fiduciary duty to diversify the plan’s investments. The plaintiff also contends that such breach “caused the Plan and the Class approximately $135 million in losses.” The plaintiff chiefly seeks to have the court order the defendants to restore that amount to the plan and to pay his court costs and attorneys’ fees.
- MBA Engineering, Inc. v. Vantage Benefits Administrators, Inc. (complaint filed on March 23, 2018 in the U.S. District Court for the Northern District of Texas): The plaintiffs in this case are the plan sponsor of a 401(k) plan and a cash balance plan, and the individual who serves as the plans’ trustee. The defendants are the plans’ TPA, its owners, and the plan’s custodian. The plaintiffs allege that the TPA, through its owners, misappropriated approximately $2.2 million of the plans’ assets, via thirty-five “fraudulent transfers” made by the custodian to the TPA. In this regard, the TPA and its owners allegedly “disguised their fraud from Plaintiffs and the Plans’ participants for nearly a year by falsifying Plan participant account statements and participant accessible website information to make it appear that participant account balances were whole and accurate…All the while, they systematically transferred millions of dollars in retirement benefits from the Plans to their own bank account, and for their own gain.” As for the custodian, the plaintiffs state that the custodian received no direction or authorization from the plaintiffs to effectuate the transfers. In addition, the custodian allegedly knew: (1) all of the transfers were made to the same business bank account held in the TPA’s name and not in the name of either plan; and (2) the transfers depleted nearly the entire multi-million dollar account balance held by the custodian in the names of the plans. Among other remedies, the plaintiffs seek a court order requiring the defendants to repay the assets at issue (plus lost earnings), as well as punitive damages under Texas state law in the amount of approximately $6.8 million.