Given the expanding world of ERISA litigation, this article has become a mainstay of The Speed Reader. Court cases that were filed, or for which courts issued rulings, recently include the following, though please note that this list is not exhaustive:
- Nieves v. Prudential Insurance Company of America (initial ruling issued on January 17, 2017 by the U.S. District Court for the District of Arizona): The plaintiff in this case was employed by the Comtech Telecommunications Corporation, and he participated in that company’s employee welfare benefit plan that provided coverage for short-term and long-term disability. He experienced significant physical problems for several years, and he was laid off on March 10, 2015 as part of the company’s reduction in force. At his termination meeting, the plaintiff asked to file for disability, but the defendant escorted him from the building without providing him with the paperwork. After subsequently applying to Prudential (the plan administrator) for disability benefits, Prudential denied his claims on the grounds that he did not have coverage under the plan at the time of his disability, which Prudential found to be March 11, 2015. After the plaintiff filed this lawsuit, the court addressed the fundamental, procedural question of what standard of review applies to Prudential’s denial of the plaintiff’s benefits claim. The court explained that when a plan “unambiguously provide[s] discretion to the administrator” to interpret the plan’s terms and to make final benefits determinations, the determination is reviewed based on whether the denying party abused its discretion. However, that grant of discretion here was provided only in the Summary Plan Description, not in the plan document, and the Summary Plan Description was not specifically incorporated into the plan document. Based on that fact, the court concluded that the more plaintiff-friendly de novo standard of review will apply to Prudential’s decision. Under that standard, the court will affording no deference to Prudential’s decision to deny the plaintiff’s claim for benefits.
- Eley v. General Cable Corporation (filed on March 15, 2017 in the U.S. District Court for the Eastern District of Kentucky): The plaintiff in this proposed class action lawsuit is a participant in the main defendant’s 401(k) plan, and the defendants include the plan sponsor and the plan’s committees. The plaintiff alleges that the defendants breached their ERISA duties when they retained the plan sponsor’s common stock as a plan investment option “when a reasonable fiduciary…would have done otherwise.” In particular, the plaintiff states that the defendants knew or should have known that such stock was “artificially inflated” during the period at issue and was thus an imprudent investment option during that period. As support for that claim, the plaintiff states that during that period, “the Company paid millions of dollars in bribes in violation of the Foreign Corrupt Practices Act of 1997 (the “FCPA”), making its revenue unsustainable…” The plaintiff seeks to recover financial losses allegedly suffered by the plan as a result of the stock’s decline, as well as court costs and attorneys’ fees.
- U.S. v. Christine Bodouva (decided on March 22, 2017 by the U.S. Court of Appeals for the Second Circuit): In this case, the plaintiff appealed her 2016 conviction for embezzling funds from her company’s 401(k) plan. (She served as the company’s Chief Operating Officer and Senior Vice President at the relevant time.) At issue on appeal was whether the district court properly concluded that it had no discretion to reduce the amount of the defendant’s forfeiture order by the amount of restitution she had already paid to her victims. The appeals court ruled that the district court was correct that it could not reduce the amount of the forfeiture order by the amount of any restitutive payments already made, in the absence of specific statutory authorization to do so. Here, there was no such statutory authorization, so the appeals court affirmed the district court’s mandated forfeiture amount.
- Bell v. Pension Committee of ATH Holding Company (ruling issued on March 23, 2017 by the U.S. District Court for the Southern District of Indiana): The plaintiffs in this case, who are participants in their employer’s 401(k) plan, allege that the defendant plan fiduciaries breached their ERISA duties by allowing the plan to be charged unreasonable investment management and administrative fees, by providing a money market investment but failing to prudently consider a stable value fund, by failing to monitor the plan’s fiduciaries, and by refusing to supply requested plan information. Last month, the court addressed the defendants’ motion to dismiss the case. In its ruling, the court found in the defendants’ favor with respect to the allegation regarding the money market fund, in that the plaintiffs’ complaint did not included sufficient facts to support their contention. However, the court ruled that the case will go forward with respect to the plaintiffs’ other allegations.
- Pease v. Jackson National Life Insurance Company (filed in the U.S. District Court for the Western District of Michigan on March 29, 2017): The plaintiff in this proposed class action, who is a participant in the defendant’s 401(k) plan, alleges that the defendant breached its ERISA duties and engaged in prohibited transactions by putting its financial interests ahead of the plan’s and participants’ interests. Specifically, the defendant allegedly included in the plan high-cost proprietary investment products offered and managed by the defendant and its affiliates. That conduct, the plaintiff contends, allowed the defendant “to maximize company profits at the expense of the Plan by collecting for itself millions of dollars in fees, an amount that greatly exceeds what the Plan would have paid for comparable low-cost non- proprietary investment products…” The plaintiff seeks to have the defendant restore to the plan all losses resulting from its fiduciary breaches, as well as any profits the defendant made as a result, and to pay the plaintiffs’ court costs and attorneys’ fees.
- Brotherston v. Putnam Investments, LLC (decided on March 30, 2017 by the U.S. District Court for the District of Massachusetts): In this class action lawsuit, the plaintiffs are participants in the defendant’s 401(k) plan, and the defendants include the plan sponsor and the plan’s committees. The plaintiffs’ complaint states that the plan’s investment options consist primarily of mutual funds owned and managed by the plan sponsor. Also, those mutual funds pay investment management fees to a company related to the plan sponsor, which the plaintiffs contend constitutes a prohibited transaction. However, the court disagreed it its ruling last month, concluding that the investment management fees are paid out of mutual fund assets and not out of plan assets. The court also concluded that the amount of those management fees is reasonable in light of marketplace data.
- Baird v. BlackRock Institutional Trust Company (filed on April 5, 2017 in the U.S. District Court for the Northern District of California): In this class action, the plaintiff is a participant in the defendant’s 401(k) plan, and the defendants include the plan sponsor and the plan’s committees. The plaintiff asserts that despite the plan’s “enormous leverage to demand and receive superior investment products and services,” the plan includes “high-cost and poor-performing investment options,” most of which are managed by subsidiaries of the defendant. The plaintiff also asserts that “21 of the BlackRock Proprietary Funds offered to employees through the Plan funnel the employees’ retirement assets into other BlackRock funds, which charge additional fees (not reported in the expense ratio), thereby eroding the participants’ returns.” Thus, by failing to replace the proprietary funds, the defendants’ conduct allegedly violated ERISA’s duties of prudence and loyalty and constituted prohibited transactions. The plaintiff mainly seeks: (1) to have the defendants make the plan whole for any losses which resulted from such alleged breaches; (2) the removal of the fiduciaries who have breached their duties from their role as fiduciaries for the Plan; (3) the appointment of an independent fiduciary to manage the plan’s assets; and (4) reimbursement of his court costs and attorneys’ fees.