Given the continuing wave of ERISA litigation, this article has become a mainstay of The Speed Reader. Cases that were recently resolved are outlined below, but please note that this list is not exhaustive.
- Pearce v. Chrysler Group LLC Pension Plan (decided on June 20, 2018 by the U.S. Court of Appeals for the Sixth Circuit): The plaintiff in this case was a long-time employee of the defendant, as well as a participant in the defendant’s pension plan. Per the plan’s Summary Plan Description (“SPD”), he did not need to be actively employed at retirement to be eligible for an early retirement supplement called “30-and-Out benefits.” However, the SPD omitted a plan document provision, under which an employee who was terminated was ineligible for that early retirement supplement. After the plaintiff was terminated, he applied for his retirement benefits. The defendant denied him the 30-and-Out benefits based on the plan document’s language. The appeals court began its analysis by citing the U.S. Supreme Court case of CIGNA Corp. v. Amara, in which the court held that (1) statements in an SPD do not constitute the plan’s terms for purposes of ERISA; but (2) ERISA empowers courts to provide equitable relief when a plan participant or beneficiary received false or misleading information about his or her plan’s provisions. The appeals court then stated that with respect to that second holding, because the plan document’s language at issue was unambiguous, the plaintiff had to satisfy eight elements for his equitable theory (i.e. essentially, the theory that he relied on the SPD, to his detriment). The court then opined that the plaintiff cannot satisfy the seventh required element. That is, he cannot demonstrate that the plan’s provisions did not allow him to determine that he would be ineligible for 30-and-Out benefits if he were terminated prior to retirement. That is because “the Plan’s provisions clearly make him ineligible for the 30-and-Out benefits, and the Plan does so with language that is accessible to an ordinary reader” and “other portions of the SPD either explicitly or implicitly inform the reader that he must look beyond the four corners of the SPD for more complete information.”
- The Boeing Company v. Spirit Aerosystems, Inc. (decided on July 12, 2018 by the Supreme Court of Delaware): The court in this case explained that the plaintiff sold a few of its manufacturing facilities to the defendant and that under the purchase agreement, the defendant would “credit periods of service prior to the [sale] for purposes of determining eligibility (and benefit entitlement with respect to…pension benefits )” under the defendant’s benefit plans. In addition, the parties agreed that the defendant’s pension plans would be “liable for benefits with respect to service recognized under [the plaintiff’s] Pension Plans on or prior to the Closing Date,” and the defendant would not have “any further responsibility with respect to the . . . Liabilities so transferred.” After the sale, the plaintiff was sued by certain union employees with respect to their pension benefits, and the plaintiff lost one such lawsuit and settled another (to the tune of approximately $150 million). The plaintiff claimed in this lawsuit that the defendant should indemnify the plaintiff for those expenses. However, the court ruled that under the sale agreement’s pertinent provision, the defendant did not agree to assume the plaintiff’s liability for pension benefits. Rather, the defendant only agreed to credit the acquired employees’ past service with the plaintiff for purposes of determining their eligibility for benefits under the defendant’s benefit plans. Thus, the defendant is not liable to the plaintiff in this case.
- Sacerdote v. New York University (decided on July 31, 2018 by the U.S. District Court for the Southern District of New York): Of the numerous ERISA cases that have been filed against major universities in approximately the past year, this is the first one to proceed to trial. The plaintiffs in this class action lawsuit are participants in the defendant plan sponsor’s 403(b) plans. (The plaintiffs also named the plans’ committee as a defendant.) The plaintiffs alleged that the defendants failed to fulfill certain fiduciary obligations under ERISA and, consequently, the plans suffered losses totaling more than $358 million. In particular, the plaintiffs first contended that the defendants imprudently managed the selection and monitoring of plan recordkeeping vendors, which resulted in excessively high plan fees. In this connection, the court ruled that the defendants prudently managed plan recordkeepers (e.g., by performing a prudent RFP process), and the plaintiffs did not prove that the defendants’ allegedly imprudent conduct resulted in plan losses. Second, the plaintiffs claimed that the committee acted imprudently by failing to remove two investment funds from the plans (thereby continuing to allow plaintiffs to invest in such funds, which underperformed and caused plan losses). Here, the court ruled that the committee regularly and closely monitored the plans’ investment alternatives’ performance, with the assistance of the plans’ co-fiduciary investment advisor, and followed that co-fiduciary’s appropriate recommendations. Also, the plaintiffs did not demonstrate that the two funds underperformed so significantly that the defendants acted imprudently by failing to remove them from the plan’s investment lineup. In sum, the court found that the plaintiffs did not prove that the defendants acted imprudently with respect to their conduct at issue.
- Eaton v. Reliance Standard Life Insurance Company (decided on July 31, 2018 by the U.S. District Court for the Western District of Tennessee): Although The Speed Reader typically focuses on retirement plans, I felt compelled to include this case in this month’s edition. That is because it deals with another interesting employee benefits topic: an insurer’s use of video surveillance on an employee, to determine if the employee is still disabled under the insured employer’s ERISA disability plan. The plaintiff in this case asserted that his claim for long-term disability payments was wrongfully denied by the defendant under his employer’s disability plan. (The defendant is the claims reviewing fiduciary, which has authority to interpret the plan and the insurance policy and to determine eligibility for benefits.) Under the plan’s terms, after an employee was on disability leave for 36 months, his or her disability coverage would continue if the employee was “capable of only performing the material duties [of the job] on a part-time basis or part of the material duties on a Full-time basis.” After his initial 36-month period, the plaintiff asserted for several years that he satisfied that standard. Despite the plaintiff’s questionable support for that assertion, the defendant continued to pay disability benefits to him under the plan. However, during 2016, the defendant hired an investigator to conduct surveillance on the plaintiff. The investigator observed the plaintiff engaging in several acts that contradicted his claim that he remained disabled (e.g., loading drinks, blankets, and other camping items into an SUV and then strapping down loose items in a trailer). With respect to the plaintiff’s argument that the defendant terminated his benefits to save money because it has a conflict of interest (i.e. it acts as insurer and plan administrator), the court concluded that the plaintiff failed to present evidence that the defendant’s conflict of interest influenced its decision to terminate his benefits. As for the plaintiff’s argument that the video surveillance was “a “questionable piece of evidence” and “unauthorized,” the court noted that courts have approved the use of surveillance footage in determining whether the claimant is disabled. In this connection, the court stated that the defendant hired the private investigator in an effort to further assess the plaintiff’s assertion that he was barely able to walk, and the defendant’s action constituted a “deliberate and reasoned choice.” Thus, the defendant did not act improperly in gathering surveillance footage of the plaintiff. Overall, the court ruled that the defendant properly ceased paying the plaintiff’s disability benefits in 2016.
- Meiners v. Wells Fargo & Company (decided on August 3, 2018 by the U.S. Court of Appeals for the Eighth Circuit): The plaintiff here is a participant in the defendant plan sponsor’s 401(k) plan. In addition to the plan sponsor, the plaintiff named as defendants “an assortment of Wells Fargo executives and entities” in his claim that those defendants breached their ERISA fiduciary duties by (1) retaining Wells Fargo proprietary investment funds in the plan’s investment lineup; and (2) using those proprietary funds as the plan’s default funds. The plaintiff asserted that such actions violated ERISA because the funds at issue were allegedly more expensive than comparable Vanguard and Fidelity funds and because the funds at issue underperformed the Vanguard funds. The court began its analysis by stating that “the challenge for ERISA plaintiffs is to use the data about the selected funds and some circumstantial allegations about methods to show that a prudent fiduciary in like circumstances would have acted differently,” and a plaintiff in this type of case must provide a sound basis for comparing relevant funds (i.e. “a meaningful benchmark”). The court then first concluded that the plaintiff did not plead facts showing that the Wells Fargo funds were underperforming funds. In this connection, the court stated that “He only pled that one Vanguard fund, which he alleges is comparable, performed better than the Wells Fargo TDFs…No authority requires a fiduciary to pick the best performing fund.” Second, the court ruled that the plaintiff failed to show that the funds at issue were too expensive. Rather than offering a proper benchmark, the plaintiff only compared the funds to cheaper alternative investments with some similarities (as opposed to comparing the funds to different share classes of the same funds). Thus, the court dismissed the plaintiff’s complaint.