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 seventeen years involves retirement plan participants’ allegations that plan fiduciaries caused participants to pay excessive recordkeeping and investment fees and included one or more poorly-performing investment options in the plan. Recent cases in this category include the following:
Other types of recent ERISA cases are as follows:
Jentz vs. Teachers Insurance and Annuity Association of America (complaint filed on August 7, 2023 in the U.S. District Court for the Southern District of New York): This lawsuit arises from a recent cyberattack and data breach suffered by the plaintiffs, for whose retirement plan the defendant provides recordkeeping services. The compromised data included the plaintiffs’ full names, addresses, dates of birth, gender, and Social Security numbers. The plaintiffs allege that the cyberattack resulted from the defendant’s “failure to implement reasonable and industry standard data security practices.” More specifically, the plaintiffs contend that:
The plaintiffs have asked the court to order several remedies, including the following: (1) require the defendant to engage independent third-party security auditors/penetration testers and internal security personnel (to conduct testing that includes simulated attacks, penetration tests, and periodic audits on the defendant’s systems); and (2) require the defendant to pay for the plaintiffs’ financial losses resulting from the data breach, as well their attorneys’ fees and litigation costs.
Walsh v. DST Systems Inc. (settlement agreement reached on July 17, 2023): The U.S. Department of Labor (the “DOL”) alleges that the defendant plan fiduciaries did not properly monitor a retirement plan’s investment advisor when that advisor failed to diversify the plan’s assets to minimize the risk of large losses. In short, the advisor invested the plan’s assets in a “highly-concentrated basis in a select number of securities.”
For example, the advisor invested in the stock of a single pharmaceutical company, and the concentration in that stock grew to more than 45 percent of the plan’s assets. Soon after, that stock “fell dramatically in price,” causing “significant losses” to the plan’s participants’ retirement savings.
The DOL states that this settlement of over $124 million “restores hard-earned retirement funds for more than 9,000 participants in DST Systems’ retirement plan.”
Berkelhammer v. ADP TotalSource Group (decided on July 17, 2023 by the U.S. Court of Appeals for the Third Circuit): The plaintiffs participated in the defendant plan sponsor’s 401(k) plan, the investment portfolio for which was managed by a third party investment manager. The plaintiffs were “displeased” with the investment manager’s performance, so they filed this lawsuit under ERISA.
Importantly for this stage of the litigation, the plaintiffs filed the lawsuit not for their own losses, but derivatively on behalf of the plan as a whole. Also, the plan’s contract with the investment manager included an agreement to arbitrate disputes between the two entities. However, the plaintiffs contend that because they did not personally agree to arbitrate, the arbitration provision does not apply to their case.
The court held that the plaintiffs “stand in the Plan’s contractual shoes and must accept the terms of the Plan’s contract.” In other words, given that the plaintiffs’ “claims belong to the Plan, the Plan’s consent to arbitrate controls” and the plaintiffs’ case must proceed to arbitration.