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.
- Acosta v. Eye Centers of Tennessee (decided on March 23, 2018 by the U.S. District Court for the Middle District of Tennessee): The DOL filed this case after its investigation revealed that the defendants (a 401(k) plan sponsor and the plan’s trustees) violated ERISA via certain conduct. Specifically, the defendants used plan assets to pay over $300,000 to an entity owned by one of the trustees. They also transferred more than $700,000 in plan assets to an entity owned by both trustees, and over $17,000 to an entity owned by the brother of one trustee. In addition, they used plan assets to purchase a commercial property, secured a mortgage for that property, and then leased it to an entity owned by the spouse of one trustee. (Such spouse’s monthly lease payments were only about one-sixth of the 401(k) plan’s monthly mortgage on the property.) As a result of that conduct, the defendants are being ordered to pay almost $1 million in restitution to the plan. That amount is in addition to the $788,850 that the defendants paid to the plan in 2016 as restitution in a related criminal matter.
- Girardot v. The Chemours Company (decided on March 29, 2018 by the U.S. District Court for the District of Delaware): The plaintiff in this case, a former employee of the defendant employer, elected to participate in the defendant’s voluntary reduction-in-force program, known as the “VSP”. The defendant instituted the VSP to improve its operations’ efficiency. Subsequently, the defendant announced that because the VSP did not sufficiently reduce costs, the defendant was instituting an involuntary reduction-in-force program called the CTP. The plaintiffs later filed this lawsuit, alleging that they would not have elected to participate in the VSP if the defendant had informed them of the possibility that the CTP would be implemented (and with greater benefits than the VSP). The main issue was whether the VSP is an ERISA “employee welfare benefit plan.” The court began its analysis by citing the ERISA definition of that term which, in pertinent part, reads as follows: “any plan, fund or program … established or maintained by an employer … to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries … (A) medical, surgical or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services.” The court then cited U.S. Supreme Court precedent, under which an ERISA plan requires “benefits whose provision by nature requires an ongoing administrative program to meet the employer’s obligations.” In short, the court concluded that the lump-sum payments distributed under the VSP did not require the creation of an ongoing administrative program. As a result, the plaintiffs have no ERISA claim in this regard, and the court granted the defendant’s motion to dismiss the case.
- Securities and Exchange Commission v. Jumper (filed on April 17, 2018 in the U.S. District Court for the Western District of Tennessee): In this case, the SEC has charged a businessman with stealing approximately $5.7 million from a company’s pension plan. Specifically, the SEC alleges that on three separate occasions between 2015 and 2016, the defendant stole “millions of dollars” the plan by forging documents (e.g., fake Board of Directors resolutions). The defendant allegedly used the stolen funds to capitalize other businesses he owned, to repay personal debts, and to invest in another business that paid a significant fee to a broker-dealer that he co-owned. The SEC seeks to have the defendant disgorge the gains at issue, plus interest and penalties. In addition, the U.S. Attorney’s Office announced that it will file criminal charges against the defendant in connection with this alleged conduct.
- Acosta v. Talbert (agreement reached on April 23, 2018 in the U.S. District Court for the Northern District of Illinois): This case was filed pursuant to a DOL investigation, and the parties have now agreed to the following: the defendant will restore $64,704.72 in losses owed to a 401(k) plan for which the defendant served as the sole trustee. That stems from the fact that the defendant failed to remit to the plan participants’ contributions and loan repayments from January of 2012 to November of 2016, and he remitted several participants’ contributions and loan repayments to the plan in an untimely manner.
- Reetz v. Lowe’s Companies, Inc. (filed on April 27, 2018 in the U.S. District Court for the Western District of North Carolina): The plaintiff in this putative class action lawsuit is a participant in the defendant plan sponsor’s 401(k) plan. The other defendants are the plan’s administrative committee and the plan’s external investment advisor. The plaintiff mainly alleges that the defendants imprudently selected and retained one of the advisor’s growth funds in the plan, despite the following alleged facts: (1) the fund was “a new and largely untested fund” when it was added to the plan; (2) the fund was underperforming its benchmark when it was added to the plan and continued to underperform after it was added to the plan; and (3) the fund was not utilized by fiduciaries of any similarly-sized plans and “was generally unpopular in the marketplace.” Further, the plaintiff states that the defendants “disturbed participants’ investment choices by transferring [$1 billion in plan] assets from eight existing funds in the Plan (which were generally performing well) and putting them in” the fund at issue. The plaintiff concludes that the defendants breached their ERISA duties because the advisor had a conflict of interest when it recommended this proprietary fund for the plan, the advisor improperly did so to further its own financial interests instead of the plan participants’ interests, and the plan sponsor and administrative committee should have recognized that conflict of interest and recognized that the fund at issue was inappropriate as a plan investment option. Given that such conduct purportedly caused the plan “to suffer millions of dollars in investment losses,” the plaintiff chiefly seeks a court order requiring the defendants to restore the plan to the position it would have been in but for the alleged fiduciary breaches, requiring the advisor to provide an accounting of profits it earned and then to disgorge those profits, and requiring the defendants to pay the plaintiff’s attorneys’ fees and court costs.
- Acosta v. Demmy (agreement reached on May 7, 2018 in the U.S. District Court for the Southern District of Ohio): The DOL filed this lawsuit after its investigation found that the defendant (a fiduciary to a 401(k) plan) violated ERISA. Under the parties’ agreement, the defendant is liable to the plan because she: (1) failed to remit $2,410 in employee contributions and $31,257 in participant loan repayments to the plan in 2013; and (2) failed to remit $257,497 in prevailing wage contributions to the plan from 2011 to 2013. Instead of remitting those funds to the plan, they were retained in the company’s general assets and used for non-plan purposes. Consequently, the defendant will make an immediate payment to the plan of $35,293 and will forfeit all but twenty percent of her own plan account, to restore losses resulting from her conduct and to pay plan expenses.