Given the continuing wave of ERISA litigation, this article has become a mainstay of The Speed Reader. Cases that were recently decided, or for which courts issued procedural rulings, are outlined below. Please note, however, that this list is not exhaustive.
- White v. Chevron Corporation (decided on November 13, 2018 by the U.S. Court of Appeals for the Ninth Circuit): The plaintiffs in this class action case, who are participants in the defendant plan sponsor’s retirement plan, also named the plan’s investment committee as a defendant. In this stage of the litigation, the plaintiffs stated that their amended complaint alleged sufficient facts to support a reasonable inference that the defendants breached their ERISA fiduciary duties of loyalty and prudence to the plan’s participants and beneficiaries, and also engaged in a prohibited transaction. However, the appeals court ruled that rather than supporting a plausible inference of breach of duties or that a prohibited transaction took place, the plaintiffs’ alleged facts “showed only that Chevron could have chosen different vehicles for investment that performed better during the relevant period, or sought lower fees for administration of the fund.” Moreover, “None of the allegations made it more plausible than not that any breach of a fiduciary duty had occurred.” In other words, the plaintiffs did not state a claim for breach of ERISA duties merely by alleging that there was a less expensive alternative to the recordkeeper and to the investment fund lineup selected by plan fiduciaries. The appeals court also ruled that the plaintiffs’ prohibited transaction claim was barred by the applicable statute of limitations. That is because the alleged prohibited transaction (i.e. hiring the plan’s recordkeeper at an unreasonable rate of compensation) is alleged to have occurred in 2002, but this lawsuit was not filed until 2016. Thus, the appeals court approved the district court’s dismissal of the lawsuit.
- Sulyma v. Intel Corporation Investment Policy Committee (procedural ruling issued on November 28, 2018 by the U.S. Court of Appeals for the Ninth Circuit): The plaintiff in this case, who is a former Intel employee and participant in Intel’s retirement plans, sued Intel (the plan sponsor) and various plan committees. The plaintiff alleged that the defendants imprudently invested retirement plan funds in violation of ERISA. The district court concluded that the plaintiff had the requisite “actual knowledge” of the defendants’ conduct to trigger ERISA’s three-year statute of limitations period and that as a result, that limitations period expired before the plaintiff filed this lawsuit. The appeals court, however, explained that a two-step process is applied when determining whether a plaintiff’s claim is barred by that ERISA statue of limitations. First, courts isolate and define the underlying violation on which the plaintiff’s claim is founded. Second, courts inquire when the plaintiff had “actual knowledge” of the alleged breach or violation. Focusing on the second step, the court stated that the defendants must show that the plaintiff was actually aware of the nature of the alleged breach more than three years before the plaintiff filed his or her lawsuit. Also, the exact knowledge required varies depending on the plaintiff’s claim. For example, in a case alleging a breach of the duty of prudence, the plaintiff must be aware that the defendant has acted and that those acts were imprudent. As another example, in a case alleging one or more prohibited transactions, the plaintiff need only be aware that the defendant has engaged in the transaction(s). Here, because disputes of material fact exist regarding the plaintiff’s actual knowledge, the court remanded the case to the district court for further proceedings.
- Masten v. Metropolitan Life Insurance Company (complaint filed on December 3, 2018 in the U.S. District Court for the Southern District of New York): This putative class action case was filed by participants in the defendant plan sponsor’s defined benefit plan, where the defendants also include the plan’s committee. The plaintiffs allege that the defendants improperly calculated alternative forms of benefits so that such forms’ amounts were not actuarially equivalent to the plan’s default benefit. More specifically, the plaintiffs assert that the defendants applied obsolete mortality tables, with accelerated death rates, which decreases the present value of the alternative benefit forms and thus decreased the monthly payment that retirees received under the plan’s alternative forms of benefit. Consequently, the combination of the mortality table and interest rate used in the calculations was not reasonable. The plaintiffs seek a court order reforming the plan to conform to ERISA, requiring payment of future benefits in accordance with the reformed plan, requiring corrective payments for amounts improperly calculated, and providing other relief that the court may deem to be appropriate.
- Acosta v. Brain (decided on December 4, 2018 by the U.S. Court of Appeals for the Ninth Circuit): This case involved a DOL investigation of the trustee of several collectively-bargained retirement plans. During the investigation, the director of the plans’ internal Audit and Collections Department (the “Director”) cooperated with the DOL by providing information that the DOL requested from her. Subsequently, the trustee set into motion an internal vote by the other trustees to have the Director placed on leave and ultimately terminated. The court held that the Director’s cooperation with the DOL was the “but-for” cause of her being placed on leave and terminated. In other words, but for her cooperation with the DOL, she would not have been placed on leave or terminated. Therefore, the trustee violated Section 510 of ERISA when he so retaliated against the Director, and the Director is entitled to compensation (e.g., lost wages). Curiously, the court also ruled that the trustee did not breach his fiduciary duty under ERISA, because he was not acting as a fiduciary (i.e. performing a fiduciary function) when taking the action that led to the Director’s involuntary leave and termination. Instead, that action involved only “a corporate or business operations action.”
- Karlson v. ConAgra Brands Inc. (complaint filed on December 19, 2018 in the U.S. District Court for the Northern District of Illinois): In this proposed class action case, the plaintiffs (participants in the defendant plan sponsor’s 401(k) plan) also named the plan’s committees as defendants. The plaintiffs note that under the plan document, the plan sponsor must make matching contributions based on “Compensation” that participants contribute. According to the plaintiffs, under the relevant part of the plan’s definition of “Compensation,” such term includes certain post-termination payments that, absent a severance from employment, would have been paid to the participant while the participant continued in employment with the plan sponsor and that are bonuses. However, in making an allegedly erroneous “administrative interpretation” of the plan document, the defendants failed to apply the named plaintiff’s deferral election to his bonus payment and failed to provide the related matching contribution. More pointedly, per the plaintiffs’ complaint, “Defendants base their denial on a “reinterpretation” of the Plan that violates the Plan’s clear language, as well as the way Defendants have interpreted and applied the Plan for years. Defendants’ purported “reinterpretation” of the Plan was motivated by their desire to save money. However, by wrongfully denying millions of dollars in benefits to a large number of Plan participants and their beneficiaries, Defendants have violated their fiduciary and other legal duties.” The plaintiffs seek to have the court award several remedies, including restoring to the plan the funds that would have been contributed (plus earnings on those amounts) if the defendants had not breached their fiduciary duties, as well as attorneys’ fees and other litigation expenses.