Here are brief summaries of some, but not all, ERISA cases that were filed recently:
- Perez v. Belanger (filed on August 15 in the U.S. District Court for the Eastern District of Pennsylvania): In this lawsuit, the DOL states that the defendant (the administrator of several employee benefit plans covered by ERISA) violated ERISA by transferring certain plan assets to itself, failing to fully disclose fees to the plans at issue, failing to timely remit assets to certain plans, destroying documents, and making errors in the plans’ administration. The DOL seeks restoration of all plan losses, lost earnings, and disgorgement to the plans of all unjust enrichment received by the defendant. As is also typical in these cases, the DOL seeks removal of the defendant as fiduciary and service provider to any ERISA-covered plan.
- Doe v. Columbia University (filed on August 16 in the U.S. District Court for the Southern District of New York): The plaintiff, who is seeking class action status in this case, is an unidentified Columbia University faculty member who is suing on behalf of herself and more than 27,000 current and former Columbia University employees. The plaintiff alleges that “Instead of leveraging the bargaining power of [the defendant’s retirement] Plans, Columbia University caused the Plans to pay unreasonable and greatly excessive fees for recordkeeping, administrative, and investment services.” In addition, the plaintiff asserts that “Instead of using its sophistication to identify and select high-quality investments that benefited participants and beneficiaries, Columbia University selected and retained expensive and poor-performing investment options that consistently and historically underperformed their benchmarks and similar funds.” The plaintiff seeks damages in the amount of one hundred million dollars to restore resulting losses to the plans.
- Burgess v. HP, Inc. (filed on August 18 in the U.S. District Court for the Northern District of California): This case targets Fidelity’s “float” practice by alleging that Fidelity earned interest equaling over one billion dollars with respect to two large plans it administered. More specifically, Fidelity allegedly improperly retained interest that accrued while plan participants’ distributions were pending and while their mutual fund share redemptions were being processed. (In the ERISA context, such interest is often referred to as “float” income.) The plaintiff’s complaint also asserts that plan sponsors HP, Inc. and United Airlines breached their ERISA fiduciary duties by failing to properly investigate Fidelity’s practices and procedures in this regard.
- Patterson v. Morgan Stanley (filed on August 19 in the U.S. District Court for the Southern District of New York): The plaintiffs here allege that the defendant violated ERISA by causing its own plan to sustain losses, which purportedly resulted from the following: “The majority of the investment options selected and retained by Morgan Stanley underperformed both their benchmarks and comparable investment funds,” and “All six of the Morgan Stanley mutual funds offered in the Plan were tainted either by poor relative performance, high relative fees, or both.” On behalf of a proposed class, the plaintiff seeks one hundred and fifty million dollars in damages.
- McDonald v. Edward D. Jones & Co., L.P. (filed on August 19 in the U.S. District Court for the Eastern District of Missouri): Rather than alleging that the defendant improperly included its proprietary investment funds in its own plan, the plaintiff in this class-action lawsuit states that the defendant “populated the Plan with investment options of its Preferred Partners and other investment managers with corporate relationships with Edward Jones.” It is also alleged that the defendant caused the plan to pay excessive recordkeeping and plan administration fees to the plan’s recordkeeper, and that the defendant should have included stable funds in the plan rather than the poorly-performing money market fund.
- Lorenz v. Safeway Inc. (filed on August 25 in the U.S. District Court for the Northern District of California): This lawsuit focuses on target date funds in the defendant’s 401(k) plan. The defendant plan sponsor allegedly breached its ERISA duties by including certain target date funds as plan investment options that “charged excessive fees as compared to readily-available alternatives.” In addition, a large portion of the fees charged by those target date funds and paid by the plaintiff and the putative class was allegedly “kicked back” to the plan’s recordkeeper to pay for those services, but the amount of such fees was allegedly “far in excess of the reasonable value of such services…”
Here are brief summaries of some, but not all, ERISA cases that were recently decided or set for further proceedings:
- In re Pilgrim’s Pride Stock Inv. Plan ERISA Litigation (U.S. District Court for the Eastern District of Texas): This stock-drop case is a putative class action on behalf of the approximately 16,000 participants in the Pilgrim’s Pride Retirement Savings Plan who owned company stock in the plan. The defendants are the directors and officers of Pilgrim’s Pride and the members of its Compensation Committee, Pension Committee and Administrative Committee. The plaintiffs allege that the defendants should have disclosed the fact that the company was in financial trouble, rather than choosing not to do so and retaining company stock as an investment in the plan. (Such stock decreased significantly in value while offered as a plan investment.) On August 19, the court decided that the plaintiffs failed to demonstrate that the defendants should have acted differently as the stock price declined. Thus, no ERISA liability applies to the defendants.
- Brannen v. First Citizens Bankshares Inc. (U.S. District Court for the Southern District of Georgia): This is another stock drop case, in which the plaintiff (an ESOP participant) claims that the defendants (ESOP plan fiduciaries) imprudently retained company stock as a plan investment, despite the fact that such stock dropped from $340 per share to approximately $29 per share. The defendants also allegedly failed to disclose negative information concerning company stock as a plan investment. On August 26, the court issued a procedural ruling. First, with respect to the defendant’s decision to buy and hold company stock during 2008-2009 (the period during which the most significant decline occurred), the court ruled that such claim is barred by ERISA’s three-year statute of limitations. That is because the plaintiff had actual knowledge of the stock price during 2008 and 2009, and she did not file this lawsuit until more than three years after that. Second, with respect to the defendant’s decision to buy and hold company stock after that period (when the value continued to decline), the court ruled that the case will move forward as to whether the defendants failed to properly investigate whether it was prudent to retain company stock in the plan. Interestingly, the court assumed that the U.S. Supreme Court’s 2014 decision on that point in Fifth Third Bancorp v. Dudenhoeffer applies here, even though that case involved publicly-traded stock and this case involves a privately-held company.
- White v. Chevron Corporation (U.S. District Court for the Northern District of California): The plaintiffs are six participants in the defendant’s defined contribution plan, and the defendants include Chevron’s investment committee. The plaintiffs claim that the defendants breached their ERISA duties by, among other acts, providing participants with a money market fund instead of a stable value fund, and by failing to put plan administrative services out for competitive bidding on a regular basis (which allegedly resulted in the plan paying “excessive administrative fees” to the plan’s recordkeeper). On August 29, the court ruled that the plaintiffs’ complaint “pleads no facts sufficient to raise a plausible inference” that the defendants breached their ERISA duties. However, the court’s ruling allows the plaintiffs to amend their complaint by pleading sufficient facts, if they do so by September 30.