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 sixteen years has involved 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:
U.S. v. Ron Craig Estes (decided on December 15, 2021 by the U.S. District Court for the Southern District of Ohio): The defendant in this case has been sentenced to 18 months in prison, plus 3 years of supervised release after he serves that prison term, for stealing money from a 401(k) plan for which he served as trustee and administrator.
During a plan audit, the DOL found that the defendant collected between $15,000 and $40,000 from the 401(k) plan fraudulently by forging participant signatures and using funds for his personal benefit. More specifically, the defendant forged the signatures of multiple participants on plan distribution forms and changed the participants’ addresses to that of his own or his company’s address. As the plan’s sole fiduciary, he then signed the distribution forms and authorized the cash distributions. The checks arrived at the company’s or the defendant’s address, and he then forged checks with participants’ signatures and converted the funds for his personal use by cashing the checks at local banks.
The court also determined that the defendant must pay an amount of restitution to the affected participants in the 401(k) plan at issue. That amount will be determined at a later hearing.
Giannini v. Transamerica Retirement Solutions, LLC (complaint filed on December 2, 2021 in the U.S. District Court for the Southern District of New York): The plaintiffs in this proposed class action lawsuit are participants in retirement plans for which the defendant is a service provider. The plaintiffs allege that the defendant failed “to exercise reasonable care in securing and safeguarding their client’s sensitive information—including names, addresses, Social Security Numbers, and retirement fund contribution amounts, collectively known as personally identifiable information (“PII”).”
The plaintiffs further contend that the defendant did not notify them of the data breach until almost four months after their PII was first accessed. As a result, the plaintiffs state, they experienced “a number of harms,” including the misuse of their PII for fraudulent purchases. The complaint goes on to assert that as a result of the data breach, the plaintiffs “will continue to experience various types of misuse of their PII in the coming years, including but not limited to unauthorized credit card charges, unauthorized access to email accounts, and other fraudulent use of their financial information.”
Based on those assertions, the plaintiffs seek several remedies from the court (e.g., ordering the defendant to pay for at least three years of credit monitoring services for the plaintiffs, awarding actual damages in an amount to be determined, and awarding attorneys’ fees and other litigation costs).
Secretary of Labor v. Potts (decided on November 24, 2021 by the U.S. Court of Appeals for the Sixth Circuit): This case stems from a DOL lawsuit against the defendant regarding potential ERISA violations. Shortly after the lawsuit was filed, the provider of the defendant’s errors and omissions/professional liability insurance policies (the “Insurer”) intervened in the case to seek a judicial determination that the Insurer had no duty to defend the defendant under the insurance policies’ plain terms. The Insurer cited language stating that the policy explicitly disclaimed coverage of ERISA-related actions. The court agreed with the Insurer, concluding that “the policies unambiguously state that they do not apply to any ERISA claims. Consequently, the district court correctly held that [the Insurer] had no duty to defend Potts against the [DOL’s] ERISA claims.”
This case serves as a reminder that fiduciaries should periodically review their insurance policies, to ensure that ERISA-related claims are covered by at least one of those policies. Also, note that insurance policies covering plan fiduciaries are not the same as the ERISA-required fidelity bond. That bond protects the plan if its assets are misappropriated, but that bond does not protect plan fiduciaries from their potential personal liability under ERISA.