January 2025 ERISA Litigation Update:

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 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:

• Vaccaro v. Pearson Education, Inc. (complaint filed on December 18 in the U.S. District Court for the Southern District of New York)
• Snyder v. UnitedHealth Group, Inc. (proposed settlement filed on December 13 in the U.S. District Court for the District of Minnesota)
• Singh v. Deloitte LLP (dismissed on December 10 by the U.S. Court of Appeals for the Second Circuit)
• Johnson v. Parker-Hannifin Corporation (procedural ruling issued on November 20 by the U.S. Court of Appeals for the Sixth Circuit)

Another type of recent ERISA case is as follows:

Barragan v. Honeywell International, Inc. (dismissed on December 19 by the U.S. District Court for the District of New Jersey):  This case is part of a new wave of ERISA litigation, in which the plaintiff (a retirement plan participant) alleges that plan fiduciaries violated ERISA via their use of plan forfeitures. Specifically, the plaintiff alleges that the defendants breached their ERISA duties by using forfeitures solely to help fund employer contributions rather than to pay plan expenses.

The plan document in this case provided plan fiduciaries with significant flexibility regarding the use of forfeitures. The relevant provisions are as follows:

• “Forfeited amounts may be applied to reduce subsequent Employer Matching Contributions, Discretionary Supplemental Employer Contributions, Qualified Nonelective Contributions, or Qualified Matching Contributions provided for under the Plan, to defray administrative expenses of the Plan, to correct errors made in allocating amounts to Participants’ Accounts, to restore Participants’ Accounts in accordance with this Section, or for any other purpose permitted under IRS rules.”

The defendants first argued that they acted in their settlor capacity rather than their fiduciary capacity when deciding how to allocate forfeitures and, therefore, no fiduciary breach could have occurred. The court began its analysis by rejecting that position, however. Specifically, the court ruled that decisions regarding how to use forfeitures were made in the defendants’ fiduciary capacity because those decisions were made while administering the plan, as opposed to designing the plan.

The court then disagreed with the plaintiff’s theory that any time a fiduciary is given the option to use forfeitures to help fund employer contributions or pay administrative costs, the fiduciary must choose the latter. In this connection, the court stated that the plaintiff’s theory is too broad. The analysis of breach of fiduciary duty claims should consider the context and circumstances of the fiduciary’s actions, but the plaintiff’s theory would “require any fiduciary to use forfeited amounts to pay administrative costs regardless of any such context or circumstances.”

The court than addressed the plaintiff’s contention that the defendants violated ERISA’s anti-inurement provisions. Under those provisions, absent exceptions not present in this case, “the assets of a plan shall never inure to the benefit of any employer and shall be held for the exclusive purposes of providing benefits to participants in the plan and their beneficiaries and defraying reasonable expenses of administering the plan.” The court ruled that the defendants did not violate those provisions, because the forfeitures at issue were used to satisfy the defendants’ employer contribution obligations under the plan and did not revert to the defendants.

Several court decisions regarding this forfeiture wave of cases have ruled in favor of the defendants. That has not stopped plaintiffs’ law firms from continuing to file these cases, though.  As one example, another one of these cases was filed on December 30. That case is Curtis v. Amazon.com, Inc., in which the plaintiff’s complaint was filed in the U.S. District Court for the Western District of Washington.