July 2023 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 for approximately the past seventeen years 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:

  • Vellali v. Yale University (jury’s verdict in favor of defendants entered on June 28, 2023 by the U.S. District Court for the District of Connecticut)
  • Ravarino v. Voya Financial, Inc. (procedural ruling issued on June 13, 2023 by the U.S. District Court for the District of Connecticut)
  • Zimmerman v. Cedars-Sinai Medical Center (complaint filed on June 13, 2023 in the U.S. District Court for the Central District of California)
  • Miller v. Pfizer, Inc. (complaint filed on June 8, 2023 in the U.S. District Court for the Western District of Michigan)

Other types of recent ERISA cases are as follows:

Henry v. Wilmington Trust NA (decided on June 30, 2023 by the U.S. Court of Appeals for the Third Circuit):  The plaintiff participated in an employee stock ownership plan (“ESOP”) sponsored by his employer. After the ESOP purchased stock at what the plaintiff believed to be an inflated price, he filed a lawsuit against the plan’s trustee and certain executives of his employer. He alleged that the defendants breached their ERISA fiduciary duties to the ESOP as a result of the stock purchase. The defendants then filed a motion to dismiss the case, arguing that an arbitration provision in the ESOP’s plan document barred the plaintiff from pursuing his claim in court. The trial court denied that motion.

The appeals court began its analysis by citing the relevant arbitration provision. The provision included a class action waiver, stipulating that claims against the ESOP “must be brought solely [in an] individual capacity and not in a representative capacity or on a class, collective, or group basis.” The court then posed the question it would consider as the following: does the class action waiver amount to an illegal waiver of the plaintiff’s statutory remedies? The court answered that question in the affirmative.

As support for that conclusion, the court explained that under applicable case law:

  • If an arbitration provision prohibits a litigant from pursuing his or her statutory rights, the arbitration provision constitutes a forbidden prospective waiver and is unenforceable.
  • ERISA authorizes plan participants to bring a lawsuit to remedy breaches of fiduciary duty, and those lawsuits can be brought in a representative capacity on behalf of the plan as a whole.     

Therefore, given that the arbitration provision’s class action waiver purports to waive plan participants’ rights to seek statutory remedies that are expressly authorized by ERISA, the appeals court opined that the  plaintiff cannot be compelled to arbitrate this case and that his case will continue in the trial court.

Su v. Bicallis LLC (judgment entered on June 27, 2023 by the U.S. District Court for the District of Maryland):  During a 401(k) plan audit, the DOL discovered that the defendants (the plan sponsor and its owner) did not remit participants’ elective deferrals to the plan and failed to collect company matching and safe harbor contributions owed to the plan for a two-year period. The DOL and the defendants reached an agreement in May of 2022, under which the defendants are required to restore $153,590 in missing contributions and lost investment earnings to the plan.

The defendants, however, failed to comply with that agreement. Thus, in this latest proceeding, the court declared the defendants to be in contempt of court. As part of its contempt finding, the court ordered that the defendants pay a fine of $100 per day until the amounts owed to the plan are paid in full.