June ERISA Litigation Update:

Given the continuing wave of ERISA litigation, this article has become a mainstay of The Speed Reader. Cases that were recently filed or decided, or for which courts issued procedural rulings, are outlined below. Please note, however, that this list is not exhaustive.

Torres v. Greystar Management Services, L.P. (filed on May 13, 2019 in the U.S. District Court for the Western District of Texas):  The plaintiff in this proposed class action case was a participant in the defendant plan sponsor’s 401(k) plan. She mainly seeks to have the defendant restore losses to the plan resulting from fiduciary breaches, based on the following allegations:

  • Administrative fees charged to participants’ accounts were higher than ninety percent of comparative plans’ fees (when calculated on a per-participant basis, and as a percentage of total assets), because the defendant did not engage in a prudent process to ascertain whether such fees were reasonable; and
  • Several of the plan’s investment options charged “excessive” fees, which resulted from the defendant’s failure to investigate adequately the potential use of “superior lower-cost mutual funds from other fund companies that were readily available.”

White v. Chevron Corporation (writ of certiorari denied by the U.S. Supreme Court on May 28, 2019):  The U.S. Supreme court has ruled that it will not review this case, which the plaintiffs sought to appeal from the U.S. Court of Appeals for the Ninth Circuit. Per that appeals court’s 2018 ruling, which upheld the trial court’s ruling, the defendants (the plan sponsor and the plan’s investment committee) did not breach their ERISA duties owed to the plaintiffs (participants in the defendant plan sponsor’s 401(k) plan). More specifically, the plaintiffs’ allegations showed only that the defendants could have (1) chosen investment alternatives that performed better than certain plan investment alternatives during the period at issue; or (2) sought lower administrative fees. However, no allegations “made it more plausible than not that any breach of a fiduciary duty had occurred.”

Usenko v. MEMC LLC (decided on June 4, 2019 by the U.S. Court of Appeals for the Eighth Circuit):  The plaintiff, a participant in the defendant plan sponsor’s 401(k) plan, also named the plan’s investment committee as defendants. The plaintiff alleges that between July 20, 2015 and April 21, 2016, because the defendants knew or should have known that their parent company was in poor financial condition and faced poor long-term prospects, they should have removed the parent company’s stock from the plan’s investment lineup. (Between those dates, the stock’s market price fell from $31.66 to $0.34.) However, the appeals court stated that:

  • Under a plan amendment that was effective as of February 1, 2015, participants could retain their existing investments in that stock fund but could no longer direct additional investments into that stock fund.
  • By the middle of 2015, “it was widely reported” that the parent company “was facing liquidity problems and was in financial distress due to an ambitious series of acquisitions.”
  • With respect to publicly-traded stock, “allegations that a fiduciary should have recognized from publicly available information alone that the market was over- or undervaluing the stock are implausible as a general rule, at least in the absence of special circumstances” rendering reliance on the market price imprudent. That is because “a security’s price in an efficient market reflects all publicly available information and represents the market’s best estimate of its value in light of its riskiness and the future net income flows that those holding it are likely to receive.”
  • The plaintiff has not alleged special circumstances indicating that the defendants could not properly rely on the market’s valuation of the stock.