June 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 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:

  • Boley v. Universal Health Services, Inc. (procedural ruling issued on June 1, 2022 by the U.S. Court of Appeals for the Third Circuit)
  • Morales v. Capital One Financial Corporation (procedural ruling issued on May 27, 2022 by the U.S. District Court for the Eastern District of Virginia)
  • Mills v. NFP Retirement Inc. (complaint filed on May 16, 2022 in the U.S. District Court for the Central District of California)

Other types of recent ERISA cases are as follows:

ForUsAll v. United States Department of Labor (complaint filed on June 2, 2022 in the U.S. District Court for the District of Columbia):  As discussed in the April 2022 edition of The Speed Reader, on March 10, 2022 the U.S. Department of Labor (the “DOL”) released its first guidance on including cryptocurrency investments in a 401(k) plan’s investment lineup. That guidance is Compliance Assistance Release No. 2022-01 (the “Release”). Essentially, the Release “cautions plan fiduciaries to exercise extreme care before they consider adding a cryptocurrency option to a 401(k) plan’s investment menu for plan participants.”

The plaintiff here, which provides services to retirement plans and was the first company to announce that it would make cryptocurrency available to 401(k) plan participants through a self-directed window, seeks to vacate and set aside the Release. The plaintiff initially notes that under applicable law, governmental agencies such as the DOL must go through a public notice and comment process before issuing rules, and judicial review is permitted when an agency’s action is arbitrary, capricious, or in excess of its statutory authority and when an agency fails to follow the required procedures. The plaintiff then alleges that the Release constitutes the “DOL’s arbitrary and capricious attempt to restrict the use of cryptocurrency in defined contribution retirement plans, in excess of its authority under [ERISA], and without following the notice and comment process required” under applicable law.

As support for those conclusions, the plaintiff states:

  • “Cryptocurrency is a widely accepted asset class. Tens of millions of Americans have included it in their portfolios, as have some of the nation’s largest institutional investors, including Harvard University’s endowment.”
  • “President Joseph R. Biden Jr. has formally declared it to be the policy of the United States to “promote” the development and use of cryptocurrency.”
  • “No asset class is presumptively imprudent under ERISA.”
  • “ERISA does not mandate paternalism with respect to participant investments.”

Overall, the plaintiff states that “This lawsuit seeks to preserve the rights of American investors to choose how to invest money in their own retirement accounts.”

Joffe v. King & Spalding LLP (decided on May 26, 2022 by the U.S. District Court for the Southern District of New York):  The plaintiff is a former employee of the defendant. One of his claims is that the defendant unlawfully retaliated against him for reporting suspected unethical conduct by partners of the firm. More specifically, the defendant allegedly wrongfully discharged him under Section 510 of ERISA, which adversely affected his vesting status under the defendant’s 401(k) plan. Section 510 of ERISA prohibits plan participants’ discharge “for the purpose of interfering with the attainment of any right to which such participant may become entitled to under [an employee benefit plan].”

The court ruled that even though the plaintiff’s last day of employment was only about two weeks before his employer contribution to the 401(k) plan would vest, the defendant had sufficient cause to terminate the plaintiff when it did. For example, the plaintiff “acted inconsistently with the firm’s expectations by failing to participate meaningfully in his own career development, including by failing to submit a business practice plan for three years in a row.” Thus, the defendants did not violate Section 510 of ERISA because the plaintiff was not terminated under circumstances giving rise to an inference of intentional interference with his ERISA rights.

Torrano v. Horizon Actuarial Services LLC (complaint filed on April 28, 2022 in the U.S. District Court for the Northern District of Georgia):  The plaintiff in this class action lawsuit  participates in a retirement plan serviced by the defendant, which provides benefit plan technical and actuarial consulting services. On or about November 12, 2021, the defendant received an email from a group “claiming to have stolen data from its computer servers” (the “Data Breach”). On or about January 9, 2022, the defendant determined the Data Breach involved the sensitive information of more than 2,537,261 current and former customers of the defendant. Those customers included the plaintiff and other members of the class. On January 13, 2022, the defendant apparently began notifying affected class members of the Data Breach.

The plaintiffs assert that their sensitive information was compromised as a result of the defendant’s “negligent and/or careless acts and omissions” and the failure to protect its customers’ sensitive information. More specifically, the defendant allegedly failed to “follow applicable, required and appropriate protocols, policies and procedures regarding the encryption of data.”  The plaintiffs seek compensatory damages and injunctive relief to remediate the defendant’s alleged failure to secure the plaintiffs’ sensitive information. The plaintiffs also seek to have the defendant provide credit monitoring, identity theft insurance, and credit repair services to protect the plaintiffs from future identity theft and fraud.