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 fifteen years has involved retirement plan participants’ allegations that plan fiduciaries caused participants to pay excessive recordkeeping and investment fees and included poorly-performing investment options in the plan. Recent cases in this category include the following:
Other types of recent cases of interest are as follows:
Cooper v. Ruane Cunniff & Goldfarb Inc. (procedural ruling issued on March 4, 2021 by the U.S. Court of Appeals for the Second Circuit): The plaintiff alleged that the defendant, which provided investment management and plan administration services to the plaintiff’s employer’s 401(k) plan, breached its fiduciary duties under ERISA by mismanaging the plan’s assets and thereby causing the plan to “lose substantial value.” In this phase of the case, the court addressed the plaintiff’s employment agreement with the plan sponsor. In that agreement, the plaintiff agreed to arbitrate “all legal claims arising out of or relating to employment.”
The court ruled that the plaintiff’s claims for breach of fiduciary duty are not “related to” his employment and, therefore, he does not have to arbitrate those claims. As support for that ruling, the court stated that “none of the facts [the plaintiff] would have to prove to prevail on his claims pertain to his employment.” Furthermore, “Congress explicitly authorized plan beneficiaries and others to sue individual fiduciaries in federal court for breach of their duties under ERISA: to interpret the [plaintiff’s arbitration agreement] as mandating arbitration of ERISA fiduciary claims would unacceptably undercut the viability of such actions.”
Dahua Technology USA Inc. v. Zhang (procedural ruling issued on February 17, 2021 by the U.S. Court of Appeals for the First Circuit): The plaintiff in this case, who is a former employee of the defendant company, asserts that the defendant breached its release agreement with him by paying him $680,000 in total instead of $680,000 per month. The defendant counters by contending that the agreement contains a mistake and that the plaintiff breached his duty of good faith and fair dealing by trying to take advantage of that mistake. At this stage of the litigation, the court ruled that the case should be sent back to the trial court. That is mainly because the facts are unclear as to whether the defendant made a mistake when drafting the agreement. If the defendant can prove that a mistake was made, the trial court will likely allow the defendant to reform the agreement so it comports with the defendant’s original intent and thus corrects the mistake.
For retirement plan sponsors, this case serves as a reminder that the careful drafting of plan documents and employee communications is a crucial step in helping to avoid costly litigation. A plan sponsor that makes a mistake in drafting its plan document or an employee communication (or that fails to discover a mistake when the plan’s service provider drafts those materials) might have to convince a court that: (1) a mistake occurred; and (2) the court should decline to honor a participant’s demand to apply the mistaken language.
Bartnett v. Abbott Laboratories (procedural ruling issued on February 8, 2020 by the U.S. District Court for the Northern District of Illinois): This case involves the theft of a participant’s retirement plan assets, and the participant’s subsequent lawsuit attacking the defendant plan sponsor’s and the defendant recordkeeper’s cybersecurity policies and procedures. The plaintiff argues that the defendant plan sponsor breached its fiduciary duties by hiring the plan’s recordkeeper, despite knowing that the recordkeeper “[fumbled] cybersecurity and data privacy” responsibilities. For example, the plaintiff alleged that the recordkeeper allowed a fraudster to access her 401(k) plan account and to initiate three separate transfers from that account. The plaintiff claims that the defendant plan sponsor knew or should have known about that, failed to monitor the recordkeeper’s performance, and thus allowed the theft to occur.
In this stage of the litigation, the court granted the plan sponsor’s motion to dismiss the case against it. As support for that ruling, the court stated that the plaintiff “has not alleged any action by the [plan sponsor] plausibly showing that [it] failed to monitor [the recordkeeper’s] performance” or that the plan sponsor’s conduct at issue was “objectively unreasonable.” However, the court will allow the plaintiff to amend her complaint against the plan sponsor after the plan sponsor provides the remainder of the documents requested in the case. Also, the case will proceed against the recordkeeper.