March 2022 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:

  • Fritton v. Taylor Corporation (complaint filed on February 14, 2022 in the U.S. District Court for the District of Minnesota)

Other types of recent ERISA cases are as follows:

Walsh v. Fensler (complaint filed on February 28, 2022 in the U.S. District Court for the Northern District of Illinois):  The Department of Labor (“DOL”) alleges that an ERISA plan’s fiduciaries violated ERISA by misappropriating more than $2.8 million of the plan’s assets. In particular, the DOL alleges that the defendants:

  • Transferred plan assets to a third party, to purchase a plan trustee’s home out of foreclosure.
  • Transferred plan assets to that trustee’s foreclosure attorney.
  • Transferred plan assets directly to that trustee for matters unrelated to the plan.
  • Used plan assets to pay that trustee’s son, as part of a dispute with a third party over life insurance commissions.
  • Paid that trustee an amount that constituted unreasonable compensation.
  • Loaned plan assets to an entity partially owned by another plan trustee.

The DOL seeks a court order requiring the defendants to restore related losses to the plan, appointing an independent fiduciary to help manage the plan, requiring the defendants to pay that fiduciary’s fees, barring the defendants from serving as fiduciaries to any ERISA plan, and requiring the defendants to pay the DOL’s litigation costs.

Smarra v. Boilermaker-Blacksmith National Pension Trust (decided on February 8, 2022 by U.S. District Court for the Western District of Pennsylvania):  The defined benefit plan in this case was amended by reducing disability pension benefits for participants not yet receiving plan benefits. To avoid that amendment’s terms, eligible participants had to submit or post-mark their disability benefit application by August 14, 2017. On March 16, 2017, the plaintiff informed one of the defendant’s pension specialist representatives via phone that the plaintiff wished to file for a disability pension. The next day, the defendant sent a letter to the plaintiff, acknowledging his request. However, neither the representative nor the letter informed the plaintiff that if he failed to submit his application by August 14, 2017, his benefit would be substantially reduced because of the plan amendment.

On October 3, 2017, the plaintiff informed the defendant that he needed more information in order to submit his application. At that time, the defendant informed him of the amendment and its adverse effect on his disability pension benefit. The plaintiff subsequently filed this lawsuit to recover the benefits that he would have been entitled to if he had submitted his application by the amendment’s deadline.

The court begin its opinion by noting that, to establish a fiduciary breach, a plaintiff can demonstrate four elements. The court ruled in the plaintiff’s favor regarding all four elements, as follows:

  1. The defendant was acting in a fiduciary capacity. The court concluded that the pension specialist representative was not merely a “ministerial employee,” and thus was acting in a fiduciary capacity when communicating with the plaintiff, because the representative counseled the plaintiff “in a manner that would cause a reasonable person to believe she was giving advice on behalf of” the defendant.
  2. The defendant failed to adequately inform participants about relevant plan information. The court noted that based on the evidence, the defendant’s failure to timely inform the plaintiff about the plan amendment “was not an inadvertent omission.” Rather, the pension specialist representatives “were affirmatively instructed not to raise or discuss the upcoming changes with participants…and were further instructed that they were not to respond to questions on the subject.”  
  3. The misrepresentation or inadequate disclosure was material. The plaintiff satisfied this element, in the court’s view, because of the substantial (sixty percent) reduction of his pension benefit that was caused by the plan amendment and its deadline.
  4. The plaintiff detrimentally relied on the misrepresentation or inadequate disclosure. Based on information he received from the representative, the court noted that the plaintiff did not file his application with the defendant until after the amendment’s deadline.

Thus, the defendant failed to fulfill its fiduciary duty to the plaintiff, and the plaintiff prevails in this case.