October 2020 ERISA Litigation Update:

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 fourteen 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:

• Khan v. Board of Directors of Pentegra Defined Contribution Plan (complaint filed on September 15, 2020 in the U.S. District Court for the Southern District of New York);
• Miller v. AutoZone, Inc. (procedural ruling issued on September 18, 2020 by the U.S. District Court for the Western District of Tennessee);
• Cunningham v. Cornell University (settlement agreement submitted on September 21, 2020 to the U.S. District Court for the Southern District of New York);
• Johnson v. Duke Energy Corporation (complaint filed on September 23, 2020 in the U.S. District Court for the Western District of North Carolina);
• Kong v. Trader Joe’s Company (case dismissed on September 24, 2020 by the U.S. District Court for the Central District of California);   
• Davis v. Salesforce.com, Inc. (case dismissed on October 5, 2020 by the U.S. District Court for the Northern District of California); and
• Guyes v. Nestle USA, Inc. (complaint filed on October 9, 2020 in the U.S. District Court for the Eastern District of Wisconsin). 

Other types of recent ERISA cases are as follows:

• U.S. v. Jamison (decided on September 24, 2020 by the U.S. District Court for the Eastern District of Kentucky):  In the ERISA portion of this case, the defendant (the owner and president of the plan sponsor) pled guilty to theft from an employee benefit plan. Specifically, during 2016, he withheld $32,317 in employees’ contributions from their paychecks but failed to remit those contributions to the 401(k) plan. He has now been sentenced to 36 months in prison and 36 months of supervised release. (Before his sentencing, he fully repaid all of the $32,317 in unremitted contributions.)   
• Bartnett v. Abbott Laboratories (procedural ruling issued on October 2, 2020 by the U.S. District Court for the Northern District of Illinois):  This plaintiff in this case, who is a participant in the defendant plan sponsor’s 401(k) plan, also named the plan’s recordkeeper as a defendant. The plaintiff filed this lawsuit after a fraudster accessed her online plan account (via the plan’s call center and website, which the recordkeeper operates) and effectuated a distribution of $245,000 to the fraudster’s bank account. In this stage of the case, the court addressed the defendants’ motions to dismiss the case.
  • With respect to the plan sponsor, the court ruled that the plaintiff’s complaint “fails to allege any fiduciary acts taken by Abbott Labs, no less link them to the alleged theft.” As support for that conclusion, the court noted that per the plaintiff, the call center and website were used to perpetuate the theft, but both are operated by the recordkeeper.
  • As for the individual who serves as the plan administrator (who is the plan’s named fiduciary), the plaintiff contends that he breached his fiduciary duty because the plan’s website misrepresents how plan assets are administered and safeguarded. However, the court ruled that it “cannot infer that [this defendant] misled plan participants through a website he does not operate.” Also, the court rejected the plaintiff’s contention that ERISA’s duty of prudence extends to the “safeguarding of data and prevention of scams” because the plaintiff failed to cite applicable caselaw supporting that position. 
  • With respect to the recordkeeper, the court ruled that “there are sufficient allegations on the face of the complaint to infer that [the recordkeeper] acted as a fiduciary by exercising discretionary control or authority over the plan’s assets” when it authorized the distribution of $245,000 to the fraudster’s bank account. The court acknowledged that as the case progresses, the issue of whether the recordkeeper performed only ministerial (non-fiduciary) functions for the plan will be critical.