Given the continuing wave of ERISA litigation, this article has become a mainstay of The Speed Reader. Recent cases are outlined below, but please note that this list is not exhaustive.
- In re DeRogatis (procedural ruling issued on September 14, 2018 by the U.S. Court of Appeals for the Second Circuit): The defendants in this case are the trustees of a pension plan and a welfare benefit plan in which the plaintiff’s deceased husband participated. Litigation arose mainly because of certain oral miscommunications by plan personnel to the plaintiff and the participant shortly before the participant’s death. With respect to the plaintiff’s pension plan claim, the court held that the defendants properly denied the plaintiff’s request for an augmented survivor benefit following the participant’s death. As support for that holding, the court stated that the plan’s SPD “adequately described the eligibility requirements for the benefits in question and thereby satisfied the trustees’ fiduciary duty to provide complete and accurate information to plan participants and beneficiaries,” despite “any erroneous advice that [the plaintiff] may have received.” As for the plaintiff’s welfare benefit plan claim, the District Court granted summary judgment for the defendants, concluding that a plan administrator cannot be held liable for unintentional misrepresentations made about the plan’s operation by its non‐fiduciary, “ministerial” agent. However, in rejecting that conclusion, the court stated that the welfare benefit plan’s SPD provided by the defendants “fell short of providing the requisite clear explanation of participants’ options to receive post‐retirement health benefits.” The court also noted that there is evidence suggesting that plan agents misstated the health benefits when communicating with the plaintiff and the participant. In this connection, “When we consider together the SPD and the statements by Welfare Fund agents, we identify an open question of material fact concerning whether the Welfare Fund trustees breached their fiduciary duty to provide the [plaintiff and the participant] with complete and accurate information about their benefits” under the welfare benefit plan. As a result, the court vacated the District Court’s judgment in favor of the defendants and remanded the case to the District Court for further proceedings (i.e. as to whether the defendants breached their ERISA fiduciary duty to provide plan participants with complete and accurate information about their benefits.)
- United States v. Williams (decided on September 17, 2018 by the U.S. District Court for the District of Maryland): The defendant in this case was the owner and CEO of an information technology and service company, which was the plan sponsor of the retirement plan at issue. The case was filed after an investigation in which the DOL and the U.S. Office of the Inspector General determined that during most of 2012, the defendant failed to deposit employees’ contributions to the plan. In particular, although the defendant withheld those contributions from employees’ paychecks, he used some of those funds to pay corporate and personal expenses. As a result, the court has sentenced him to one year and one day of imprisonment and is requiring him to pay $354,175 in restitution to the plan. This results from the defendant pleading guilty to one count of theft or embezzlement from the plan.
- Acosta v. Reliance Trust Co., Inc. (settlement agreement approved on September 18, 2018 by the U.S. District Court for the Eastern District of North Carolina): This case resulted from a DOL investigation finding that an ESOP sponsor’s owners sold one hundred percent of the company stock to the plan for $82.5 million, purportedly for employees’ benefit. However, the DOL concluded that the sale price exceeded the stock’s fair market value and that the defendant (a plan trustee) did not determine the sales price in good faith. In particular, the defendant failed to ensure that the financial information provided to the appraiser and used in its valuation was accurate and complete, the defendant failed to thoroughly understand the appraiser’s valuation, and the defendant failed to meaningfully question the assumptions underlying the stock’s valuation. Therefore, as a result of the defendant’s “disregard of its fiduciary responsibilities, the plan overpaid for the company stock, causing losses to the plan.” Under the settlement agreement, the defendant will pay $4,545,454 back to the ESOP within 30 days and the DOL will assess a civil penalty of $454,545 against the defendant.
- Davis v. Washington University in St. Louis (decided on September 28, 2018 by the U.S. District Court for the Eastern District of Missouri): The plaintiffs in this case sued the plan sponsor of the 403(b) plan in which they participate, as well as the plan sponsor’s Board of Trustees. The plaintiffs mainly alleged that the defendants breached their ERISA fiduciary duties by causing the plan to overpay for recordkeeping services, causing the plan to pay unreasonably-high investment fees (by offering retail investment class shares rather than available lower-cost institutional class shares in the same funds), and failing to address the underperformance of certain investment options. With respect to the excessive fees claims, the court ruled that “Plaintiffs start with the false premise that just because the Plan’s fees could have been lower that necessarily Defendants’ breached their fiduciary duties.” In this connection, the court stated that the plaintiffs failed to allege that the process of choosing the recordkeepers or investment options was flawed. Also, “the diverse selection of funds available to Plan participants negates any claim that Defendants breached their duties of prudence simply because cheaper funds were available.” The court then addressed the plaintiffs’ claim that “two of the Plan’s more than 100 investment options “underperformed” over the alleged class period.” The court held that it could not “isolate these two funds to determine whether Defendants breached their fiduciary duties,” because the prudence of each investment option is not assessed in isolation, but as each investment relates to the plan’s entire portfolio. Consequently, the court granted the defendants’ motion to dismiss the case.