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COLLECTED WISDOM™ on Court and Legal Actions Related to Retirement PlansA directory and index of articles that review what is happening in the courts and legal system. RSS feed of this page is available:
$6.1 Million Settlement Struck in 401k Excessive Fee SuitA four-year-old case (Ferguson v. BBVA Compass) in which participants accused plan fiduciaries of "stuffing cash into a mattress" while at the same time forcing participants "to play the fool's game" by offering only "high-cost actively managed funds" has come to terms. Source: Napa-net.org, September 2023
New Strategy in 401k Litigation: Ask for Settlement Before Suit Is FiledA new entrant to the world of 401k lawsuits is trying what appears to be a novel tactic: Contacting plan sponsors out of the blue and implying that they should settle. That's before the hint of any lawsuit or request for information about the plan that would lead to a lawsuit, said Daniel Aronowitz, managing principal of 401k insurer Euclid Fiduciary, who has had at least seven clients contacted by law firm Lieff Cabraser Heimann & Bernstein. Source: Investmentnews.com, September 2023
Latest ERISA Standard Ruling Could Lead to More DismissalsA recent Tenth Circuit decision upholding Barrick Gold of North America Inc.'s defeat of a proposed class action alleging it saddled retirees with excessive 401k plan fees and subpar investments added to a growing body of circuit precedent applying a defense-friendly standard to dismissal bids in retirement plan mismanagement cases. Source: Wagnerlawgroup.com, September 2023
When Attorney-Client Privilege Applies Under ERISAWhen a plan fiduciary communicates with an attorney, those communications are not always protected by attorney-client privilege. If a fiduciary is getting advice from an attorney on a matter related to plan assets, that advice would be rendered for the benefit of the plan and could therefore be discoverable in court. Fiduciaries are not often aware of this fact. Source: Planadviser.com, September 2023
Suit Finds 401k Fiduciary Fault in Bed, Bath & Beyond BankruptcyJust days after The New York Times reported on the impact of a corporate bankruptcy on 401k accounts, litigation has been filed against the plan fiduciaries. Plaintiffs claim defendants "failed to monitor the prudence of the Plan's investment in the MassMutual Guaranteed Interest Account, certified false and misleading statements concerning the risk of loss to Plan participants invested in the GIA and failed to take action to avoid the multi-million-dollar losses that followed." Source: Napa-net.org, September 2023
Plaintiffs Get Past Motion to Dismiss in BlackRock TDF SuitThe plaintiffs in one of the dozen or so cases (Trauernicht et al. v. Genworth Financial Inc. et al.) involving the BlackRock Lifepath target-date funds have made it past the motion to dismiss stage. Source: Napa-net.org, September 2023
Eastern District of Pennsylvania Rules in Favor of ERISA Defendants After Rare Bench TrialLawsuits bringing fiduciary claims under ERISA continue to surge, but trials remain a rarity. Against that backdrop, Nunez et al., v. B. Braun Medical Inc. et al. stands apart. The 63,000-member class action lawsuit alleged that B. Braun Medical Inc. and its retirement committee violated ERISA's fiduciary duties concerning the monitoring and selection of the retirement plan's investments and recordkeeping fees. After a three-day bench trial, the Eastern District of Pennsylvania found in favor of B. Braun on all counts. Source: Groom.com, September 2023
Tenth Circuit Adopts "Meaningful Benchmark" Pleading Standard in Dismissing Challenges to 401k Plan FeesIn a case of first impression in the Tenth Circuit, the Court recently joined the chorus of circuit courts in holding that a 401k plan participant alleging excessive investment management or recordkeeping fees must assert a "meaningful benchmark" to survive a motion to dismiss. In addition to rejecting commonly pleaded "benchmarks" because they were not meaningful, the Court's ruling is of particular significance because, unlike some other courts, it dismissed the participants' "share-class claim" ruling on a motion to dismiss that their allegation that cheaper share classes of the same mutual fund were available to the plan was demonstrably false. Source: Erisapracticecenter.com, September 2023
Fiduciaries Fend Off Excessive Fee Claims in 401k SuitA federal judge has held that a participant who wasn't invested in the funds in question lacked standing to bring suit and that his claims about excessive recordkeeping fees weren't specific enough. The suit -- filed less than a year ago in the U.S. District Court for the Middle District of North Carolina -- made a series of familiar allegations involving the $2 billion Old Dominion 401k Retirement Plan. Source: Napa-net.org, September 2023
DOL Announces DST Systems to Pay Over $124M to Settle 401k Plan MismanagementThe DOL announced the settlement of a class action ERISA lawsuit for more than $124.6 million on behalf of the more than 9,000 participants in the DST Systems Inc. 401k plan. The DOL and private plaintiffs alleged that DST and other defendants, including New York City investment management firm Ruane, Cunniff, & Goldfarb Inc., had failed to manage the profit-sharing portion of its retirement plan properly. Source: Hallbenefitslaw.com, September 2023
Plaintiffs Land Excessive Fee Settlement With Cruise LineLess than a year after being sued for the standard series of alleged missteps, the parties in an excessive fee suit have struck a deal. The plaintiff bringing suit just a year ago (September 2022) targeted plan, the NCLC 401k Plan, as well as NCL Corporation LTD, and the Plan's administrator, NCL (BAHAMAS) LTD, a Bermuda Company (Norwegian Cruise Lines) for breaching their fiduciary duties in violation of ERISA. Source: Napa-net.org, September 2023
Another 401k Plan Fiduciary Defeats Breach of Fiduciary Duty Claims at TrialsThe court opinions serve as a good reminder that offense is the best defense, and ERISA plan fiduciaries best protect themselves against ERISA breach of duty of prudence claims by proactively implementing strong fiduciary governance practices, such as keeping thorough committee meeting minutes. Consistently creating and maintaining detailed records regarding the initial selection and ongoing monitoring of vendors and investment options will help the committee defend those decisions later. Source: Spotlightonbenefits.com, September 2023
Staying Ahead of the Risk Curve: Lessons From LitigationERISA's fiduciary responsibilities are inherently procedural. One might say that they don't require that fiduciaries arrive at the right answer, but they do require that fiduciaries deploy a prudent process aimed toward the right answer. This begs an interesting question: Should your organization's fiduciaries care more about the process or the outcome? Current litigation trends suggest the answer is: both. But if fiduciary responsibilities are procedural, how can that be? Consider this perspective. Source: Qualifiedplanadvisors.com, September 2023
Federated Hermes Sued Over Using Own Funds in Its 401kA former Federated Hermes employee this week sued the company because it included its funds in the company's 401k plan. The asset management firm is the latest to be targeted by a plaintiff's law firm over the issue of using in-house products rather than comparable funds from outside providers that might have better performance records and lower fees. Source: Investmentnews.com, September 2023
One Step Forward, One Step Back for Use of Crypto in Retirement AccountsIt was one step forward, one step back this week toward a world in which cryptocurrency investments start popping up widely in retirement accounts. ForUsAll, a firm that helps retirement plans offer cryptocurrency investments to their participants, suffered a setback when the U.S. Court of Appeals for the District of Columbia dismissed the firm's lawsuit against the DOL over its March 2022 crypto guidance. Source: Investmentnews.com, September 2023
Another Excessive Fee Suit Settlement StruckThe allegations are familiar, as are the attorneys representing the plaintiffs, but this settlement proposal involves more than just money. The proposed settlement comes in an action brought by plaintiffs on behalf of participants in the Biogen, Inc. 401k Savings Plan against defendants Biogen Inc., the Board of Directors of Biogen Inc., and the Biogen Inc. 401k Retirement Committee. The suit itself was a consolidated action resulting from the combination of two separate 2020 ERISA class action suits. Source: Napa-net.org, August 2023
Litigation Landscape: Schlichter, BlackRock and the New "Plausibility Standard"ERISA breach of fiduciary duty litigation in 401k and 403b cases continues to persist, with new litigants rapidly emerging. The "new" standard of plausibility continues to prevail in some federal court districts, dismissing suits before trial, as long as the insurance policies cover those expenses. Here's what you need to know. Source: Napa-net.org, August 2023
Allianz Strikes Another Settlement in Second Excessive Fee SuitJust four years after striking an excessive fee settlement, a fund company has been sued again -- and settled again -- for allegedly not making the changes to its 401k lineup the original settlement contemplated. Source: Napa-net.org, August 2023
The Eighth Circuit's "Meaningful Benchmark" Requirement for 401k Excessive Fee Lawsuits Continues to Generate DismissalsOn August 21, 2023, the U.S. District Court for the District of Minnesota largely dismissed -- for a second time -- a putative ERISA class action challenging "excessive" fees and "poor" performance in a 401k plan. The district court determined that, for most of the claims, the plaintiff still had not satisfied the Eighth Circuit's pleading requirements. Source: Dorseyerisa.com, August 2023
Process Prevails in ERISA Excessive Fee Bench TrialFollowing a three-day bench trial in a class action accusing B.Braun Medical Inc. and its 401k plan committee of imprudently allowing excessive record-keeping fees and high-cost investments, a Pennsylvania district court found that the committee's conduct was objectively prudent in its monitoring and selection of investment funds and record-keeping fees. This bench trial victory for Braun clearly demonstrates that prudent plan governance is the best line of defense when confronted with plaintiff litigation. Source: Cohenbuckmann.com, August 2023
ERISA Plan Litigators Use "More Credible" Tactics in First Half of 2023Mid-year report finds there were fewer cases filed, as plaintiff law firms catch up on those they brought in 2022, but new entrants are using more accurate fee and service benchmarking data, Euclid Fiduciary finds. Source: Plansponsor.com, August 2023
Prudent Plan Governance Essential in Defense Against Fiduciary BreachAlthough retirement plan excessive fee cases remain an ongoing concern for plan sponsors, the recent jury trial victory for Yale in Vellali v. Yale University provides hope for plans with strong, prudent plan governance. Given the pace of new excessive fee lawsuits and the verdict in Yale, plan sponsors should review their plan governance procedures as soon as possible for compliance with the roadmap outlined here. Source: Dwt.com, August 2023
Live Nation 401k Plan Escapes Class Suit, Moves to ArbitrationA federal judge has ruled that allegations of fiduciary mismanagement brought by former employees participating in Live Nation Entertainment's 401k plan must be addressed by arbitration rather than in court, effectively ending the plaintiff's attempts at a class action lawsuit. Source: Planadviser.com, August 2023
Most ERISA Excessive Fee Cases Surviving Motions to DismissIf you thought a heightened pleading standard in ERISA breach of fiduciary duty claims based on the fees or performance of funds in 401k and 403b plans was helping plan sponsors beat back these lawsuits, think again. Mid-year analysis from Euclid Fiduciary finds plan sponsors only winning about 30% of dismissal motions, fewer than in 2022. Source: 401kspecialistmag.com, August 2023
Plaintiff Drops Fidelity, Financial Engines From American Airlines ESG LawsuitTwo defendants in a lawsuit that alleged the American Airlines 401k plan sacrificed performance for environmental, social, and governance factors have been cut by the plaintiff. The plaintiff voluntarily dismissed two of four defendants from the lawsuit that claims ESG factors were considered ahead of returns. Source: Planadviser.com, August 2023
7th Circuit Shift Resuscitates Excessive Fee SuitA shift in precedent has lowered the bar to establish a plausible argument sufficient to overcome a motion to dismiss and plaintiffs in yet another case are getting another shot at proceeding to trial. Source: Napa-net.org, August 2023
Wake Forest Medical Center Settles ERISA Class Action SuitWake Forest University Baptist Medical Center has agreed to settle a proposed ERISA class action lawsuit pending in a North Carolina federal district court. In Garnick et al. v. Wake Forest University Baptist Medical Center et al., former employees claimed that plan administrators had violated their fiduciary duties under ERISA in administering the $2 billion retirement plan covering about 30,000 participants. Source: Hallbenefitslaw.com, August 2023
Ameritas 401k Faces ERISA SuitFormer employees of Ameritas Holding Co. filed a proposed class action suit on July 28, alleging the company had mismanaged the $779 million 401k plan. Three former employees allege Ameritas failed to review the plan's investment portfolio to ensure proper performance and cost. Source: 401kspecialistmag.com, August 2023
Mitsubishi Chemical Group Sued by Former WorkerMitsubishi Chemical America's retirement plan fiduciaries are facing a class action complaint filed against the company on July 19 that alleged they caused plan participants to pay excessive fees for administrative services and failed to negotiate lower per-participant fees. The complaint was filed in U.S. District Court for the Southern District of New York. Source: Plansponsor.com, July 2023
Fourth Circuit Affirms Aon's Trial Victory in Investment SuitThe Fourth Circuit affirmed Aon Hewitt Investment Consulting's trial victory in a 250,000-member class action suit alleging that Aon breached ERISA's fiduciary duties. Aon was initially Lowe's 401k plan's investment advisor and later was engaged as the plan's 3(38) delegated fiduciary. The plaintiffs' fiduciary breach claims alleged that, after being retained as a delegated fiduciary, Aon transferred plan assets to an Aon fund with an unproven track record that underperformed. Source: Erisalitigationadvisor.com, July 2023
Investment Firm to Pay $124M to Settle 401k Plan Mismanagement AllegationsInvestment management firm Ruane, Cunniff & Goldfarb Inc. will pay more than $124.6 million to settle lawsuits filed by the U.S. Department of Labor and private plaintiffs that alleged the firm improperly managed a 401k plan sponsored by DST Systems, DOL announced. Source: Hrdive.com, July 2023
Verizon Settles 401k Complaint for $30MVerizon Communications Inc. has agreed to pay $30 million to settle a complaint from 2016 related to allegations of an underperforming hedge fund in its retirement plan target-date funds, according to a July 7 filing in the U.S. District Court for the Southern District of New York. Source: Planadviser.com, July 2023
2023 Mid-Year Update on Excess Fee and Imprudence LitigationAt the halfway point of 2023, it is noteworthy that the number of cases filed in the first six months is down by fifty percent. This is largely because the activity in pending litigation is keeping legacy law firms too busy to find more disgruntled employees to file new cases. This 2023 mid-year ERISA report will summarize the case filings, the law firms filing the cases, and the types of claims being asserted in 2023 excess fee and investment imprudence cases. Source: Euclidspecialty.com July 2023
DST 401k Plan Fiduciaries on Hook for $125 Million in ERISA SettlementFiduciaries of a retirement plan sponsored by DST Systems -- including New York City-based investment management firm Ruane, Cunniff & Goldfarb Inc. -- will pay more than $124.6 million to resolve a 7-year-old ERISA lawsuit according to a settlement announced by the Department of Labor on Monday. The DOL announced the "extraordinary" settlement in a case where more than 9,000 participants suffered large losses due to the plan's lack of diversified investments. Source: 401kspecialistmag.com, July 2023
Wake Forest Baptist Health Settles 403b Suit for $3.8MThe plaintiffs in a lawsuit against the 403b managers for Atrium Health Wake Forest Baptist, previously known as the Wake Forest University Baptist Medical Center, have reached a tentative settlement for $3.8 million, according to a U.S. District Court filing. Source: Planadviser.com, July 2023
Settlement Struck in 401k Deferral SuitThe parties involved in a suit challenging the ability to defer more to a 401k have come to terms, with a settlement of roughly $1.5 million. The suit alleged that Hyatt had a mandatory policy of requiring tipped employees to be paid all charged tips in cash rather than through payroll, "interfering with Plaintiff's and Class members' ability to defer income under the terms of the Plan." Source: Napa-net.org, July 2023
Verizon 401k Lawsuit Settles for $30 MillionVerizon will pay $30 million to settle a 2016 lawsuit over an underperforming hedge fund the plaintiffs alleged the company dragged its feet in removing from its retirement plan. The settlement sends an uncomfortable message to retirement plan advisors and other fiduciaries, an observer says. Source: Investmentnews.com, July 2023
DOL Targets New Jersey 401k Plan for Concrete CompaniesConcrete producer Di Ferraro Inc. failed to remit employee withholdings and loan repayments to the plan over six years, the Department of Labor alleges. Source: Plansponsor.com, July 2023
Three Key Issues in the Yale 403b Jury Trial VerdictThe authors of this article suggest that "Yale should never have been sued in the first place, because the plan fiduciaries were at the forefront in pushing TIAA and other investment providers for lower fees to benefit plan participants." The article is an analysis of three key issues on the Yale 403b plan defense verdict. Source: Euclidspecialty.com, July 2023
Yale Prevails in 403b Excessive Fee SuitOne of the first excessive fee suits filed against a university 403b plans has concluded with a jury verdict in favor of the fiduciary defendants, with an odd twist or two. The suit against Yale University was one of the first to be filed in this area by Schlicther Bogard LLP in August 2016. Source: Napa-net.org, July 2023
Potential for Increased Participant Litigation Looms After Appellate Court DecisionThe U.S. Court of Appeals for the Seventh Circuit recently took a second look at allegations that a defined contribution plan's fiduciaries had breached the duty of prudence under ERISA in Hughes v. Northwestern University. Source: Hallbenefitslaw.com, June 2023
Pfizer Hit with Excessive Fee 401k ComplaintA former employee claims that plan fiduciaries operating the Pfizer 401k Savings Plan breached their ERISA duties. The complaint, filed in U.S. District Court for the Western District of Michigan, Southern Division, named as defendants Pfizer Inc, the Board of Directors of Pfizer Inc., and the Savings Plan Committee of Pfizer Inc. Source: Planadviser.com, June 2023
Another BlackRock TDF Suit Bites the DustAnother of the suits alleging that plan fiduciaries "chased" low fees and disregarded poor performance has been dismissed, though not with "prejudice." In a suit filed by a former participant and current plaintiff Jermaine Anderson (on behalf of himself and some 12,027 participants), Anderson had, according to the suit, his account invested in the BlackRock LifePath Index 2035 Fund. Source: Napa-net.org, June 2023
Legal Complaint Targets Pfizer 401k Plan Committee, BoardA former Pfizer Inc. employee is alleging the pharmaceutical company caused harm to retirement plan participants, according to a complaint filed last week in federal court in Michigan seeking class-action status. The class-action proposal seeks to recover retirement plan losses allegedly caused by fiduciary breaches leading to "unreasonable" fees. Source: Plansponsor.com, June 2023
Are All ESG Investments Imprudent? A Plaintiff Suing American Airlines Says YesPolitically-motivated lawsuits were filed earlier this year to invalidate the Biden administration's ESG regulations. The plaintiffs in these lawsuits don't even claim specific losses from having made ESG investments. After that, it seemed that it was only a matter of time before the first lawsuit against a corporate plan sponsor was filed. Now we have one. A new lawsuit targets American Airlines and aggressively challenges its 401k ESG investment offerings. Source: Cohenbuckmann.com, June 2023
Participants Prevail at Pleading Stage on Excessive Fee Claim Against Mega 401k PlanParticipants in a "mega" 401k plan brought this lawsuit claiming that their employer and plan benefits committee breached their fiduciary duty of prudence by allowing the plan to pay excessive bundled recordkeeping and administrative fees, and that the employer and its board of directors breached their duty to monitor those fees. The court denied the employer's motion to dismiss the case under the Seventh Circuit's "newly formulated pleading standard" for this type of fiduciary breach claim. Source: Thomsonreuters.com, June 2023
Interpreting the DOL's Amicus Brief and its Potential Impact on the Future of 401k LitigationThe need for plans to address these fiduciary prudence and cost-inefficiency issues has become even more important in light of a recent amicus brief filed by the DOL addressing the issue of which party has the burden of proof concerning the issue of causation of damages in 401k/403b litigation. While there is a split within the federal courts on this issue, the DOL's brief provides a persuasive argument that the burden of proof belongs to plan sponsors, not plan participants. Source: Fiduciaryinvestsense.com, June 2023
American Airlines Pilot Sues Company 401k Over "Woke" ESG InvestingIn a case sure to be closely watched by the retirement industry, a senior American Airlines pilot is suing his employer. Proposed class action claims airline's retirement plan is filled with investments that pursue "leftist political agendas" through environmental, social, and corporate governance strategies. Source: 401kspecialistmag.com, June 2023
Fraudster's 401k Can Be Used for RestitutionEvan Greebel, pharma bro Martin Shkreli's lawyer and co-conspirator, lost his bid to protect his 401k from garnishment to pay restitution to his victims. The Supreme Court declined to hear the case, effectively ending Greebel's quest to keep his retirement plan free from a $10.4 million judgment found by a lower court. Source: Napa-net.org, June 2023 | |||||||
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