The Eastern District of Kentucky recently became the latest court to weigh in on arbitration and class action waiver provisions in ERISA-governed defined contribution plans. In Merrow v. Horizon Bank, the court found such a provision enforceable and compelled arbitration of the plaintiffs’ ERISA breach of fiduciary duty and prohibited transaction claims.
The three plaintiffs were former employees of P.L. Marketing (PLM), who were vested participants in the P.L. Marketing, Inc. Employee Stock Ownership Plan (the Plan). They filed an action against Horizon Bank, the Plan’s trustee, asserting that defendants violated ERISA by causing the Plan to overpay for company stock. Plaintiffs brought three ERISA claims, arguing: 1) Horizon participated in a prohibited transaction; 2) Horizon breached its fiduciary duty as the Plan administrator; and 3) the selling shareholders knowingly participated in ERISA violations under 29 U.S.C. § 1132(a)(3).
Continue reading “District Court Finds Arbitration and Class Action Waiver Provision Enforceable in Retirement Plan”
Following a bench trial in a Pennsylvania federal district court in Nunez v. B. Braun Medical, Inc., 401(k) plan fiduciaries defeated a lawsuit alleging that the fiduciaries imprudently managed and paid excessive recordkeeping and investment management fees. The B. Braun Medical fiduciaries’ win follows on the heels of a jury trial win by fiduciaries of Yale University’s 403(b) plan. The court opinions in both of these cases 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.
In Nunez, the court found that both the processes and the outcomes with respect to the plan’s recordkeeping and investments were objectively prudent—the opposite of which the plaintiffs would be required to prove to win their case.
Continue reading “Another 401(k) Plan Fiduciary Defeats Breach of Fiduciary Duty Claims at Trial”
A series of cases against fiduciaries of 401(k) plans that offer BlackRock Target Date Funds (TDFs) have been dismissed by district courts in recent months. In three recent cases, the district courts held that plaintiffs failed to allege any facts about the plan fiduciaries’ process for selecting and monitoring the BlackRock TDFs and that plaintiffs’ reliance on the BlackRock TDFs’ alleged underperformance alone was insufficient to state a claim for breach of fiduciary duty.
Continue reading “Plan Fiduciaries Continue to Defeat BlackRock Target Date Fund Class Actions”
The Seventh Circuit revived two previously dismissed ERISA breach of fiduciary duty claims in its latest decision in Hughes v. Northwestern, which had been remanded from the Supreme Court. In doing so, the Seventh Circuit issued its own pleading standard for deciding ERISA duty of prudence claims alleging mismanagement of defined contribution plans. The standard does not affect how plan fiduciaries review, choose, and monitor investment choices and recordkeeping fees, but makes it easier to second-guess those decisions without fully understanding the “circumstances prevailing” at the time the fiduciary acts.
Continue reading “ERISA Litigation Roundup: Seventh Circuit Sets Forth Pleading Standard in ERISA Duty of Prudence Claims in Hughes v. Northwestern University”
This article originally appeared in the March 2023 edition of The Brief Case, DRI’s monthly newsletter.
Amid a circuit split, the U.S. Court of Appeals for the Fourth Circuit (Fourth Circuit) has firmly taken a side as to its treatment of benefit claim denials brought under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1132(a)(1)(B). In Tekmen v. Reliance Standard Life Insurance Company, 55 F.4th 951 (4th Cir. 2022), the Fourth Circuit endorsed seeking judgment, not via summary judgment or a quasi-summary judgment procedure, but through Federal Rule of Civil Procedure 52 if the case involves de novo review of a benefit claim with factual disputes. Rule 52 allows a court to conduct a “trial on the papers” and thus issue findings of fact and conclusions of law.
Continue reading “Fourth Circuit Endorses Rule 52 for Resolving ERISA Benefit Claim Cases with Factual Disputes”
In an unusual decision, a federal judge last month refused to strike a plaintiff class’ demand for a jury trial in an ERISA 401(k) class action.
In Garthwait v. Eversource Energy Co., a class of former and current participants in the Eversource 401(k) Plan (the Plan) filed an action against Eversource Energy Company and Plan fiduciaries seeking to recover plan losses caused by alleged breaches of fiduciary duty and requesting other equitable or remedial relief.
Continue reading “ERISA Litigation Roundup: Judge Permits Partial Jury Trial in Eversource Energy 401(k) Dispute”
Earlier this year we reported on the “Employee and Retiree Access to Justice Act,” which sought to render arbitration and class action waiver provisions, and discretionary authority for plan administrators, in ERISA plans unenforceable. On September 29, 2022, the U.S. House of Representatives passed the Mental Health Matters Act (the Act) — which encompasses the Employee and Retiree Access to Justice Act.
Continue reading “ERISA Litigation Roundup: Legislation Update — House Passes ERISA Bill to End Arbitration and Firestone“
The Employee and Retiree Access to Justice Act is — yes — another employee benefits bill recently introduced in both the House and Senate (see our other blog post on SECURE 2.0, already passed by the House and which now has a draft bill under review in the Senate Health, Education, Labor and Pensions Committee). In addition to seeking to eliminate individual arbitration as a method for resolving benefit denial and breach of fiduciary duty disputes under ERISA, the Employee and Retiree Access to Justice Act also seeks to invalidate discretionary clauses in ERISA-governed benefit plans. The prohibition of such clauses would eliminate deferential judicial review of benefit claim denials in court.
Continue reading “ERISA Litigation Roundup: The End of Firestone?”
On June 7, 2022, the Second Circuit decided McQuillin v. Hartford Life and Accident Insurance Co., No. 21-1514, holding that under ERISA and Department of Labor (DOL) regulations governing administrative benefit claims and appeals (29 C.F.R. § 2560.503-1), when considering an appeal of a denied disability claim, a plan administrator must make full determination of benefits. In doing so, the Second Circuit rejected the claim administrator’s argument that reversing the claim denial and remanding the claim internally for reevaluation satisfied the regulations — instead, a decision on whether or not benefits would be awarded was required.
Continue reading “ERISA Litigation Roundup: Second Circuit Holds Disability Benefit Claim Must Be Fully Determined on Internal Appeal Review Within 45 Days”
On April 27, 2022, the Sixth Circuit decided Hawkins v. Cintas Corporation, No. 21-3156, holding that claims for breach of fiduciary duty under § 502(a)(2) of the Employment Retirement Income Security Act of 1974 (ERISA), belong to the plan, and plaintiffs asserting such claims for alleged harm to their individual retirement accounts in defined contribution plans may not be compelled to arbitrate those claims absent the plan’s consent.
Hawkins is a putative class action that participants in an ERISA-governed defined-contribution retirement plan filed on behalf of the plan against Cintas Corporation, their former employer and the plan’s sponsor, under ERISA § 502(a)(2). The plaintiffs alleged that Cintas had breached fiduciary duties it owed to them under ERISA in connection with its administration of the plan, causing losses to the plan.
Continue reading “ERISA Litigation Roundup: Sixth Circuit Holds ERISA § 502(a)(2) Claims May Not Be Arbitrated Absent Plan Consent”