ERISA Litigation Roundup: Ninth Circuit Partially Reverses Dismissal of Two Proposed Class Actions

The U.S. Court of Appeals for the Ninth Circuit partially reversed the dismissal of two proposed class actions alleging mismanagement of separate 401(k) plans in violation of ERISA. In Davis v. Salesforce.com, Inc., 2022 WL 105557 (9th Cir. Apr. 8, 2022), participants in 401(k) plan claimed that Salesforce.com, its board of directors, investment committee and executives breached their fiduciary duties by imprudently selecting and retaining relatively high-cost investments and failing to investigate less expensive alternatives, despite the availability of lower-cost options with identical or substantially similar underlying assets. The district court dismissed the plaintiffs’ complaint in its entirety, noting that it lacked adequate factual support. Specifically, the district court held that the allegations regarding alternative share classes, without more, were insufficient to state a claim; the complaint improperly attempted to compare passive funds with actively managed funds; and there is no obligation to offer alternatives such as collective investment trusts (CITs), and, in any event, CITs are not meaningful comparators to mutual funds.

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Fifth Circuit Clarifies Standard for Remanding ERISA Dispute to Plan Administrator

In Newsom v. Reliance Standard Life Ins. Co., the Fifth Circuit clarified when it is appropriate for a district court to remand an ERISA dispute to a plan administrator for development of a merits record. 26 F.4th 329 (5th Cir. 2022). James Newsom suffered from a variety of maladies, and in September 2017 his employer reduced his schedule to 32 hours per week. In October 2017, Newsom’s schedule again was reduced to 28 hours per week, and he stopped working entirely on January 30, 2018. After Newsom filed a claim for disability benefits, Reliance Standard, the claims administrator, determined that his date of disability was January 30, 2018, and since he was working less than 30 hours per week at that time, he was not a full-time employee and did not qualify for long-term disability coverage. After Newsom sued, the district court determined that Newsom’s date of disability was October 2017, that Newsom was a full-time employee as of that date, and that he was eligible for long-term disability coverage. Accordingly, and without further analysis, the district court awarded Newson long-term disability benefits.

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