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Employee Benefits Law Report Reporting on recent trends and developments affecting employee benefits

Category Archives: ERISA Litigation

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Facebook brag underscores the enforceability of confidentiality clauses in settlement agreements

Posted in ERISA Fiduciary Compliance, ERISA Litigation

Settlement agreements are fairly common in the ERISA / employee benefits area. We typically do not need “unique” provisions for these agreements, beyond making sure all the proper parties are named and that ERISA is referenced. But two issues typically require extra attention: confidentiality provisions, and payment method (including tax withholding and reporting). As discussed in our sister blog, a party might quietly violate a confidentiality provision, and get away with it without causing any real harm. But when a party shares settlement information with a child who has both a Facebook page and poor judgment, the ramifications can …


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ERISA preemption is complicated – except when it isn’t

Posted in ERISA Fiduciary Compliance, ERISA Litigation, Other Articles

In light of health care reform, we anticipate ERISA preemption cases to start popping up more frequently. Two recent decisions demonstrate that ERISA preemption is complicated, except when it isn’t. In Liberty Mutual Ins. Co.v Donegan, Second Circuit Judge Dennis Jacobs explains the complicated nature of ERISA preemption. This opinion may be helpful for anyone to develop a better understanding of the topic and its history. (Shameless plug alert: you also may want to see the preemption chapter that I edit in ERISA: A Comprehensive Guide.)

Then there is the decision that demonstrates when preemption isn’t complicated.  Seventh


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Frommert v. Conkright “Actuarial Heresy” is Back Again

Posted in ERISA Fiduciary Compliance, ERISA Litigation, Retirement Plans

Frommert v. Conkright, the Xerox “actuarial heresy” floor-offset plan case is back. This time, the Second Circuit has ruled that the new interpretation of the plan is unreasonable, and that ERISA’s “notice provisions” were violated.

Stating, “SPDs are central to ERISA,” the Court concluded that the SPD (summary plan description) did not satisfy 29 C.F.R. § 2520.102-3(l) because the SPD did not describe the offset provision in question in more detail. The Court held, “the Plan and its related SPDs violate ERISA’s notice provisions” and “Plaintiffs’ notice claims fall under Section 502(a)(3).” Frommert has been remanded to the district …


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Supreme Court Takes on Fifth Third Bancorp v. Dudenhoeffer ESOP Dispute

Posted in ERISA Litigation, ESOPs, Other Articles

As I mentioned in my Heimeshoff v. Hartford blog, the U.S. Supreme Court has agreed to review Dudenhoeffer v. Fifth Third Bancorp, now captioned Fifth Third Bancorp v. Dudenhoeffer. The Court granted certiorari on the question as originally framed:

Whether the Sixth Circuit erred by holding that Respondents were not required to plausibly allege in their complaint that the fiduciaries of an employee stock ownership plan (“ESOP”) abused their discretion by remaining invested in employer stock, in order to overcome the presumption that their decision to invest in employer stock was reasonable, as required by [ERISA], …


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Heimeshoff v. Hartford: Supreme Court Upholds ERISA Plan Document’s Three-Year Statute of Limitations for Benefit Claims

Posted in ERISA Litigation, Retirement Plans

I have been blogging about ERISA basic principles and respect for boundaries, and just got a little help from the U.S. Supreme Court. In Heimeshoff v. Hartford Life & Accident Insurance Company, a unanimous decision, the Court upheld the three-year statute of limitations set forth in the terms of the ERISA benefit plan document. The Court held that while a cause of action does not commence until the plan issues a final denial in the claims appeal process, the plan and its participants can agree to commence the limitation period before that time (here, at the proof of …


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Sixth Circuit 502(a)(3) Windfall in Rochow v. Life Insurance Company of North America — ERISA’s Delicate Balance Goes So Far Off Kilter That I Am Queasy

Posted in ERISA Fiduciary Compliance, ERISA Litigation

When you think about it, balance is really important. It is hard to imagine how we all stand steady on a planet that is rotating on its access and rotating around the sun. The last earthquake I experienced left me queasy afterward, and that is how I feel after reading a new decision. Curses (or thank you?) to Brian Hall, editor of our sister blog, employerlawreport.com, for forwarding.

Within days of writing the Dudenhoeffer v. Fifth Third Bank blog about a threat to ERISA’s delicate balance and importance of boundaries, we have yet another Sixth Circuit decision that blazes …


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Dudenhoeffer v. Fifth Third Bank at the U.S. Supreme Court: DOL Brief and the ESOP Sponsor / Fiduciary Boundary Dispute

Posted in ERISA Litigation, ESOPs

The DOL has filed a brief with the U.S. Supreme Court in the Dudenhoeffer v. Fifth Third Bank employee stock ownership plan (“ESOP”) dispute that made me think about Boundaries, a book about the importance of establishing boundaries, and compelling respect for those boundaries. In designing ERISA, Congress forged a delicate balance between protecting benefit plans and encouraging employers to provide those benefit plans. The U.S. Supreme Court reminded us in CIGNA v. Amara that this delicate balance includes carefully distinguishing the roles of plan sponsors and fiduciaries, even when one entity (e.g., the employer) wears both hats. The …


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First Circuit to Potential Business Acquirers: Buyer Beware…of Underfunded Pension Liabilities

Posted in Benefits Issues Related to Mergers and Acquisitions, ERISA Litigation

We frequently encounter employers who are excited to purchase an underperforming company with the belief that it can make that company profitable.  While we as ERISA counsel never want to rain on anyone’s parade, we always encourage these employers to do their due diligence with respect to the company’s employee benefits plans.  The last thing an acquirer wants is to learn that it is responsible for a previously unknown pension liability of the acquired entity.  Careful planning can help minimize the risk of such liability.

A recent First Circuit decision involving a private equity fund’s investment in a portfolio company …


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U.S. Supreme Court decision: U.S. Airways, Inc. v. McCutchen

Posted in ERISA Litigation

The United States Supreme Court issued an opinion today in an ERISA case regarding the breadth of Section 502(a)(3) relief, and the common-fund doctrine. While the decision was unanimous on the primary issues, the Court surprised us with a 5-to-4 split on a secondary issue. Overall, the decision in U.S. Airways, Inc. v. McCutchen is favorable for employers sponsoring health care plans. The decision is also favorable for health care plan participants in the aggregate because it allows for control of plan costs, and premiums, at a critical time when plans are gearing up for 2014 health care reform cost …


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Circuit Decision Reminds Employers: Get Your Ducks in a Row at the EEOC Charge Stage and, for Goodness Sake, Know Your Own Policies

Posted in ERISA Litigation, Health and Welfare Plans

On our sister blog — Employer Law Report Sara Jodka analyzes a recent case — Gaglioti v. Levin Group, Inc. (6th Cir. Dec. 13, 2012), which serves as a good reminder to employers to pin down their reasoning for terminating an employee at the start, and stick to it.

In addition to his other claims, Gaglioti claimed that he was fired in response to the company’s fear of higher health costs for his wife, and that this was discriminatory under ERISA Section 510. Such a claim requires the plaintiff to establish “(1) prohibited employer conduct (2) taken for the …


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How Do You Jack a 401(k) Plan? Santomenno v. John Hancock Life Insurance Company

Posted in ERISA Litigation, Retirement Plans

If you are the fiduciary of an ERISA plan that invested in John Hancock group variable annuity contracts, we hope you have heard that three individuals have filed a lawsuit, claiming to be representing your plan and its participants and beneficiaries. You will not be receiving service of process.

Santomenno v. John Hancock Life Insurance Company is an “excessive fee” case. The Third Circuit held that a participant may bring ERISA Sections 502(a)(2) and (3) claims without first making demand upon the plan trustee who entered into the contract with the defendant, and without joining the plan trustee. The U.S. …


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Fiduciary Litigation Update — Tussey v. ABB, Inc.

Posted in ERISA Fiduciary Compliance, ERISA Litigation

A recent case, Tussey v. ABB, Inc., has received much warranted and unwarranted attention in the Section 401(k) plan arena. In Part 1 of this legal update, we will explain the basics of what happened in this case. In Part 2, we will provide practical aspects of Tussey and deliver specific recommendations on how plan sponsors and fiduciaries can help minimize their potential fiduciary liability.

Part 1: Case Summary

By way of background, this case was one of 15 different cases filed in 2006 by a single law firm. These lawsuits were aimed at large employers alleging …


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United States Supreme Court Declines to Review Sixth Circuit’s Rejection of Class Certification in ERISA Fee Case

Posted in ERISA Litigation, Health and Welfare Plans

The Supreme Court last week denied a writ of certiorari to review the Sixth Circuit’s rejection of class certification for a group of self-insured health plans alleging that their plan administrator charged them improper fees.

In Pipefitters Local 636 Insurance Fund v. Blue Cross Blue Shield of Michigan, No. 09-2607 (Aug. 12, 2011), the Sixth Circuit Court of Appeals reversed the district court’s decision to certify the class, which would have consisted of between 550 to 875 self-insured plans that entered into Administrative Services Contracts (“ASC’s”) with Blue Cross Blue Shield of Michigan (“BCBSM”). These services included payment of …


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Road to ERISA Class Action Certification Gets Bumpier With Second Circuit Decision in Nationwide Life Ins. Co. v. Haddock

Posted in ERISA Litigation

In Nationwide Life Ins. Co. v. Haddock, No. 10-4237-cv (Feb. 6, 2012), the Second Circuit vacated a district court’s order certifying an ERISA class action in light of the United States Supreme Court’s decision in Wal-Mart v. Dukes, 131 S. Ct. 2541 (2011). This decision may be a game-changer in the ERISA class action litigation arena, and may ease the pressure on service providers and employers to settle even frivolous claims to avoid the expense of litigation.

The Haddock litigation is substantial in terms of the number of plans involved. This is not the typical ERISA litigation involving …


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Establishing that a pension plan creep benefit claim is preempted by ERISA took 19 years in state court – don’t let this happen to you

Posted in ERISA Litigation

ERISA preemption of state law is complicated, and it gets even murkier in state court. We advise our clients and our litigation partners to immediately refer anything that smells like an ERISA action to our ERISA team, so that the matter can be timely removed to federal court. State courts do not routinely handle ERISA matters, and this litigation tends to not go very well there. Barnett v. SKF USA, Inc. demonstrates what can happen.

In this case, non-union plaintiffs claim that back in 1991, they were promised a pension plan “creep benefit.” The pension plan allowed early retirement at …


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Allowing Employee Investment in an ESOP or 401(k) Employer Stock Fund Becomes a Bigger Gamble – Sixth Circuit Decision in Pfeil v. State Street Bank & Trust Co.

Posted in ERISA Fiduciary Compliance, ERISA Litigation, Retirement Plans

The Sixth Circuit has reversed the district court’s dismissal of the GM ERISA stock-drop suit, Pfeil v. State Street Bank & Trust Co., and is allowing the case to proceed.  You may recall that we cautioned fiduciaries of ESOPs and 401(k) plans allowing investment in employer stock to keep an eye on this case because it could be a game-changer. And now it is.

The GM plan offered a number of investment options, one of which was the GM stock fund. The GM stock fund was not a default fund, and participants could change investments on any business day. …


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Estoppel in ERISA: Simple Mistakes Can Lead to Costly Litigation

Posted in ERISA Litigation, Retirement Plans

Plan administrators need to take steps to ensure that the information they provide to plan participants is accurate. Otherwise, plan participants may use this misinformation to bring an estoppel claim.

In civil litigation, defendants have long relied on equitable estoppel as an affirmative defense. The basic elements of an equitable estoppel defense are:

  • a definite misrepresentation of fact made to another person with the expectation that they will rely on it; and
  • reasonable and detrimental reliance on the misrepresentation

See, e.g., Heckler v. Community Health Servs. of Crawford County. The rationale behind this defense is that a party who …


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The Top-Hat Plan Test for Your ERISA Executive Deferred Compensation Plan – Daft v. Advest, Inc.

Posted in ERISA Fiduciary Compliance, ERISA Litigation, Executive Compensation

A recent Sixth Circuit decision provides a tutorial on designing and administering an ERISA executive compensation top-hat plan. In Daft v. Advest, Inc., a U.S. Court of Appeals for the Sixth Circuit reversed the District Court’s decision that the executive compensation plan was an ERISA plan but was not a top-hat plan, on the grounds that the District Court should have remanded the matter to the plan administrator for expansion of the administrative record and its own determination on this issue. This is good news for the employer, and presumably good news for the other plan participants, because an …


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The Constitutionality of the Defense of Marriage Act is Questioned in an ERISA Case

Posted in ERISA Litigation

Feeling overwhelmed by ambiguous employee benefits law? You’re not alone. A law firm recently filed an interpleader in the Eastern District of Pennsylvania, asking the court to decide whether its deceased employee had a “spouse” who was entitled to profit sharing plan benefits. Cozen O’Connor, P.C. v. Tobits. The dollar amount at issue is small ($37,000) relative to the significant amount of attention being paid to this case.

Cozen O’Connor sponsors a profit sharing plan in which its employee, Sarah Farley, participated. When Ms. Farley died, she had no children, and she did not have a beneficiary designation on …


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Join Us in Cleveland or Columbus for One of Our Upcoming Seminars

Posted in ERISA Litigation, Health and Welfare Plans

Would you like to spend a morning outside of the office, enjoying free breakfast and continuing education credit? Here’s your chance! This month, Porter Wright is sponsoring Employment Relations Seminars in both Cleveland and Columbus. I will be speaking about employee benefits developments and best practices at both session, and would love to see you there. Details follow, and we hope you can join us in one of these locations.

“Emerging Issues for Employers” Seminar to Be Held In Cleveland on October 20, 2011

Porter Wright is presenting a seminar on Thursday, October 20, 2011 from 8:30 – 11:45 a.m. …


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Ohio Federal Judge Allows Say-on-Pay Lawsuit to Proceed

Posted in ERISA Fiduciary Compliance, ERISA Litigation

I would like to direct our readers to a recent post by my partner – Bill McGrath on our sister blog – Federal Securities Law Blog titled “Ohio Federal Judge Allows Say-on-Pay Lawsuit to Proceed.”  In his post, Bill discusses a “September 20, 2011 Opinion, where Judge Timothy Black of the Southern District of Ohio ruled that a lawsuit brought against senior executives and directors of Cincinnati Bell, Inc. alleging a breach of fiduciary duty regarding compensation would be allowed to proceed. The lawsuit focuses on the “say-on-pay” provisions of the Dodd-Frank Act: specifically, attacking the …


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The Fiduciary Exception to the Attorney-Client Privilege — “Document Everything” is a Best Practice, Except When It Isn’t

Posted in ERISA Litigation

“Document everything” is often a best practice, but when you are an ERISA plan fiduciary communicating with your attorney, you may need to throw that thinking out the door. In Solis v. Food Employers Labor Relations Association the Fourth Circuit joined the Second, Fifth, Seventh, and Ninth Circuits in holding that the attorney-client privilege does not apply as to trust beneficiaries regarding communications between an ERISA plan fiduciary and an attorney when such communications relate to plan administration. The U.S. Supreme Court also recently discussed the fiduciary exception and its rationale in the context of ERISA matters in a recent …


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Curtiss-Wright Corp. v. Schoonejongen Comes Back to Haunt Us — Follow Your Plan Amendment Procedures

Posted in ERISA Litigation, ESOPs, Health and Welfare Plans, Retirement Plans

We often are asked why plan amendment procedures vary from plan to plan, and why it is important to follow those procedures—however written. Sometimes there are unique reasons for the specified procedures, but very possibly the answer goes back to the 1990′s and a case called Curtiss-Wright Corp. v. Schoonejongen, which took us on an amendment procedure roller coaster ride. First, the district court in Curtiss-Wright invalidated a plan amendment to cease post retirement health care coverage on the basis that the plan failed to specify a valid “procedure for amending [the] plan, and for identifying the persons who …


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Update on What Fiduciaries Need to Know about Investments and Fees

Posted in ERISA Litigation, ESOPs

Plan fiduciaries generally understand that they have certain duties related to plan investments and service provider fees. Court decisions over the years have shed some light on these duties. Fiduciaries should already be doing the following to satisfy their fiduciary duties:

1. Obtain some measure of expertise in plan investments. Lacking expertise, a fiduciary should hire someone with the professional knowledge required to carry out the investment functions.

2. When selecting service providers, engage in a reasoned decision-making process and document the basis for decisions. The duty to act prudently focuses primarily on the decision-making process.

3. Pay only reasonable


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