Source: http://www.401khelpcenter.com/401k_court_legal.html
Timestamp: 2019-04-23 12:42:04+00:00

Document:
A directory and index of articles that review what is happening in the courts and legal system.
Abstract: Tussey v. ABB, after winding through earlier settlement awards to the plaintiffs, two appellate hearings in the 8th Circuit, and double rejections by the U.S. Supreme Court, ultimately will be remembered both as a case about plan sponsors' fiduciary duties and one that defined how to quantify participant losses from related breaches. As a result, the retirement plan industry has moved in a unified way to press for reductions in service provider fees, opt for lower-cost share classes, and insist upon greater transparency for recordkeeping and asset management costs.
Abstract: The district court rules Safeway's dismissal motions conflate the principle that investment decisions should not be evaluated based on hindsight with the need to use historic information available at the time the decision was made.
Abstract: Participants in a Boeing retirement plan have filed an ERISA lawsuit related to the Boeing 737 MAX airplane issues. The complaint says Boeing should have warned defined contribution plan participant invested in the company's stock that issues the company was having caused the stock price to be inflated.
Abstract: Health insurer Anthem, sued by employees who claimed its 401k retirement plan had excessive fees even though its provider was the Vanguard Group, has settled the case for $23.7 million.
Abstract: After briefly reviewing current "pay to play" litigation, the article takes up the question, "do these arrangements pose an ERISA prudence challenge for sponsor fiduciaries?" Bottom line: as with other 401k fee litigation, the key question is likely to be, is the plan overpaying for these services? And the answer to that question is likely to turn on the issue of fair market value and the cost of alternative solutions.
Are Class-Action Waivers the Future of ERISA Plans?
Abstract: Thanks to a recent ruling by the Supreme Court, employers can now be confident that arbitration agreements and class action waivers are enforceable and do not violate the National Labor Relations Act. This debate started in 2011 with AT&T Mobility Servs. v. Concepcion, which held that arbitration provisions were enforceable when included in consumer contracts. It further held that these agreements barred participation in class action litigation. Employers began to adopt similar agreements to protect their plans against significant litigation.
Abstract: In litigation involving a service provider's management of a stable-value fund that was included as an investment option for an employer retirement plan, the US Court of Appeals for the Tenth Circuit affirmed the district court's grant of summary judgment in favor of the service provider. The Tenth Circuit held that the service provider was not a fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA), and therefore could not be held liable for alleged breaches of fiduciary duty. The court also concluded that the participant could not recover on his alternative claim alleging the service provider was a non-fiduciary party in interest that participated in a prohibited transaction because he failed to show the relief he sought was equitable under ERISA.
Abstract: The question in the lawsuit, according to a federal judge, is whether the plaintiff has standing to sue, for one, because she signed a settlement agreement with the university, and also, the defendants claim, she has not proved harm in her challenges to investments used in the university's 403b plan.
Abstract: As plaintiffs' attorneys noticed the reductions in plan fees and the successful litigation on the part of large plans, they begin to use these negotiated reductions as evidence against smaller plans. These cases argue that, previously, fiduciaries had not been paying attention as plan fees crept out of control. There is now a clear pattern for ERISA litigation, making it profitable to pursue smaller plans.
Abstract: The US District Court for the District of Colorado granted partial summary judgment to 401k fiduciaries, holding that ERISA's six-year statute of repose barred some claims and rejecting challenges to the plan's fees.
Abstract: The U.S. Court of Appeals for the Tenth Circuit affirms a District Court's holding that Great-West Life & Annuity Insurance Co. was not a fiduciary with respect to its stable value fund, even though it announced the fund's credited rate quarterly.
Abstract: A federal appeals court has affirmed summary judgment in a class action suit involving 270,000 plan participants across more than 13,000 plans. The suit was filed in 2015 by plaintiff John Teets, a participant in the Farmers' Rice Cooperative 401k Savings Plan, which had contracted with Great-West for recordkeeping, administrative and investment services.
Abstract: Parties in the longest running 401k fee lawsuit have agreed to a $55 million settlement, bringing to near conclusion a 12-year case that's one of the best-known of its kind. The lawsuit, Tussey v. ABB, was among the initial tranche of lawsuits attorney Jerome Schlichter brought in 2006, alleging that employers had caused their employees to lose out on retirement savings due to overpaying for 401k plan services such as recordkeeping and investment management.
Abstract: Paul Hamburger, co-chair of Proskauer's Employee Benefits & Executive Compensation Group, and associate Joe Clark discuss how the attorney-client privilege rules apply in an employee benefit plan context. The attorney-client privilege allows for the free flow of information between an attorney and a client in order to insure that the client gets the best possible representation. We discuss the various specific rules that apply in the employee benefit plan context where information is often shared between attorneys and plan fiduciaries.
Abstract: In a presentation at McDermott's Employment and Employee Benefits Forum, Ted Becker and Chris Scheithauer explored the various ways that disgruntled employees file lawsuits with plaintiffs' lawyers. Lawsuits have been brought in cases alleging, imprudence in the management of plans, challenging fees, involving company stock, actuarial equivalence and more. They used recent cases such as, NYU, American Century Services and IBM, as examples of the various types of lawsuits and the important lessons employers can take away from them.
Abstract: If the 403b excessive fee litigation continues along a trajectory similar to its 401k predecessors, then we can expect the recent 403b settlements to usher in a new volley of suits brought against institutions overseeing slightly smaller retirement plans than the billion-dollar-plus plans at issue in the first wave of 403b cases.
Abstract: The BlackRock Retirement Savings Plan board urged a California federal judge Thursday to toss most of a putative class action accusing it of violating the Employee Retirement Income Security Act and costing participants over $100 million, arguing the board operated within the terms of its contracts. Plaintiffs Charles Baird and Lauren Slayton hit BlackRock Inc., its subsidiaries and board members, along with BlackRock's investment consultant Mercer Investment Counseling, with a sprawling, 134-page, 11 count amended complaint in August.
Abstract: Despite a setback for Oracle at the class certification stage, a new ruling out of a federal court in Colorado pushes back strongly against many -- but not all -- of the plaintiffs' claims.
Abstract: The District of Massachusetts court struck the plaintiffs' jury-trial demand in their ERISA complaint for damages and equitable relief against 401k plan fiduciaries. The court followed the "great weight of authority" in ruling that there is no right to trial by jury in ERISA actions for breach of fiduciary duty.
Abstract: A federal appeals court unanimously rejected a complaint by participants in a Walt Disney Co. 401k plan that fiduciaries violated their duties by offering the Sequoia Fund, a mutual fund that several years ago plummeted in net asset value.
Abstract: Respondeat superior is a doctrine that a party is responsible for (has vicarious liability for) acts of their agents. Respondeat superior claims in the ERISA context may be made in one of two ways. While there is no circuit split on this issue, there is a split of authority as to the manner in which these claims should be addressed. This article considers these rulings.
Abstract: In their second amended complaint, the plaintiffs argued that the Sequoia Fund purported to be a value fund, but increased investments in Valeant Pharmaceuticals created a "clear indicia of a growth stock," and did not meet the Sequoia Fund's purported investing criteria of seeking out value stocks.
Abstract: A class action complaint1 was filed by Andre Wong, et al, representing the T-Mobile USA, Inc. 401k Retirement Plan against Fidelity Management & Research and a number of its affiliates for self-dealing and a breach of fiduciary responsibility. This could produce unintended consequences of limiting investment choices to participants in the future.
Abstract: Intel's investment policy committee asked the court to review litigation involving a participant in two Intel defined contribution plans. The participant alleged that plan managers violated their ERISA obligations by offering too many alternative investments in the plans' lineups and that the plans' disclosures of investment information were inadequate. The investment policy committee has argued that the participant missed the three-year deadline for filing ERISA claims.
Abstract: The U.S. Second Circuit Court of Appeals overturned a lower court's dismissal of a "stock drop" case in a way that could add to the list of allegations participants might use to overcome employers' motions to dismiss these types of cases. Although this case involved an employee stock ownership plan, the holding could equally apply to a 401k plan that has company stock as a participant-directed investment option.
Abstract: A lawsuit contends that kickback payments Fidelity requires from investment funds bear no relationship to the cost or value of services provided and are a replacement for declining amounts of revenue sharing payments received by Fidelity as a result of the increasing use of passive mutual funds, institutional and R6 share classes of mutual funds and collective trusts.
Abstract: The parties in an excessive fee lawsuit filed against the committee that oversees the Anthem 401k plan have reached a settlement agreement. Fiduciary defendants were accused of allowing unreasonable expenses to be charged to participants for administration of the plan and of retaining high-cost and poor-performing investments.
The First Circuit's Putnam Decision: Where Does ERISA 401k/403b Litigation Go Now?
Abstract: The First Circuit Court of Appeals recently handed down its decision in Brotherston v. Putnam Investments, LLC. The First Circuit vacated the lower court's decision in which the court had dismissed the plaintiff's ERISA excessive fees/breach of fiduciary duty action. The First Circuit has laid down the gauntlet for plan sponsors, investment fiduciaries and ERISA attorneys.
Abstract: A proposed class action lawsuit in the Northern District of Illinois, involving a failure to follow the terms of a 401k plan, personally names the Vice President of Human Resources for Conagra Brands, Inc. Karlson v. Conagra Brands as a defendant, and, as it happens, the lead plaintiff is the former senior director of global benefits at the company. Other named defendants included the benefits administrative and appeals committee of the Conagra board, both of which committees included the named VP of Human Resources among its members.
Abstract: Franklin Templeton Investments has agreed to pay roughly $14 million to settle a lawsuit alleging the firm profited at the expense of its employees by loading its 401k plan with in-house investments.
Abstract: Participants in a 403b plan run by Long Island University have dropped their ERISA lawsuit after having accused plan manager of having allowed excessive fees. The three-sentence notice, filed Feb. 8 without explanation in U.S. District Court in Brooklyn, concludes the case of Mulligan et al. vs. Long Island University et al. "with each party to bear its own fees and costs."
Abstract: Charles Schwab convinced a federal judge to dismiss all but one claim in a proposed class action targeting investments in its 401k plan.
Abstract: After giving plaintiffs a second chance at offering alternative action Exxon could have taken, the court again found the suggested action was something plan fiduciaries could believe would do more harm than good.
Abstract: Recently, there have been a number of court decisions dismissing 401k/403b ERISA breach of fiduciary actions. The author writes, "I am still puzzled by some of the decisions, as the rationales cited by some of the courts seems to be inconsistent with long-standing ERISA precedent."
Abstract: The complaint alleges that Stadion Money Management and Mutual of Omaha abused their managed account arrangement by putting their own interests ahead of participants.
Abstract: The United States Court of Appeals for the Second Circuit issued a rare procedural victory to "stock drop" plaintiffs. The Jander ruling is a notable development that has already and will likely continue to encourage further stock drop litigation, and could also require plan fiduciaries to consider difficult questions about disclosure as a way to potentially limit litigation exposure.
Georgetown University Defeats Retirement Plan Fee Litigation and "If a Cat Were a Dog, It Would Bark"
Abstract: The court dismissed most of the claims on the grounds that plaintiffs had not plead sufficient facts showing that they had individually suffered an injury. Because they challenged defined contribution plans, the plaintiffs had to plead facts showing how their individual plan accounts were harmed. In this case, the named plaintiffs had not invested in the challenged funds, or the challenged fund had actually outperformed other funds, or, in the case of the early withdrawal penalty from the annuity fund, the penalty had been properly disclosed and neither plaintiff had attempted to withdrawal funds; thereby suffering no injury.
Abstract: The percentage of employers citing the threat of lawsuits as a major factor hampering their innovation has tripled since last year. More than 60% of employers say the threat of lawsuits hampers their innovation; this level is up from 53% of respondents who said the same in a 2018 study. Among these respondents in the 2019 study, 12% said the threat of lawsuits is a “major factor,” compared to only 4% in 2018.
Abstract: American Century Investments won a class-action lawsuit alleging the asset manager profited from its company 401k plan at the expense of employees by loading the retirement plan with in-house funds. Judge Greg Kays of the U.S. District Court for the Western District of Missouri found in favor of American Century on all counts, saying plaintiffs failed to prove that American Century had breached its fiduciary duty to plan participants.
Abstract: Putnam Investments has filed a petition for writ of certiorari with the U.S. Supreme Court asking it to settle questions in a case in which it was accused of engaging in self-dealing by including high-expense, underperforming proprietary funds in its own 401k plan.
Abstract: A case accusing fiduciaries of the Duke Faculty and Staff Retirement Plan of causing the plan to pay unreasonable and greatly excessive fees for recordkeeping, administrative, and investment services, and a second complaint -- this one focusing on revenue sharing it took but didn't deliver for distribution to plan participants -- have been combined for a settlement agreement. A settlement agreement was announced by counsel for both parties, but details of a settlement had not at that time been reported to the U.S. District Court.
Abstract: Attorneys with Mayer Brown say there has been little consensus or direction from the federal courts (at least so far) as to what exactly constitutes prudent administration of tax-qualified benefit plans; this will remain a challenge in 2019 and beyond.
Abstract: The recent dismissal of the Georgetown University 403b excessive fees/breach of fiduciary action has led some to suggest that such actions are now over. A closer look at the Georgetown decision suggests that that opinion may be premature.
Abstract: In the Ninth Circuit, ERISA's three-year statute of limitations begins when the plaintiff has actual knowledge of the "nature of the alleged breach." Furthermore, the Ninth Circuit rejected a "constructive knowledge" standard, meaning participants are not charged with knowledge of documents they were provided but did not actually read.
Abstract: Losses continue to mount for university employees suing their schools over allegedly excessive retirement-plan fees. Georgetown University became the fifth defendant to successfully beat back such claims in court. Roughly two dozen lawsuits against universities for imprudent management of their 403b plans, which are defined-contribution plans for nonprofits, have been filed since August 2016.
Abstract: Many parties to ERISA litigation and arbitration pay lip service to the burden of proof, put on their respective cases and leave it to the trier of fact to decide which side deserves the victory. Burdens of proof have become increasingly important, however, as procedural and substantive issues become more complex, and judges often have less time to deal with the subtleties in ERISA litigation. Burdens of proof thus demand more attention.
Abstract: While there have been roughly two dozen of these 403b university lawsuits filed since 2016, Georgetown is now the fifth university to prevail at trial. The bottom line seems to be that the defendants willing and able to go to trial stand a pretty good chance of success.However, that bar is not so low as to permit an easy summary judgment dismissal of the claims made.
Abstract: In a colorfully worded opinion, the district court judge chides plaintiffs for failing to acknowledge basic facts about the way annuities work and their well-established role in 403b plans.
Abstract: A recent class action lawsuit emphasizes the importance of clarity in plan language, particularly the definition of compensation, a frequent source of errors. As most plan administrators are aware, what elements of pay are counted as compensation for various purposes of the plan can vary and change from time to time, particularly when payroll systems or vendors change or employers adopt different compensation designs. In this case, the plaintiff has asserted that the plan sponsor should have treated certain post-termination bonuses as benefitable compensation under the terms of the plan.
Abstract: While there were fewer 401k claims in 2018 than in prior years, settlements are up, amounting to approximately $90 million in the aggregate. There appears to be less appetite to incur substantial defense costs, driving the settlement rate up.
Abstract: Current and former participants in the Transamerica's 401k plan have sued the company and plan fiduciaries, alleging they breached their duties under ERISA by failing to remove underperforming proprietary investments. The defendants "saddled the plan's participants with substandard investment portfolios that were managed by a Transamerica affiliate," said the complaint.
Abstract: A number of vexing issues facing ERISA practitioners came to a head in 2018 and are primed to be resolved in the coming year. This article examines the cases raising these issues, and the impact their resolution in the coming year will have on retirees and the retirement industry.
Abstract: Plaintiffs in the case say the appellate court held them to stricter pleading standards than it did plaintiffs in other Employee Retirement Income Security Act lawsuits.
Abstract: A series of recent settlements in ERISA lawsuits illustrates to defined contribution sponsors why an ounce of prevention is worth a pound of cure. These settlements cover financial institutions that have filled their 401k plans with proprietary investments, provoking allegations of self-dealing that violate their fiduciary responsibilities under ERISA.
Abstract: In Sulyma v. Intel Corporation Investment Policy Committee, the Ninth Circuit Court of Appeals recently held that having access to documents disclosing an alleged breach of fiduciary duty is not sufficient to trigger the three-year statute of limitations under ERISA if the plaintiff does not have actual knowledge of the alleged breach.
Abstract: A plan sponsor who had been sued for allegedly breaching its ERISA fiduciary duties in shifting allocations in a plan's custom target-date portfolios to "risky and high-cost" investments will have to go back to court.
Abstract: The Second Circuit reinstated a claim for breach of fiduciary duty under ERISA brought by participants in IBM's 401k plan who suffered losses from their investment in IBM stock. This article briefly reviews the Supreme Court and Circuit Court precedent leading up to the Second Circuit's IBM decision, the IBM decision itself, and its potential implications going forward.
Abstract: The Second Circuit reversed dismissal of an ERISA stock drop class action finding plaintiff alleged enough to plausibly show that disclosure of alleged corporate problems would not have done more harm than good and sketching a treasure map for ERISA plaintiffs seeking to recover for 401k plan losses.
Abstract: Edward Jones will pay $3.2 million to settle a lawsuit alleging the firm enriched itself at the expense of employees through mismanagement of its company 401k plan.
Abstract: A $500,000 settlement has been reached in a lawsuit alleging that fiduciaries to the $500 million 401k program offered by Pioneer Natural Resources USA breached their ERISA duties regarding investments and investment fees.
Abstract: The appellate court found that the allegations showed only that Chevron could have chosen different vehicles for investment that performed better during the relevant period, or sought lower fees for administration of the fund, not that any breach of ERISA duties had occurred.
Abstract: In a case alleging self-dealing in Franklin Templeton's 401k plan, the parties have reached an agreement in principle to settle the case. No details of the settlement agreement have been revealed since, according to a notice in the case's docket, "Plaintiffs anticipate needing 60 days to file a motion for preliminary approval." The trial in the case was set to begin January 14, 2019.
Abstract: 401k and 403b plan litigation is not going away. If you are a plan fiduciary looking to avoid (or win) future lawsuits over fees and investments, there are lessons to be learned from recent decisions and settlements about the best ways to protect yourself in 2019. Here are some important takeaways from recent litigation activity.
Abstract: 401k lawsuits are on the rise. However, the legal responsibilities associated with 401k lawsuits are not always crystal clear. Plan fiduciaries who manage and administer 401k and 403b plans struggle with knowing how to perform. There are many grey areas, and so questions persist about fiduciary duties and 401k lawsuits. A 2018 paper from the Center for Retirement Research at Boston College explores the reasons behind these lawsuits, as well as their implications for plan sponsors and the retirement industry.
Abstract: In an unpublished 3-page opinion, a three-judge panel of the Ninth Circuit Court of Appeals upheld the dismissal of plaintiffs' claims in the White v. Chevron 401k fee litigation. The court sided with defendants on one of the critical issues in current 401k fee litigation: whether a plaintiff may state a claim for breach of the ERISA duty of prudence merely by alleging that there was a less expensive, "identical" alternative to the service/fund provider selected by plan fiduciaries.
Abstract: The author writes that, "The 1st Circuit just handed down what in my opinion is one of the best well-reasoned and well-written opinions I have read in my 36 years of practicing law. If you practice in the 401k/403b arena, you should do yourself a favor and read it. It’s long, 50 pages, but if SCOTUS upholds the decision, it will result in significant changes in ERISA pension plans."
Abstract: Despite ERISA's endorsement of arbitration for certain issues, breach of fiduciary duty claims, which tend to involve greater damages and tend to attract the most media attention, are not arbitrated. One possible reason is that it has not been clear that courts would require parties to arbitrate such disputes, but that may change. Another possible answer is that arbitration is not all it is chalked up to be. For sophisticated fiduciary disputes, arbitration may in fact be just as time consuming, just as expensive, and less likely to lead to a just outcome.
Abstract: Plaintiffs and defendants agreed to drop litigation in a lawsuit by Caterpillar 401k participants alleging the plan's recordkeeper and an affiliate violated their fiduciary duties when they subcontracted a financial advice service to Financial Engines.
Abstract: Edison International is urging a federal appeals court to uphold a ruling denying a request to recover nearly $1 million for expert witnesses used during an 11-year litigation.
Abstract: The defendants moved to dismiss under a procedural rule which required the federal district court to accept as true the facts alleged in the complaint, and to draw reasonable inferences in favor of plaintiffs. Over plaintiffs' objections, the court took "judicial notice" of investment fund prospectuses and fact sheets as materials "necessarily embraced by the pleadings." The judge granted defendants' motion to dismiss all counts, finding that the university satisfied its duty to offer an acceptable array of investment funds with reasonable fees, and that no facts indicated that the fiduciaries failed to use a prudent process in selecting plan investment options.
Abstract: Here is a simple recipe for minimizing the likelihood that a 401k plan will be the subject to a lawsuit. Advisors can use this recipe to help their 401k plan clients avoid trouble, or to open the door with 401k plan prospects that may appreciate a review of their current practices.
Abstract: The two plaintiffs, who are Texas A&M University retirees, voluntarily dismissed their complaint against Matrix on Nov. 16 in the U.S. District Court for the District of Colorado "without prejudice, with each party to bear its own costs, attorneys' fees, and expenses."
Abstract: Waddell & Reed Financial Inc. is settling a lawsuit that alleges it loaded its company 401k plan with costly in-house investments by agreeing to pay nearly $5 million.
Abstract: A federal judge in San Francisco delivered a mixed ruling in preliminary judgments on a lawsuit filed against Franklin Resources Inc. by former participants in the company's $1.4 billion 401k plan. In an order issued Nov. 16, Judge Claudia Wilken in the District Court for the Northern District of California, granted Franklin's request for summary judgment on the claim that the firm failed to monitor the plan's administrative arrangements, which allegedly led to excessive recordkeeping fees.
Abstract: While insurers have not reacted in a unified way, the claim environment has become much more active and severe during the past 24- 36 months, highlighted by well-publicized excessive fee litigation under ERISA. This 10-page fiduciary liability claim trends report discusses, among other items, the many excessive fee cases brought against universities, why proprietary funds are more challenging risks, and recent results from a Boston College study examining the causes and consequences of 401k lawsuits.
Abstract: New York Gov. Andrew Cuomo had, through the Department of Financial Services, ordered state regulators to suggest to 401k and similar financial firms they "review any relationships they may have with the National Rifle Association and other similar organizations. Upon this review, the companies are encouraged to consider whether such ties harm their corporate reputations and jeopardize public safety."
Abstract: Jackson National Life Insurance Co. has reached a $4.5 million settlement in a self-dealing lawsuit that alleged the company profited at the expense of its employees by adding high-cost proprietary investment funds to its 401k plan.
Abstract: Two more courts have disallowed claims of imprudence against 401k plan fiduciaries that permitted investments in employer stock as those companies headed toward bankruptcy.

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