After multiple cases in which the United States Court of Appeals for the Seventh Circuit had expressed approval for the “Moench presumption,” without formally adopting the presumption, the Court recently took the final step. Indeed, the Seventh Circuit’s take on the presumption may be the hardest to overcome of any circuit. How so? Read on to find out.
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ERISA provides standing to bring an action for breach of fiduciary only to a plan’s participants, beneficiaries, and fiduciaries. However, the United States Court of Appeals for the Second Circuit recently held that an entity had standing to bring an action even though it had ceased being a fiduciary more than 20 years prior to the decision. What led the court to reach this result? Read on to find out.
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The United States Court of Appeals for the Fourth Circuit recently held, over the objections of not only the putative class representatives but amicus briefs filed by the Department of Labor, the Pension Benefit Guaranty Corporation, and the AARP, that participants in a defined benefit pension plan lack standing to challenge the plan’s investments in mutual funds that were affiliated with the plan’s sponsor. Why did the plaintiffs lack standing? Read on to find out.
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On January 4, 2013, federal district court judge Denise Hood of the Eastern District of Michigan certified a class action in Pfeil v. State Street Bank & Trust Co. under Fed. R. Civ. P. 23(a), 23(b)(1)(B) and 23(b)(3). The certified class includes all participants or beneficiaries of the GM retirement plans who suffered losses to their investments in the GM stock fund during the class period of July 15, 2008 to April 24, 2009. This blog post provides a brief recap of the litigation and class certification in Pfeil.
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Federal Rule of Civil Procedure 23(b)(2) authorizes class action treatment if the defendant “has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” But is it really possible for a defendant to “act” or “refuse to act” the same way with respect to a group that is so large and varied that it is broken into 10 separate and distinct subclasses? Judge Posner thinks so. Indeed, writing on behalf of a three-judge panel of the Seventh Circuit, Judge Posner recently affirmed certification under Rule 23(b)(2) of a class of more than 4,000 individuals who participated in an ERISA-governed pension plan over a span of 23 years, and comprising 10 distinct subclasses. See Johnson v. Meriter Health Services Employee Retirement Plan, --- F.3d ----, 2012 WL 6013457 (7th Cir. Dec. 4, 2012).
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Judge Martini of the United States District Court for the District of New Jersey recently dismissed a putative class action lawsuit against Horizon Healthcare Services. The plaintiffs (various chiropractors who regularly provide certain chiropractic treatments for plan participants) alleged that Horizon systematically and improperly denied reimbursement for certain types of chiropractic services. Horizon later claimed that it “bundled” reimbursement for the chiropractic services into a “global fee.”
The Court granted Horizon’s motion to dismiss, finding that the plaintiffs’ “vague references to a common practice and purported assignment” were not enough to satisfy the chiropractors’ burden to prove that they had standing to sue under ERISA. See Demaria v. Horizon Healthcare Services, Inc., No. 2:11–cv–7298 (WJM), 2012 WL 5472116, at *4 (D.N.J. Nov. 9, 2012).
Read the entire blog entry to find out why Judge Martini decided to not back the chiropractors in response to Horizon’s motion to dismiss.
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We all know that a fiduciary must act solely in the interests of the participants and beneficiaries of the plan at all times. This includes, for example, bringing a lawsuit against former fiduciaries or current co-fiduciaries for breaches of their fiduciary duty that caused harm to the plan. But, what happens when Fiduciary No. 1 brings a lawsuit against Fiduciary No. 2, and then Fiduciary No. 2 turns around and seeks contribution and indemnification from Fiduciary No. 1? There is no statutory right to contribution and indemnification under ERISA, but is this permitted under common law? The Supreme Court has not ruled on whether an ERISA fiduciary has the right to seek contribution and indemnity from a co-fiduciary, and several Circuits and district courts are split on this issue. However, a recent decision from the Middle District of Florida relied on trust principles to hold that the rights to contribution and indemnity from co-fiduciaries under ERISA are properly permitted pursuant to federal common law. See Guididas v. Community National Bank Corp., Case No. 8-11-cv-02545-JSM-TBM (M.D. Fla., Nov. 5, 2012).
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On October 15, 2012, the Supreme Court denied the petition for writs of certiorari filed by plan participants in 401(k) plans sponsored by Citigroup and McGraw-Hill Companies, meaning that the high court chose not to weigh in on the Second Circuit’s adoption of the presumption of prudence regarding investment in employer stock, otherwise known as the Moench presumption. However, the Moench presumption may yet make its way to the Supreme Court, thanks to the Sixth Circuit’s minority holding that rejected the application of the presumption at the pleadings stage. Will the Supremes be more willing to take up this issue on a cert petition in Pfeil v. State Street Bank & Trust Co., 671 F.3d 585 (6th Cir. 2012)?
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On August 3, 2012, the Second Circuit affirmed dismissal of a putative ERISA class action against Xerox Corporation (“Xerox”), because the plaintiffs did not allege sufficient factual content from which to conclude that Xerox (and the other defendants) misrepresented any material matter to plan participants regarding the receipt of their lifetime health care benefits and, in the absence of any other alleged breach of fiduciary duty, the plaintiffs did not state a plausible claim for relief under Sections 1132(a)(2) or (a)(3) of ERISA. See Coriale v. Xerox Corp., et al., Case No. 11-1724-cv (2d Cir. Aug. 3, 2012).
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In a recent case, Griffin v. Flagstar Bancorp, Inc., No. 11–1497, 2012 WL 2989231 (6th Cir. July 23, 2012), the Sixth Circuit stuck with its position that the presumption of prudence does not apply at the pleadings stage, when it reversed an order dismissing a putative ERISA class action.
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On July 18, 2012, Judge Rosemary Collyer of the United States District Court for the District of Columbia denied certification of a class of 1,350 U.S. Airways pilots in an ERISA class action to recover interest on lump sum pension distributions, in a case that has been pending for more than a decade. Judge Collyer held that the named plaintiff’s exhaustion of his administrative remedies under the pension plan did not suffice for the entire class, and does not, as a matter of law, excuse the entire putative class from exhausting their administrative remedies. Therefore, the pilots’ claims could not be maintained as a class action.
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On June 8, 2012, the United States Court of Appeals for the District of Columbia Circuit held that changes made by E.I. du Pont de Nemours and Company (“DuPont”) to its ERISA-governed medical plan (the “Plan”) after the expiration of collective bargaining agreements (“CBA”) with two local unions did not violate the National Labor Relations Act (“NLRA”) because DuPont had an established practice of unilaterally changing the plan and because the Plan had a provision authorizing DuPont to make such changes.
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On May 31, 2012, Magistrate Judge Ann Marie Donio of the United States District Court for the District of New Jersey denied plaintiffs’ motion to compel the production of 54 e-mails on the basis that these documents were protected from disclosure by the work-product doctrine. In doing so, Judge Donio held that these documents did not fall within the “fiduciary exception” commonly applied in the ERISA context so as to mandate their disclosure because the documents were created specifically for use in litigation against the beneficiary requesting the documents. See Goldenberg v. Indel, Inc., et al., Case No. 09-5202, Order dated May 31, 2012 (Doc. No. 205).
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On May 25, 2012, the United States Court of Appeals for the Sixth Circuit affirmed the dismissal of a class representative’s putative ERISA class action against KeyCorp and related defendants because the proffered “class representative” could not demonstrate that she suffered any actual injury from the alleged breach of fiduciary duty and, therefore, lacked standing. See Taylor v. KeyCorp, No. 10-4163, 2012 WL 1889283 (6th Cir. May 25, 2012).
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It’s that time of year again. Final exams are almost over, the school year is ending, and summer recess is almost here. With graduations looming, May often serves as a time to reflect on the past and look to the future. Inspired by the sense of nostalgia this time of year brings, we thought it would be a good time to reflect on how ERISA stock drop class actions have fared in the Circuit Courts of Appeal during this spring semester of 2012.
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In a much anticipated development, a federal circuit court has weighed in on the availability of “reformation” and “surcharge” under ERISA § 502(a)(3), following the Supreme Court’s decision in CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011). In Skinner v. Northrop Grumman Ret. Plan B et al., a three-judge panel of the Ninth Circuit held that inaccuracies in a summary plan description (“SPD”) did not warrant reformation or an equitable surcharge under ERISA § 502(a)(3).
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On February 29, 2012, a unanimous panel of the Third Circuit rejected a bid for summary judgment by class action plaintiffs who claimed that the integrated technology company Siemens Corporation and its related benefit plans violated ERISA by refusing to provide the plaintiffs with permanent job separation (“PJS”) pension benefits when Siemens terminated their employment. The Third Circuit remanded the case to the district court, with instructions to enter summary judgment in favor of Siemens and the Siemens Plans.
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On February 15, 2012, the Honorable Barbara J. Crabb of the United States District Court for the Western District of Wisconsin certified a class of retired Kraft Foods Global, Inc. (“Kraft”) employees at Kraft’s Madison, Wisconsin, meat processing plant over changes to the retirees’ health benefits. The plaintiffs allege that Kraft’s decision to eliminate an HMO option and to increase prescription drug costs violated the vested rights of the retirees, in contravention of ERISA, and breached certain collective bargaining agreements in violation of the Taft-Hartley Act.
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Perhaps the Second Circuit could borrow a line from the late, great CBS broadcast journalist Edward R. Murrow. On February 1, 2012, the Second Circuit effectively said “good night, and good luck” to plaintiffs seeking to bring a putative class action lawsuit against CBS, after concluding that the plaintiffs’ claims were time-barred.
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The Department of Labor (“DOL”) has returned to the fray over the future of the Moench presumption. On December 14, 2011, the DOL was given the “go ahead” from the Second Circuit to file an amicus curiae brief in the McGraw-Hill matter.
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