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Lessons from the Newest Benefits Lawsuits

19th Annual Conference on Employee Benefits and Retirement PlansJim Griffin

jgriffin@jw.com

Issue Case Name

Reasonableness of 401(k) Fees

Damberg v. LaMettry’sCollission, Inc.

Complaint/Argument

This is a potential class action lawsuit against an employer, its President and CFO to recover losses resulting from allegedly excessive 401(K) plan fees as a result of selecting inappropriate and expensive mutual funds as investment options for the plan. The plan in this case has only 114 active participants and holds only $9.2 million in assets.

Issue Case Name

Promoted tax savings strategy

Machacek v. Commissioner, Tax Court Memorandum 2016-55 March 28, 2016.

Holding

Sterling Benefit Plan which provides insurance policies for owners and operates as a welfare benefit plan under Code Section 419(e) is a nonqualified deferred compensation plan, and amounts paid for life insurance premiums were held to be taxable income to the covered owners and nondeductible by their companies.

Issue Case Name

Claim for Benefits and Burden of Proof

Estate of Barton v. ADT Security Services Pension Plan, USCA9 April 21, 2016.

Holding

When a claimant has made a prima facie case that he is entitled to a pension benefit but lacks access to key information about corporate structure or hours worked needed to substantiate his claim and the defendant controls that information, the burden shifts to the defendant to produce the information.

Issue Case Name

Venue Malagoli v. AXA Equitable Life Insurance Company, USDC SDNY March 24, 2016.

Holding

Forum selection clause requiring litigation against a plan to be filed in a specific court is enforceable.

Issue Case Name

Beneficiary Designation Becker v. May-Williams, USDC WDWash March 8, 2016.

Holding

A participant’s attempt to change a beneficiary by phone will only be effective if the participant strictly complies with the plan’s procedures or if the participant substantially complies with the plan’s procedures. Substantial compliance means that there is a high degree of certainty that the participant unequivocally desired to make the change and that he did not change his mind and that he has done everything reasonably possible to make the change.

Issue Case Name

Statute of Limitations Santana-Diaz v. Metropolitan Life Insurance Company, USCA1 March 14, 2016.

Holding

A plan’s contractual limitations period for filing a lawsuit involving a claim for benefits is not enforceable if the benefit and appeal denial letters do not inform the participant of the plan-imposed time limit for doing so.

Issue Case Name

DOL Investigation and COBRA

Nicole Clarke-Smith v. Business Partners in Healthcare USDC NDTX January 22, 2016.

Holding

Litigation involving employment termination related to COBRA notices, 401(K) deposits and DOLinvestigation.

Issue Case Name

401(k) Stock Drop Coburn v. Evercore Trust Company USDC DC February 2016.

Holding

Pleading that alleged decline in employer stock price from $36.72 to $5.92 will not support a claim for breach of fiduciary duty to continue to hold such stock in the absence of special circumstances. The mere failure of a business plan alone will not result in a breach of fiduciary duty under ERISA.

Issue Case Name

Statute of Limitations Tibble v. Edison International 135 SCT 1823 2015.

Holding

Duty to monitor and remove imprudent investments is separate from the duty to exercise prudence in the selection of investments.

Issue Case Name

Obamacare Marin v. Dave & Buster’s, Inc. USDC SDNYFebruary 9, 2016.

Holding

ERISA prohibits an employer from reclassifying an employee from full time to part time if it did that intentionally to prevent the employee from being covered under an employee health plan.

Issue Case Name

Beneficiary Claim Jenkins-Dyer v. Drayton, USDC KS September 25, 2015.

Holding

Interpleader case involving the plan administrator of the Exxon savings plan and dispute between daughter and step-mother over ownership of plan account and question of validity of the marriage.

Issue Case Name

Excessive Fees Walker v. Merrill Lynch, USDC SDNY March 25, 2016.

Holding

Merrill Lynch did not serve in a fiduciary role when it provided a list of mutual funds to an employer who then selected the mutual funds to be offered as part of its 401(k) plan. Accordingly, Merrill Lynch could not be sued for breach of fiduciary duty for selecting mutual funds with excessive fees.

Issue Case Name

Stock Drop Whitley v. BP, P.L.C., USDC SDTX US Department of Labor Brief Filed March 16, 2016.

Holding

Certified question to the Fifth Circuit Court of Appeals-- What plausible factual allegations are required to meet the 'more harm than good to the fund' pleading standard articulated by the Supreme Court in Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct. 2459, 2472–73 (2014)?

Issue Case Name

Claims review and standard of review

Halo v. Yale Health Plan USCA2 April 12, 2016.

Holding

In the Second Circuit, a plan administrator’s decision will be subject to de novo review if the plan administrator fails to strictly comply with the requirements of the DOL’s claims procedure regulations.

Issue Case Name

ESOPs and Expert Reports

Perez v. Cactus Feeders, Inc., Compliant filed by DOL March 10, 2016.

Holding

ERISA fiduciaries have a responsibility to review and understand expert reports, including fairness opinions and appraisals, in complex transactions and are not protected simply by receiving a report that they do not take the time to review and analyze.

Issue Case Name

Multiple mailings and plan expenses

Lefkowitz v. TIAA, USDC SDNY Class action complaint filed March 16, 2016.

Holding

Plaintiff in this potential ERISA class action is seeking an order requiring TIAA as third party administrator to combine all mailings that go from TIAA to the same household. Plaintiff believes that separate mailings constitute an unnecessary expense and a breach of ERISA fiduciary duty.

Issue Case Name

ERISA Preemption Gobeille v. Liberty Mutual Insurance, 136 SCT 936 March 1, 2016.

Holding

Vermont’s all payer claims database law intrudes on a central matter of plan administration and interferes with national uniform plan administration and is therefore preempted by ERISA.

Issue Case Name

Defective Firestone Language

Stephanie C. v. Blue Cross Blue Shield of Massachusetts USCA1 February 17, 2016.

Holding

A grant of discretionary decision making authority in an ERISA plan must be couched in terms that unambiguously indicate that the claims administrator has discretion to construe the terms of the plan and determine whether benefits are due in particular instances.

Issue Case Name

Top Hat Plans Sikora v. PHMC, USDC WDPA December 22, 2015.

Holding

Nonqualified plan held to meet top hat requirements where participation in the plan was limited to less than 15% of total employees and where the average compensation of plan participants was 10 times greater than the average compensation of employees.

Issue Case Name

Severance Plans Zgrablich v. CardoneIndustries USDC EDPA February 3, 2016.

Holding

Court may treat claim for severance benefits under written employment agreement as an ERISA claim rather than a claim for breach of contract. ERISA preemption is allowed.

Issue Case Name

Controlled Group Liability

Sun Capital Partners III, LP v. New England Teamsters and Trucking Industry Pension Fund, USDC MA March 28, 2016.

Holding

Two related private equity funds that formed a single LLC to invest in an operating company were liable for the withdrawal liability of the operating company.

Lessons from the Newest Benefits Lawsuits

19th Annual Conference on Employee Benefits and Retirement PlansThursday, June 9, 2016

Jim Griffinjgriffin@jw.com