On Monday, the US Supreme Court agreed to review the Second Circuit’s decision in Jander v. Retirement Plans Committee of IBM, a “stock drop” lawsuit against IBM’s benefit plan fiduciaries. The Second Circuit’s decision marked one of the few times a federal court permitted a “stock drop” lawsuit to survive dismissal since the Supreme Court’s decisions in Fifth Third Bank v. Dudenhoeffer (2012) and Harris v. Amgen (2016). (more…)
A recent summary-judgment decision explains how individual releases can bar the individual from pursuing ERISA fiduciary-breach claims on behalf of the plan. A plan, employer or fiduciary that wants to ensure a release that includes ERISA claims on behalf of a plan should consider language that addresses the court’s areas of inquiry in the case, which are outlined in this article.
In a presentation for the National Center for Employee Ownership (NCEO) Conference, Erin Turley presented on selling a family of multi-shareholder business to an ESOP. She discussed ownership transition alternatives and how to execute the ESOP transaction. Below are a few key takeaways from the presentation.
In a presentation for the National Center for Employee Ownership (NCEO) Conference, Emily Rickard presented on ESOP plan design, operation and administration. She, along with the other presenters, identified ERISA compliance watchdogs including the plaintiff’s bar, Department of Treasury and Department of Labor, and what attracts their attention when it comes to audits. Emily also identified common mistakes employers make during the entire ESOP lifecycle (e.g. lack of employee communication, distribution strategy and planning) and provided guidance on how to correct those mistakes.
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. In addition, they provided attendees with key strategies to minimize exposure to lawsuits, including demonstrating a thoughtful and deliberative decision-making process.
Looking ahead to 2019, they touched on ERISA issues to watch for including, venue/forum selection clauses in plan documents, arbitration agreements and impact on fiduciary duty claims, statute of limitations and burden of proof issues.
What to expect in 2019 and how to prepare now. Join McDermott lawyers Judith Wethall, Ted Becker and Rick Pearl for an interactive discussion regarding ERISA litigation trends.
Join our lively 45-minute discussion while we tackle the following items:
Friday, January 11, 2019
10:00 – 10:45 am PST
11:00 – 11:45 am MST
12:00 – 12:45 pm CST
1:00 – 1:45 pm EST
On September 20, 2018, the US Supreme Court dismissed—pursuant to settlement—an ERISA lawsuit that could have resolved the circuit split over who holds the burden of proof in ERISA breach of fiduciary duty cases. In Pioneer Centres Hold. v. Alerus Fin., Case No. 17-677 (2018), the Pioneer Centres Holding Company Employee Stock Ownership Plan and Trust (the “Plan” or “ESOP”) and its trustees sued Alerus Financial, N.A. (Alerus) for breach of fiduciary duty in connection with the failure of a proposed employee stock purchase. In affirming summary judgment in Alerus’s favor, the Tenth Circuit determined that the Plan carried the burden to prove causation rather than shifting the burden to Alerus to disprove causation once the Plan established a prima facie case. In so holding, the Tenth Circuit agreed with the Sixth, Ninth and Eleventh circuits that beneficiaries, not fiduciaries, must prove causation between the company’s conduct and the plan’s losses due to a fiduciary breach. The Second, Fourth, Fifth and Eighth circuits disagreed, holding that the burden of proof shifts to the fiduciaries to establish the absence of loss causation once the beneficiaries makes a prima facie case by establishing breach of fiduciary duty and loss. Details of the parties’ settlement were not disclosed.
The settlement and dismissal of this case is disappointing for ERISA litigators because the anticipated resolution regarding burden shifting for loss causation will likely not be resolved in the near future. The outstanding burden shifting inquiry is not limited to the ESOP context. These issues have also been considered in other ERISA cases, such as the 401(k) context. See, e.g., Womack v. Orchids Paper Prod. Co. 401(K) Sav. Plan, 769 F. Supp. 2d 1322, 1334–35 (N.D. Okla. 2011) (acknowledging the burden shifting circuit split in the 401(k) context). Moreover, the lack of resolution will necessarily encourage plaintiffs to continue forum shopping tactics. Thus, the industry may see an increase in ERISA cases filed in the Second, Fourth, Fifth and Eighth circuits, which shift the burden to fiduciaries to establish the absence of loss causation once the plaintiffs make a prima facie case.
Recent litigation and audit activity is focusing on the process undertaken by fiduciaries in connection with a transaction involving an ESOP. Eliot Burriss presented at the 2018 National Center for Employee Ownership Conference summarizing relevant litigation cases, exploring roles and responsibilities, and providing best practices.
Emily Rickard presented “ESOP Fiduciary Responsibility for Value Determination” at the National Center for Employee Ownership National Conference addressing the fiduciary duties involved in the selection of an ESOP appraiser and the review of a valuation report.
The Department of Labor’s fiduciary rule has recently been rendered unenforceable following a recent 5th Circuit Court of Appeals decision. In an article published by the Society for Human Resource Management, McDermott partner Brian Tiemann weighs in on what this means for plan sponsors. “As a result of the Fifth Circuit’s ruling, the suitability standard is effectively restored” for advising plan participants on investments, distributions and rollovers, Tiemann observed. He also points out that advisors may want to revise service agreements with plan fiduciaries to clarify the scope of advice that fiduciaries will provide participants.
Originally published by the Society for Human Resource Management, May 2018.
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