Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
Nov. 2 — BP Plc employees have again lost their bid to have the company and its top officials held liable for allegedly failing to monitor those they put in charge of administering the company's retirement plan investments.
The Oct. 30 ruling by Judge Keith P. Ellison marks the second time the U.S. District Court for the Southern District of Texas has thrown out portions of the stock-drop class action filed by BP employees who claim they lost millions of dollars in retirement savings when the company's stock price plummeted following the 2010 Deepwater Horizon disaster.
The court said the corporate defendants—including BP America Inc. and BP North America Inc.—weren't plan fiduciaries and couldn't be held vicariously liable for the acts of those who had made the investment decisions.
Moreover, the court joined others that have held that the Employee Retirement Income Security Act's duty to monitor doesn't carry with it the duty to apprise plan fiduciaries of material, nonpublic company information.
The proposed class action was filed by BP employees shortly after the Deepwater Horizon oil spill in 2010. The employees alleged that BP and its top officials breached their ERISA fiduciary duties by allowing employees to invest their retirement plan accounts in BP stock because they knew or should have known that their continued investment in the stock was imprudent.
The lawsuit was dismissed in 2012, but was later revived by the U.S. Court of Appeals for the Fifth Circuit after the U.S. Supreme Court announced new precedent that changed the evidentiary burden in ERISA stock-drop cases (Fifth Third Bancorp v. Dudenhoeffer, 2014 BL 175777, 58 EBC 1405 (U.S. 2014)). The case was then remanded to the district court.
In its latest decision, the district court found that BP, BP America, BP North America and the boards of these companies weren't plan fiduciaries.
To try and overcome the fact that none of these defendants were specifically named as fiduciaries in plan documents, the plaintiff employees argued that the corporate defendants should be held vicariously liable for the acts of those they had appointed to be plan fiduciaries. The court rejected this attempt, saying that to be vicariously liable, the defendants needed to “actively and knowingly” participate in the fiduciary breaches. There was no evidence of this, the court said.
In addition, the court threw out the employees' claims that the corporate defendants and board members breached their ERISA duties by failing to monitor the fiduciaries they had appointed to manage the plans' assets. The employees had argued that the duty to monitor carries with it the duty to inform appointees of material, nonpublic information that could affect the appointees' evaluation of the prudence of investing in employer stock.
The court refused to take such an expansive view of the duty to monitor, saying ERISA doesn't impose a duty on monitoring fiduciaries to keep their appointees apprised of material, nonpublic information.
“The Department of Labor has specifically laid out the ‘ongoing responsibilities of a fiduciary who has appointed trustees or other fiduciaries' in the Code of Federal Regulations, and a ‘duty to inform' appointed fiduciaries is nowhere to be found,” the court said.
Fiduciary breach claims against those appointed to oversee the plans' investments are still pending.
The employees are represented by Milberg LLP, Egleston Law Firm, Squitieri & Fearon LLP, Wexler Wallace LLP, Lanier Law Firm, Harwood Feffer LLP and Stull Stull & Brody.
The BP defendants are represented by Sullivan & Cromwell LLP, Steptoe & Johnson LLP, Andrews & Kurth and Kirkland & Ellis LLP.
To contact the reporter on this story: Jo-el J. Meyer in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Phil Kushin at email@example.com
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)