Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
Claims by workers accusing BP Corp. North America Inc. of violating ERISA by mishandling the 1989 conversion of its defined benefit pension plan to a cash balance plan were tossed out by a federal judge in Texas ( Guenther v. BP Retirement Accumulation Plan , S.D. Tex., No. 4:16-cv-00995, 2/21/17 ).
Judge Melinda Harmon Feb. 21 granted in part BP’s motion to dismiss, holding that the two participants who filed the lawsuit on behalf of others lacked standing because they didn’t allege they were injured by the conversion. Although they asserted generally that plan participants will receive reduced benefits, they didn’t allege that they themselves have received—or will receive—less than originally promised, Harmon said. She gave the participants 30 days to amend their complaint.
The decision is the most recent to address standing in actions under the Employee Retirement Income Security Act—an issue that may be decided soon by the U.S. Supreme Court.
Harmon declined to adopt the participants’ argument that statutory violations under ERISA are sufficient to demonstrate an injury in fact to provide constitutional standing. Instead, she followed a recent decision, Pundt v. Verizon Communications Inc., in which the U.S. Court of Appeals for the Fifth Circuit held that a bare allegation of improper defined benefit plan management, without more, doesn’t support constitutional standing. A petition for review in Pundt is pending in the high court.
Frederick A. Guenther and Walton Fujimoto, who worked for Standard Oil of Ohio prior to its acquisition by BP in 1987, seek to represent a class, comprising approximately 450 or more former Standard Oil employees. They claim that BP failed to provide them a timely and sufficient notice about the plan conversion. They also allege that BP violated ERISA fiduciary duties by using “artificially” high interest rates in calculating the opening balances for participants when it converted the plan.
In a defined benefit plan, as the one at issue in this case, a participant’s interest in the plan is “his nonforfeitable right only to the defined level benefits established under the plan,” Harmon said. Thus, to have standing, a participant must allege that his right to payment is at risk, she said. Because no specific allegations were made by the participants, there can’t be a sufficient injury in fact, Harmon concluded.
Harmon’s decision contrasts with the Labor Department’s position on standing in ERISA cases. Under the Obama administration, the DOL sought to make it easier for pension plan participants to sue over plan mismanagement and investment losses.
Earlier this month, the Second Circuit reversed a district court decision that dismissed a proposed class action against brokerage firm Convergex Group LLC on standing grounds. However, the Second Circuit ruling didn’t address specifically whether statutory violations alone are enough to confer constitutional standing to participants alleging plan mismanagement under ERISA. Instead, the Second Circuit held that allegations describing Convergex’s breach of fiduciary duty and the resulting financial loss sustained—an amount totaling $1,578—were sufficient to confer standing on a participant to bring the lawsuit as a representative of the plan.
Merrick Hofstedt Lindsey PS represents the proposed class. Seyfarth Shaw LLP represents BP.
To contact the reporter on this story: Carmen Castro-Pagan in Washington at email@example.com
To contact the editor responsible for this story: Jo-el J. Meyer at firstname.lastname@example.org
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
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 email@example.com.
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 firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)