The pace of class actions being filed against pension plan fiduciaries for allegedly breaching their ERISA fiduciary duties concerning plan fees is still going strong after Tibble v. Edison Int’l, with little impact from the most recent Supreme Court stock drop decision in Amgen Inc. v. Harris.
Gretchen Obrist, an attorney with Keller Rohrback LLP's Seattle office, told Bloomberg BNA that Tibble v. Edison Int’l, 2015 BL 152750, No. 13-550, 5/18/15, was a significant win for excessive fee and other ERISA cases, because it confirmed the continuing duty to monitor the prudence of investments, regardless of the investment option’s selection date. Thus, fee claims in general remain strong and the larger body of case law remains encouraging for ERISA plaintiffs.
In the past 30 days, there have been four class actions filed:
On Jan. 29, plan participants filed a proposed class action against Massachusetts Mutual Life Insurance Co. in the U.S. District Court for the District of Connecticut, alleging it breached its ERISA fiduciary duties by engaging in prohibited transactions when it received allegedly undisclosed and unreasonable compensation (Bishop-Bristol v. Mass Mut. Life Ins. Co., D. Conn., No. 3:16-cv-00139, complaint filed 1/29/16). The proposed class consists of ERISA-covered pension plans whose assets were invested in MassMutual's group annuity contract stable value funds within the six years prior to the date the lawsuit was filed. See related story, MassMutual Accused of ERISA Fiduciary Breach.
On Jan. 31, a proposed class action was filed against Intel Corp. in the U.S. District Court for the Northern District of California, accusing Intel of losing hundreds of millions of dollars in its workers’ retirement savings by exposing them to alternative investments in hedge funds, commodities and private equity, which exposed them to “significant investment, liquidity and valuation risks” along with “hugely excessive fees” (Lo v. Intel Corp., N.D. Cal., No. 5:16-cv-00522, complaint filed 1/31/16). See related story, Intel Sued Again Over 401(k) Hedge Fund Investments.
On Jan. 25, plan participants filed a class action against Oracle Corp. in the U.S. District Court for the District of Colorado, accusing it of breaching its ERISA fiduciary duties by paying excessive fees in recordkeeping and administrative services, failing to monitor fiduciaries and engaging in prohibited transactions (Troudt v. Oracle Corp., D. Colo., No. 1:16-cv-00175, complaint filed 1/22/16). See related story, Oracle Sued Over 401(k) Fees Paid to Fidelity. The complaint alleges that the technology company failed to negotiate reasonable, fixed-fee record-keeping and administrative services for its 401(k) plan, resulting in losses to the plan of more than $40 million. See related story, Oracle Sued Over 401(k) Fees Paid to Fidelity.
In addition, on Jan. 15, Great-West Life & Annuity Insurance Co. was hit with a class action complaint, also in the U.S. District for the District of Colorado, alleging that Great-West’s retirement plan business receives kickbacks from the mutual funds it offers to 401(k) plans as part of an impermissible “pay-to-play scheme.” Great-West allegedly “deceptively characterized” these kickbacks as service fees and reimbursements (Krikorian v. Great-West Life & Annuity Ins. Co., D. Colo., No. 1:16-cv-00094, complaint filed 1/14/16). See related story, Great-West, Empower Targeted in Latest 401(k) Fee Suit.
One question is whetherAmgen Inc. v. Harris (U.S., No. 15-278, per curiam 1/25/16), where the Supreme Court’s ruling clarified that workers challenging losses in their employer stock plans face a higher hurdle than some lower courts have used, will have an impact on ERISA fiduciary breach cases other than stock drop cases.
Erin Riley, an attorney with Keller Rohrback LLP's Seattle office, told BNA that Amgen’s broader application to ERISA litigation will be limited, because it focused on prudence claims and it is constrained to the context of a company stock fund in an ESOP. “For example, Amgen did not involve prohibited transaction claims, whereas many successful and strong excessive, undisclosed, and self-dealing 401k plan fee cases involve such claims. Prohibited transaction and breach of loyalty claims of the type typically pursued when challenging fees are unaffected by the pleading and proof standards relevant to company stock litigation like Amgen. In particular, claims involving proprietary funds or other conflicts of interest would not be impacted at all by the latest Amgen opinion.”
However, regarding the overall impact of Amgen, Riley said the decision is not the doomsday for ERISA plaintiffs that defendants make it out to be. For one thing, Amgen suggested that the district court might grant the Amgen ERISA plan participants leave to amend their complaint. (Their complaint was not amended following the Fifth Third Bancorp v. Dudenhoeffer, 134 S.Ct. 2459, 58 EBC 1405 (U.S. 2014) decision). Additionally, the presumption of prudence (the standard prior to Dudenhoeffer) established a high standard for ERISA plaintiffs to overcome.
“Since that time, stronger ERISA complaints have been filed—rare is the complaint with a modest stock decline, with an immediate stock rebound. Thus, ERISA plaintiffs are used to a high pleading standard for prudence claims, and Amgen does not materially change the practice. Further, Dudenhoeffer and Amgen only address breach of prudence claims. Many similar cases also include breach of loyalty claims since most ESOP fiduciaries are insiders. Similarly, both Dudenhoeffer and Amgen only address ESOP fiduciaries and ESOP plans. The cases do not address the standard for a breach of the duty of prudence claim involving a pure 401(k) plan,” Riley said.
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