Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
Thousands of workers who invested their retirement savings in JPMorgan’s stable value funds got approval to sue the company as a certified class ( In re JPMorgan Stable Value Fund ERISA Litig. , S.D.N.Y., No. 1:12-cv-02548-VSB, order unsealed 4/17/17 ).
The lawsuit accuses JPMorgan Chase & Co. of mismanaging its stable value funds—which are meant to be conservative, low-risk options that protect against interest rate volatility—by overinvesting them in risky mortgage-related assets. A federal judge certified the five-year-old lawsuit as a class action in an order issued March 31 and publicly released April 17.
Stable value funds have become a flashpoint in litigation under the Employee Retirement Income Security Act. Retirement plan sponsors including Anthem Inc., Chevron Corp. and Insperity Inc. have been sued—unsuccessfully—for failing to include stable value funds in their investment lineups. Other lawsuits have targeted the companies that offer and manage stable value funds, with cases pending against Union Bond & Trust Co., Fidelity Management Trust Co., CVS Health Corp., Massachusetts Mutual Life Insurance Co. and Prudential Retirement Insurance & Annuity Co.
In the case against JPMorgan, investors challenged the company’s decision to invest 78 of its stable value funds in a proprietary bond fund tied to “risky, highly-leveraged assets,” including mortgage-backed securities. The investors painted this strategy as imprudent, claiming that it caused losses that ultimately drove down the crediting rates that determined the return they received on their investments.
The judge certified the case as a class action after finding that it presented a “common theory of liability” based on the allegedly imprudent investment in the company’s bond fund by all 78 stable value funds. Moreover, the investors likely could show causation and damages on a classwide basis, the judge said, adding that any individualized damages calculations that may be needed wouldn’t be difficult to perform.
JPMorgan argued that differences in the goals and risk profiles of each stable value fund prevented class certification, but the judge disagreed. The company was similarly unsuccessful in its effort to paint the investors as “sophisticated parties” capable of pursuing their claims through individual actions.
Finally, the company argued that certain investors—those who participated in Caterpillar Inc.'s retirement plan—were barred by a settlement agreement from bringing these claims. The judge dealt with this wrinkle by creating a subclass just for Caterpillar plan participants.
Judge Vernon S. Broderick of the U.S. District Court for the Southern District of New York wrote the decision. Broderick promised to issue a ruling on summary judgment by June 30.
Schneider Wallace Cottrell Konecky & Wotkyns LLP and Law Offices of Michael M. Mulder represent the investors. Morgan Lewis & Bockius LLP represents JPMorgan.
To contact the reporter on this story: Jacklyn Wille in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jo-el J. Meyer at email@example.com
Text of the decision is at http://www.bloomberglaw.com/public/document/In_re_JP_Morgan_Stable_Value_Fund_Erisa_Litigation_Docket_No_112c.
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 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)