2021 ERISA Litigation: Recent Cases, Assessing Fiduciary ......2021/07/21 · • In Dorman v....

2021 ERISA Litigation: Recent Cases, Assessing

Fiduciary Risks, Strategies for CounselStock Drop Litigation, Cybersecurity, Participant and Plan Data Cases, Excessive Fees and Proprietary Funds

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WEDNESDAY, JULY 21, 2021

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Nicholas (Nick) Bullard, Attorney, Dorsey & Whitney LLP, Minneapolis

Andrew Holly, Partner, Dorsey & Whitney LLP, Minneapolis

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July 21, 2021

Andrew HollyNick Bullard

2021 ERISA Litigation: Recent Cases, Assessing Fiduciary Risk, Strategies for Counsel

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“Occasionally, a statute comes along that is so poorly contemplated by the draftspersons that it cannot be saved by judicial interpretation, innovation, or manipulation. It becomes a

litigant's plaything and a judge's nightmare. ERISA falls into this category.”

~ The Honorable William Acker, U.S. District Court Judge, N.D. Ala.


ERISAFederal law governing nearly all employee benefit plans in the

United States, including group health plans, pension,

disability, severance, etc.

A “comprehensive and reticulated” statute.

Preempts all state laws that “relate to” an employee benefit plan.

ERISA is a “candidate for the most inscrutable legislation Congress ever passed.”


Background on ERISA

• Employee Retirement Income Security Act of 1974 (ERISA)– Covers benefit plans (i.e., group health plans) sponsored by private employers and

unions– Does not cover:

• Plans sponsored by governmental entities• “Church plans”• Individual insurance policies, through the ACA or otherwise

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Background on ERISA

• Fiduciary Standards - ERISA Section 404(a)– A fiduciary is to discharge duties to a plan solely in the interests of the participants and

beneficiaries, and• (1) for the exclusive purpose of providing benefits and paying reasonable expenses,• (2) with the care, skill, and prudence of a prudent person familiar with such matters,• (3) by diversifying investments, and• (4) following the plan documents

• Prohibited Transaction Rules

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Background on ERISA

• Preemption• Remedies• Attorneys’ Fees• Claims for Benefits• Removal Issues

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Definition of Fiduciary

• A person is a fiduciary to the extent the person:– Exercises any discretionary authority or control respecting management of such plan,– Exercises any authority or control respecting management or disposition of its assets,– Renders investment advice for a fee or other compensation, direct or indirect, with respect

to any moneys or other property of such plan, or has any authority or responsibility to do so,or

– Has any discretionary authority or responsibility for plan administration

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Update on ERISA Litigation: Supreme Court

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• Thole v. U.S. Bank• Intel Corp. v. Sulyma• Rutledge v. PMCA• IBM v. Jander• Hughes v. Northwestern University


Update on ERISA Litigation: ERISA Class Actions Grow

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• Over 200 new ERISA class actions filed in 2020—double the filings in 2018• Most are 401(k) “excessive fee” cases; many are against small employers• One firm has received settlements of $1.5 billion• 25% contingency….


Update on ERISA Litigation: Defined Contribution Litigation

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• Began in 2006, with a challenge to revenue sharing—has exploded since• Continues to grow quickly. Hundreds of “excessive fee” class actions

filed in the last year• New players/small plans (TriHealth, Greystar, Pioneer Natural Resources

litigation)• Ongoing service provider litigation• Stable Value Fund Litigation—ability to set interest rates


Update on ERISA Litigation: ERISA “Stock Drop” Cases

• A question that has vexed courts since the days of Enron: What duties do ERISA fiduciaries have with respect to undiversified company stock?

• Retirement Plans Committee of IBM v. Jander—ongoing disputes over standards for “company stock” claims

• The cases continue• Private ESOP litigation raises separate and distinct issues. E.g., Vigeant

v. Meeks

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Update on ERISA Litigation: Standard for Pleading a Breach of Prudence Claim

• What is necessary to state a plausible claim of fiduciary imprudence based on “excessive fees” in the management of DC plans?

• Arguably conflicting standards:– Sweda v. University of Pennsylvania (3rd Cir.)– Davis v. Washington University in St. Louis (8th Cir.)– Hughes v. Northwestern University (7th Cir.)

• The Supreme Court to weigh in; cert. granted in Hughes

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Update on ERISA Litigation: Cybersecuirty/Plan Data Issues

• Plan data as Plan property• Cybersecurity as a fiduciary duty?• Theft of 401(k) Plan accounts• Shell Oil Litigation• Cassell v. Vanderbilt Univ.• Bartnett v. Abbott Laboratories

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Update on ERISA Litigation: Standing

• Thole’s impact on DC plans• Do DC participants have standing to challenge investments in which they

did not invest?

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Update on ERISA Litigation: DB Plan Litigation

• “Actuarial Equivalence” under ERISA 203(a)• Has Thole killed the DB Plan litigation?

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Update on ERISA Litigation: Welfare Benefits

• Although usually not raising fiduciary issues, lawsuits involving grouphealth plans, their administrators, and medical providers have beensoaring

• General paradigm• Fiduciary issues?• Demand letters• COBRA litigation

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Update on ERISA Litigation: Arbitration

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• Supreme Court decisions have increasingly favored arbitration• In Dorman v. Charles Schwab, the Ninth Circuit ordered arbitration of

401(k) fee claims• In Cooper v. Ruane Cunniff & Goldfarb, Inc., the Second Circuit may be

next in line• But be careful what you ask for—the defendant in Cooper is seeking to

stay 400 arbitrations


Winning the War—How to prepare for litigation

• Process, process, process• Watch the canary in the coal mine

– 104(b) Letters– Solicitations

• Know your service provider• Keep up on ERISA litigation trends• Plan documents/Investment policies: Say what you do, do what you say• Document what you have done

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Winning the War: Litigation

• Motion to Dismiss?• Watch for Standing• Preparing the Record• Summary judgment and Trial

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Contact Information

Andrew HollyPartnerDorsey & Whitney(612) [email protected]

Nicholas BullardAssociateDorsey & Whitney(612) [email protected]

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Legal Notice

• This presentation is intended for general information purposes only and should not be construed as legal advice or legal opinions on any specific facts or circumstances. An attorney-client relationship is not created through this presentation.

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2021 ERISA Litigation: Recent Cases, Assessing Fiduciary ......2021/07/21 · • In Dorman v....

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Transcript of 2021 ERISA Litigation: Recent Cases, Assessing Fiduciary ......2021/07/21 · • In Dorman v....