There's little disagreement that the Department of Labor uses friend-of-the-court briefs in ERISA cases to influence decisions as well as define the scope of the law's protection against breaches of fiduciary duty.
What is in dispute, however, is the interpretation of those actions.
Mark Ugoretz believes the Labor Department has gone too far. “They are clearly looking to expand the liability of plan sponsors,” said Mr. Ugoretz, president and CEO of the ERISA Industry Committee, Washington, which represents employers. “They are seeking to obtain through the courts what they couldn't get through legislation or regulation.”
Attorney Jerome Schlichter, who represents participants in ERISA fiduciary duty cases, does not agree. He said the friend-of-the-court briefs “supplement or elaborate upon” DOL advisory letters that provide regulatory guidance to sponsors and providers.
“It's perfectly proper for the department to weigh in when the parameters of fiduciary protection are being decided by the courts,” said Mr. Schlichter, founding partner of the St. Louis law firm Schlichter, Bogard & Denton. “There's no reason for them to sit on the sidelines.”
Friend-of-the-court briefs, known as amicus curiae, are filed by parties not involved in a specific case to provide comment on legal issues pertaining to the case.
“The law is going to be fashioned by the courts whether we're there or not,” said Timothy Hauser, associate solicitor for the Labor Department's plan benefits security division, explaining the amicus brief strategy. “We want to make our position known. We don't want to sit it out.”
The DOL's website identifies “significant” friend-of-the-court briefs the agency filed in federal courts, including those involving breach-of-fiduciary duty cases such as allegations of excessive fees or poor investment management in stock-drop cases. Last year, 19 such briefs were filed; 18 were filed in 2009.
Mr. Hauser disputes arguments that the DOL's strategy – and number of filings — is affected by politics or that the agency is trying to make policy in the courts.
“I don't perceive a big change from one administration to the next,” said Mr. Hauser, who has been with the DOL for more than 20 years.
“There's been quite a rise in private ERISA litigation, and that may explain some of the small increase in amicus cases,” he added. “But the people who are unhappy with the department's positions in amicus briefs now were also probably unhappy with our positions in the last administration.”
Some ERISA lawyers agree that lawsuit volume has played the biggest role in the DOL filing friend-of-the-court briefs.
“I haven't seen any distinction between (political) administrations in terms of the number of briefs being filed, or over what issues,” said Lars Golumbic, a principal with the Groom Law Group, Washington, whose firm has represented sponsors and providers.
“As far as frequency of filings, it seems the DOL has been pretty active in recent years with a corresponding rise in ERISA lawsuits being filed,” he added.
Said James Fleckner, a partner at Goodwin Procter LLP, Boston: “I wouldn't say (the increase is) due to (changes in) political administration.”
DOL amicus briefs not only “announce their attention to influence specific cases, they also announce the department's position to the regulated community about fees, investment management and fiduciary obligations,” said Mr. Fleckner, whose firm has defended providers in ERISA 401(k) fee cases.
Gregory Jacob, a partner in the Washington office of Winston & Strawn LLP, said the DOL's amicus brief strategy is “very similar” to that used when he served as deputy solicitor in 2005-2006 and solicitor from 2007 to January 2009. “If a (legal) position was staked out before I was solicitor, I would support the previous position unless there was an extraordinary situation,” he said.
By issuing amicus briefs, the DOL “is able to hold up a body of work that shows up across all (federal appeals court) circuits and shows a consistency of its position,” said Mr. Jacob, whose firm has represented sponsors and providers.
In recommending the filing of amicus briefs, the DOL's civil service staff “would rather have all cases be allowed full discovery and factual development, with the opportunity for trial,” Mr. Jacob said. “They want plaintiffs to get the full opportunity beyond summary judgment or a motion to dismiss.”
Bradford P. Campbell, a Washington-based attorney for Schiff Hardin LLP and head of the Employee Benefits Security Administration from 2006 to early 2009, said some of the DOL's actions in recent years illustrate the department's “conscious efforts to reverse established policy through amicus briefs.”
He was referring to DOL briefs in cases that feature a legal principle called the Moench presumption. It is based on a 1995 federal appeals court decision regarding an employee stock option plan. The decision has been cited by lower courts to mean that offering company stock as an investment option “is presumed to be prudent (under ERISA) unless the company is in a dire economic situation,” he said.
The DOL, in its amicus briefs, “is suddenly going in the other direction, saying there is no foundation in ERISA for a presumption in favor of employer stock,” Mr. Campbell said. “Congress has acted again and again to encourage employee ownership, viewing employer stock as a good thing. The DOL has been trying to make policy in the courts because they don't have much traction on this point in legislation or regulation.”
DOL's Mr. Hauser said the department has been consistent in its approach to the Moench presumption. “In employer stock cases, the department has argued for years, both in this administration and the last, that plan fiduciaries have an obligation to make sure that the investment in employer stock is prudent, regardless of whether participants have authority under the plans' terms to direct their account balances into the stock.”
