The U.S. Supreme Court this month declined two cases involving defined contribution plans.
On Nov. 10, the court declined a petition that it review Tussey et al. vs. ABB Inc. et al., a fiduciary breach case that has been closely watched by the defined contribution plan community.
The court's decision — denying certiorari — means the complex ruling in March by a federal appeals court in St. Louis remains in effect regarding complaints by participants in two 401(k) plans run by ABB, Cary, N.C.
The request for Supreme Court review was filed in August by the lead attorney for the plaintiffs, Jerome J. Schlichter, founding and managing partner of law firm Schlichter, Bogard & Denton. He sought the review because he claimed various appellate courts used different standards to decide complaints about fiduciaries' “statutory duties of prudence and loyalty,” according to his Supreme Court petition.
In an interview Nov. 10, Mr. Schlichter said the next step will be for the U.S. District Court in Jefferson City, Mo., to set a date to retry a portion of the original suit that was sent back for further consideration by the appellate court.
The retrial is based on the appellate court's vacating a ruling — and a $21.8 million judgment against ABB — focusing on ABB's mapping one investment in the 401(k) plans' menu, Vanguard's Wellington Fund, to the Fidelity Freedom Funds target-date series.
On Nov. 18, the Supreme Court on Nov. 18 declined to hear an appeal by participants in a class-action lawsuit against Cleveland-based KeyCorp and fiduciaries of the firm's $1.5 billion 401(k) plan, alleging company stock was an imprudent investment.
In March, the 6th U.S. Circuit Court of Appeals in Cincinnati applied a more stringent standard for pleading stock-drop cases alleging “artificial inflation” of employee stock investments than one addressed by the Supreme Court in its June 25 decision in Fifth Third Bancorp et al. vs. Dudenhoeffer et al. In Fifth Third vs. Dudenhoeffer, an “alternative investments” case, the Supreme Court removed a presumption of prudence standard used by defined contribution plans sued for fiduciary breaches when the company stock sank.
In other court action, on Nov. 17, the 4th U.S. Circuit Court of Appeals in Aiken, S.C., ruled that Washington Safety Management Solutions LLC must honor a supplemental benefit for early retirement that it tried to remove.
The unpublished opinion, which is not a binding precedent in the circuit, affirmed a District Court ruling that the Aiken-based firm's termination of an early retirement pension supplement in 2004 violated anti-cutback provisions of the Employee Retirement Income Security Act, on the grounds that it was an accrued benefit. n
