DOL reverses course on filing amicus briefs in pending ERISA cases
The Trump administration has taken a hands-off approach to commenting on major retirement plan issues being challenged in courts, a sharp contrast to the approach taken by the Obama administration.
During the nearly two years of the Trump administration, the Department of Labor has filed no amicus briefs in court contests over broad plan management, product choices, fees and other defined contribution practices, according to the DOL's website. Spokesman Mike Trupo said the department declined to comment.
The Obama DOL filed dozens of friend-of-the court briefs in these ERISA cases, including some signature U.S. Supreme Court rulings governing the role of plan fiduciaries.
"It makes me sad that they are not moving forward from a consumer point of view," said Phyllis Borzi, who served as assistant secretary of labor for the Employee Benefits Security Administration from July 2009 to January 2017. "I thought the process would continue."
Ms. Borzi said her office used amicus briefs to outline the department's thinking about issues that were broader than the facts of specific cases being decided by federal appeals courts and the Supreme Court. Filing amicus briefs served to "clarify the ambiguities in the statute and move statutory interpretation forward," she added.
Among the most prominent ERISA cases during the Obama era were Tibble et al. vs. Edison International et al. and Fifth Third Bancorp et al. vs. Dudenhoeffer et al. In both instances, the Supreme Court requested the DOL's opinion, and in both cases, the DOL supported claims by plan participants.
The Supreme Court ruled unanimously for the participants in both cases. In Tibble, the court said sponsors have a "continuing duty to monitor trust investments and remove imprudent ones." In the Fifth Third Bancorp case, the court threw out the "presumption of prudence" defense that many sponsors had used successfully to defeat stock-drop challenges.
"Regardless of the administration, amicus briefs are a way to explain their viewpoint," said David Levine, partner in the Groom Law Group, Washington, referring to the DOL. "Different administrations take different approaches."
Amicus briefs "are helpful to the market," added Andrew Oringer, a New York-based partner at Dechert LLP and co-chairman of its ERISA and executive compensation group. "They set forth analyses and have the effect of staking out what the DOL was thinking without going the regulatory route."
Some attorneys speculated that the DOL's silence may be due in part to the late start in having a top DOL official approved by the Senate and in hiring enough staff members. Preston Rutledge was approved in December 2017 as assistant secretary of labor for the Employee Benefits Security Administration, nearly a year after his predecessor, Ms. Borzi, left the job.
"It could be a matter of resource constraints," Mr. Oringer said.
"It has taken a while to get their team together," said Jan Jacobson, senior counsel for retirement policy at the American Benefits Council, Washington.
Organizations representing sponsors, service providers, record keepers and investment managers complained in the past that the DOL was using amicus briefs as a way to regulate plans without issuing formal regulations.
"I'm happy they are looking to take a step back," said Ms. Jacobson, whose organization has filed many amicus briefs in high-profile ERISA cases at the federal appeals court and Supreme Court levels. The ABC represents primarily large employers on retirement, health and other benefits issues.
"We get involved in cases when the situation could affect a number of our member companies," said Ms. Jacobson, who added that ABC often files the briefs jointly with the U.S. Chamber of Commerce.
"Definitely, we are trying to educate the courts," she said. "If any sponsor can be challenged on the basis of hindsight, that creates a lot of anxiety among plan sponsors."
Attorney Jerome Schlichter uses the words "broader context" to describe the role of amicus briefs, even though his view of ERISA litigation is the polar opposite of ABC and the Chamber of Commerce.
Mr. Schlichter is founder and managing partner of Schlichter, Bogard & Denton, the St. Louis law firm that has become synonymous with fiduciary-breach cases since the mid-2000s. His lawsuits have periodically attracted pro-plaintiff amicus briefs from AARP and, during the Obama administration, the DOL.
Perhaps the most significant was the Tibble case, for which the Supreme Court ruling has served as legal ammunition for plaintiffs' lawyers in fiduciary-breach cases.
"Amicus briefs can advise the courts of broader considerations" beyond the facts of a specific case, Mr. Schlichter said. "They can address policy implications. They can help the courts apply broader context."
No shortage of cases
Although the Trump administration's DOL has been silent on plan-management ERISA litigation, there's been no shortage of cases that have attracted amicus briefs from ABC and the Chamber of Commerce — and sometimes the ERISA Industry Committee — during the last two years supporting sponsors and service providers.
They have filed amicus briefs in several cases involving the management and strategy of stable value funds. They also have filed briefs in cases involving a claim of excessive fees, criticism of a private university's 403(b) plan management, and a sponsor's use of a record keeper's proprietary investment products.
Last year, the ABC asked the DOL to start filing friend of the court briefs to reduce "unwarranted litigation" against sponsors and service providers. The DOL never responded, Ms. Jacobson said.
ABC wanted the DOL to file amicus briefs "where appropriate, including, but not limited to, in opposition to class-action plaintiffs that do not satisfy the pleading standards necessary to survive a motion to dismiss for failure to state a claim" under federal rules of civil procedure, said a July 2017 letter from the council to the DOL.
Convincing federal judges to dismiss an ERISA complaint is a crucial strategy for defendants. The cost of defense rises sharply if a case goes to trial due to the expense of pre-trial discovery.
The ERISA Industry Committee, Washington, wants to reduce "frivolous" litigation through legislation, said Will Hansen, senior vice president, retirement and compensation policy. "For pleading standards, we want the bar to be set higher," said Mr. Hansen, referring to the legal threshold to make dismissals more frequent.
ERIC worked on a proposal for about a year, and "we are floating the idea with some Capitol Hill staffers," he said, declining to elaborate. As ERISA fiduciary-breach cases proliferate, "it forces sponsors into a box where they cannot innovate" because they fear being sued, he said.
When ERIC files an amicus brief, "we want to make sure to educate the courts on broader sponsors' responsibilities," he said. "We're providing the plan sponsor point of view."