Rare legal strategy used to encourage ERISA dismissals

Frustrated by what they say is an onslaught of "frivolous" and "nuisance" ERISA lawsuits, retirement industry trade groups are using an aggressive and unusual strategy to convince federal judges to dismiss the complaints.

Typically, the industry — and other interest groups — file friend-of-the-court briefs supporting defendants or plaintiffs in appeals to the U.S. Supreme Court and to federal appeals courts. However, in recent months, and especially in recent weeks, they have been filing amicus briefs at the District Court level. They need a court's OK to file these briefs, and requests can be rejected.

Decrying the "cookie-cutter" nature of ERISA complaints about fees and investment selection, Chantel Sheaks, vice president of retirement policy for the U.S. Chamber of Commerce, Washington, said her organization wants to "educate the District Court judges" about the industrywide impact of chronic litigation.

The Chamber has been the retirement industry's most aggressive filer of amicus briefs at the District Court level, and it has been doing so for about 18 months.

The Chamber and other retirement industry members are concerned that District Court judges won't dismiss ERISA complaints because the judges may believe the litigation is too complicated for a quick rejection, Ms. Sheaks said.

Once a District Court rejects a motion to dismiss, sponsors and record keepers face expanded costs of the legal discovery process — the data-gathering and data-sharing by the dueling parties — that could be a precursor to holding a trial. ERISA cases that survive a motion to dismiss at the District Court level often lead to settlements.

Research by Callan LLC shows 165 new ERISA lawsuits were filed against DC plans between 2019 and mid-August 2022. Callan's research covered plans with assets of $175 million or more. Among 77 motions to dismiss filed by defendants, judges granted 55% of them. Forty-six lawsuits were settled.

"The issues used to be questions of law at the appeals courts and Supreme Court," said Annette Guarisco Fildes, CEO of the ERISA Industry Committee, Washington.

The proliferation of ERISA complaints "has caused us to act earlier" in filing amicus briefs, she said. "The strategy of plaintiffs' lawyers is to drive settlements as early as possible. We have to do something to push back."

A recent effort by the industry to file amicus briefs at the District Court level involves the multiple ERISA lawsuits against various sponsors in many judicial districts over their offering of the BlackRock LifePath Index target-date fund series.

Filed by the same law firm, Miller Shah LLP, as lead counsel or co-counsel, the 11 lawsuits say sponsors violated ERISA because they failed to replace the BlackRock target-date series, which they claimed provided poor results compared with several other target-date series in the marketplace.

The Chamber filed amicus briefs supporting Capital One Financial Corp. on Oct. 24, Microsoft Corp. on Nov. 4 and Cisco Systems Inc. on Nov. 7, each of which was sued for offering BlackRock's target-date series.

"These suits impose significant costs on plan sponsors — and, by extension, plan participants and beneficiaries — often without producing any concomitant benefit," said the amicus brief in the Cisco case. "These suits threaten to undermine one of the most important aspects of ERISA: the value of innovation, diversification, and employee choice."

The ERISA Industry Committee and several other organizations filed an amicus brief on Nov. 7 in support of Cisco Systems. This coalition includes the American Benefits Council, American Retirement Association and the Committee on the Investment of Employee Benefit Assets Inc.

"Given the discovery costs and settlement dynamics in these cases, we cannot count on subsequent discovery and trial practice to vindicate defendants' arguments if plaintiffs' claims are allowed to proceed," the document said. "Luckily, nothing compels this court to bring this parade of horribles about in the first place."

In recent weeks, ERIC and its coalition partners have filed amicus briefs in District Courts hearing BlackRock target-date suits against Microsoft, Capital One, Genworth Financial Inc. and Booz Allen Hamilton Inc.

The BlackRock cases represent the first time ERIC has filed an amicus brief at the District Court level for a DC plan ERISA lawsuit, although the organization has used this strategy in some health-care and pension cases.

ERISA attorney Emily Seymour Costin suggests that the increased use of amicus briefs at the District Court level reflects not only the growth of ERISA lawsuits but also the industry's disappointment with a January 2022 U.S. Supreme Court ruling, Hughes et al. vs. Northwestern University et al.

Even though the Supreme Court ruled 8-0 in favor of participants in two Northwestern 403(b) plans, saying that fiduciaries must monitor all investments, industry members had hoped the court would provide clear guidance to federal court judges in determining whether a complaint should be dismissed or allowed to go to trial.

"The Supreme Court didn't provide comfort" to the retirement industry, said Ms. Costin, a Washington-based partner and ERISA litigation practice leader for the law firm Alston & Bird LLP, which represents sponsors in ERISA cases. "They left it up to the District Courts. The lower courts didn't get any clearer guidance than before."

Like the trade group representatives, Ms. Costin, who declined to discuss her firm's cases, said these amicus briefs "provide a broad discussion of the impact on the industry which some judges might find persuasive."

To illustrate the rarity of amicus briefs at the District Court level, Akiva Shapiro, the New York-based litigation partner for Gibson, Dunn & Crutcher LLP, and colleagues surveyed all amicus briefs in the federal court system for 2020. At the Supreme Court, 90% of the cases for which oral arguments were held received amicus briefs. Among federal appeals courts, 1% to 2% received amicus briefs. At the District Court level, only 0.1% received amicus briefs. The research, which wasn't restricted to ERISA cases, was published in the Dec. 24, 2020, issue of the New York Law Journal.

"There's a growing recognition that you want to start with a win at the District Court," Mr. Shapiro said in an interview. "You want to shape and get the right result at the outset."

Even though lower courts in different districts aren't bound by rulings in other districts, Mr. Shapiro said the District Court amicus brief strategy can yield dividends.

"On a novel issue, judges sometimes look to other districts," he said. "Some judges are receptive; some are not."

Mr. Shapiro's advice to amicus brief filers at the District Court level is to avoid repeating what parties write in their responses to courts, to emphasize expertise and to provide information on broad issues such as economic impact or legislative history.

Even if they follow his advice, "it's pretty common" for a plaintiffs' lawyers to ask judges to reject the amicus brief, Mr. Shapiro said.

One attorney who has done that is Eric Lechtzin, a partner in the firm of Edelson Lechtzin LLP, Newtown, Pa., who represents ERISA case plaintiffs.

"It's not appropriate" for an amicus brief to be filed with a District Court judge reviewing a motion to dismiss by a defendant, he said.

"Amicus is supposed to be a friend of the court," said Mr. Lechtzin. At the District Court level, "this is a friend of the defendant."

Because appeals courts deal with "issues of law," Mr. Lechtzin noted that "I don't recall objecting to an amicus brief at the appeals court level."

His firm and co-counsel recently successfully objected to an amicus brief request filed by the U.S. Chamber of Commerce in the case of Parker et al. vs. GKN North America Services Inc. et al., in which 401(k) plan participants accused the company of violating ERISA. They filed a 12-page petition opposing the Chamber's effort, arguing that the proposed brief "largely raises generic arguments that are not closely tailored to the complaint" and "duplicate arguments already raised by defendants."

Although U.S. District Court Judge Sean F. Cox dismissed some allegations in August, he allowed several allegations to proceed to trial, including fiduciaries' failure to investigate and select lower-cost investment options, to monitor investments and to remove imprudent investments. He also rejected the Chamber's request to file the amicus brief.

Citing his discretion "to determine if the proposed amicus has demonstrated its entitlement to file a brief," the judge wrote that the Chamber's request and proposed amicus brief "simply rehash arguments already made by the parties and summarizes case outcomes from other jurisdictions irrelevant to this case."

Following the rejection of the motion to dismiss, the case is now in discovery.

Retirement groups pursue rare legal strategy to encourage dismissal of ERISA cases

Retirement groups are filing ERISA case friend-of-the-court briefs in District Courts instead of waiting to petition appellate courts.