During the second quarter of 2021, 44 ERISA-related lawsuits were filed and/or updated. Each event represents the involved parties either reaching a settlement or filing an appeal, or a court decision was made. The parties involved in the ERISA lawsuits in the second quarter included seven financial firms, two health-care-related firms, four universities, and prominent companies such as Caesars Entertainment Corp., Estee Lauder Inc., Lowe's Cos. Inc and PricewaterhouseCoopers LLP, whose case was reviewed by the U.S. Supreme Court.
Financial firms
- The U.S. Supreme Court declined to hear a Wells Fargo stock-drop case; 401(k) plan participants claimed the company’s sales-practices scandal led to the declining stock price.
- Transamerica Corp. agreed to settle for $5.4 million after its 401(k) plan participants sued the company and fiduciaries for investing in underperforming proprietary investments.
- MetLife’s petition to dismiss an ERISA lawsuit against the company was rejected. Plan participants sued fiduciaries for using outdated mortality tables to calculate alternate benefits.
- John Hancock Life Insurance Co. agreed to pay $14 million to settle an ERISA lawsuit filed by its 401(k) plan participants who alleged that plan fiduciaries violated ERISA by charging excessive fees and offering proprietary investment products.
- State Street Corp. 401(k) plan participants sued the company and its fiduciaries for keeping underperforming State Street investment products.
- A Wells Fargo & Co. 401(k) plan participant sued the company and its fiduciaries for charging excessive fees and offering poor-performing investments. A federal judge rejected Wells Fargo’s request to dismiss the lawsuit.
- Principal Life Insurance Co. was sued by a WEC Employees 401(k) participant for self-dealing and charging excessive fees. A federal judge rejected the ERISA claim and stated that product was offered at a competitive interest rate by using sound actuarial principles.
Health-care organizations
- A federal judge dismissed some ERISA claims against Genentech and Roche 401(k) plan fiduciaries but also ruled that an excessive fee claim may proceed.
- Banner Health 401(k) plan participants’ petition to increase damages and interest payment from $2.3 million to $19.4 million was rejected.
Universities
- A U.S. District Court and federal appeals court dismissed an ERISA claim by two Northwestern University 403(b) plan participants alleging the university and its fiduciaries charged excessive fees and failed to offer prudent investment options. Acting U.S. Solicitor General Elizabeth Prelogar stated the U.S. Supreme Court should grand the petition for a writ of certiorari. The Supreme Court announced July 2 it would hear the case.
- Columbia University agreed to pay $13 million to settle an ERISA complaint filed by two 403(b) plan participants who alleged that university charged excessive fees and offered low-performing investments.
- After Cornell University agreed to pay $225,000 for high fees charged on a target-date series, two 403(b) plan participants submitted an appeal document stating that other ERISA claims shouldn’t have been dismissed.
- University of Tampa agreed to settle an ERISA complaint filed by university 403(b) plan participants for charging excessive record-keeping fees.
Other organizations
- A Royal Caribbean Cruises 401(k) plan participant sued Russell Investment Management LLC and fiduciaries for investing in underperforming proprietary products.
- The U.S. Supreme Court denied PricewaterhouseCoopers LLP’s petition to reverse a cash balance plan ruling. The plaintiffs claimed that they should be entitled to larger payments and the firm didn’t use a "whipsaw calculation" of 9% to 10% to project their benefits to age 65 and instead used the 30-year Treasury rate.
- A Caesars Entertainment Corp. 401(k) plan participant sued the company and its money manager Russell Investments alleging that Russell transferred all investment options to its low-performing proprietary funds and caused a $100 million loss.
- A federal judge ruled that an ERISA lawsuit against Estee Lauder Cos. Inc. may proceed. The company's 401(k) plan participants claimed that fiduciaries failed to maintain a prudent investment lineup and could have invested in cheaper alternative options.
- Lowe's Cos. settled an ERISA lawsuit filed by a 401(k) plan participant who alleged the company and its investment consultant Aon breached their fiduciary duties by investing in Aon’s proprietary products.
Non-ERISA stories
During the second quarter of 2021, 16 stories were written on non-ERISA lawsuits that involve legal prosecution or settlements, and an additional 86 legislation and regulation stories were written.
June
- Robinhood Financial LLC agreed to pay a record $70 million penalty to settle allegations of misleading customers, failure to maintain platform stability during outages as well as weak supervision for options trading.
- The U.S. Department of Justice sued to block Aon’s merger with Willis Towers Watson, stating that the acquisition can eliminate competition, raise prices and lower quality of services.
- The U.S. Supreme Court rejected the claims that the Federal Housing Finance Agency exceeded its authority under federal law, which upset investors who wanted to release Fannie Mae and Freddie Mac from the government control. The U.S. Supreme Court also ruled that the president had the authority to oust the regulator. The White House announced on the same day the removal of Mark Calabria, the FHFA director.
- The U.S. Supreme Court sent Goldman Sachs Group’s class-action lawsuit back to the 2nd U.S. Circuit Court of Appeals in New York. Arkansas Teacher Retirement System and other plaintiffs alleged that Goldman Sachs Group made misleading representations during the subprime mortgage crisis. The firm’s ethical principles and internal controls over conflicts of interest were also questioned.
- Citadel Securities and GSA Capital Partners reached a confidential settlement regarding GSA’s attempt to recruit a senior trader from Citadel who had information on a secret trading algorithm.
- The House of Representatives passed the Corporate Governance Improvement and Investor Protection Act that requires public companies to disclose ESG metrics.
- Republicans and Democrats on the Senate Banking Committee discussed creating Federal Reserve’s own digital currency but didn’t come to an agreement.
- The House Ways and Means Committee approved the Securing a Strong Retirement Act, also referred to as SECURE Act 2.0.
May
- Nomura, UBS and UniCredit were fined €371 million ($451 million) by the European Commission for market manipulation of eurozone government bonds.
- S&P Dow Jones Indices agrees to pay $9 million to settle SEC charges for using stale index values instead of real-time prices to calculate S&P 500 VIX Short Term Futures Index ER during a period of unprecedented volatility.
- The Sustainable Investment Policies Act and the Retirees Sustainable Investment Policies Act were reintroduced by House Democrats.
April
- A Delaware court denied Sixth Street Partners’ request to block Owl Rock Capital Partners’ merger with Dyal Capital Partners and a SPAC. The Dyal Capital Partners III fund holds a passive minority interest in Sixth Street and Sixth Street claimed that consent needs to be obtained before entering an acquisition deal with Sixth Street’s competitor. The court ruled that the consent rights were with the fund but not with the firm.
- Sterling Bancorp Inc. agreed to pay $12.5 million to settle a class-action lawsuit led by the Oklahoma Police Pension & Retirement System for stock price manipulation.
- Credit Suisse Group was sued for issuing misleading statements on financial prospects and allowing high-risk clients to take on excessive leverage, which led to fund withdrawals from Greensill Capital’s supply chain finance funds and Archegos Capital Management’s defaults on margin calls. Securities and Exchange Commission officials are considering tougher disclosure requirements for investment firms and deciding whether derivatives and short positions should be disclosed in filings.
- Julie Su’s nomination as deputy secretary of labor was approved by the Senate Health, Education, Labor and Pensions Committee.
- Gary Gensler’s nomination as chairman of the Securities and Exchange Commission was confirmed by the Senate.
