ERISA stories
During the second quarter of 2020, 43 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 first quarter included seven financial firms, with U.S. Bank’s case reviewed by the U.S. Supreme Court, six health-care-related firms, and prominent companies such as Estee Lauder Inc., IBM, Costco, DuPont, Johnson & Johnson, McKinsey & Co. and Phillips 66 Co.
Financial firms
- Participants in the U.S. Bancorp Pension Plan sued plan fiduciaries claiming that they engaged in misconduct, failed to diversify investments and invested in high-risk equities. After both a lower court and the 8th U.S. Circuit Court of Appeals dismissed the case, the Supreme Court ruled that participants of defined benefit plans that are not underfunded do not have standing to sue plan fiduciaries for mismanagement.
- Fidelity Investments reached a $28.5 million settlement with former 401(k) plan participants who accused the plan's fiduciaries of ERISA violations for the case of Moitoso et al. vs. FMR LLC et al.
- Neuberger Berman Group agreed to pay $17 million to settle an ERISA complaint against the company's 401(k) plan fiduciaries alleging that plan executives improperly retained an underperforming Neuberger fund with high fees.
- J.P. Morgan Chase agreed to pay $9 million to settle an ERISA lawsuit with 401(k) plan participants who claimed that fiduciaries retained expensive investment options and failed to look for cheaper and better-performing replacements.
- Wilmington Trust agreed to pay $19.5 million to settle an ERISA class-action lawsuit filed against the company while denying the allegations during its acquisition of Martin Resource Management Corp. Plan participants claimed that the acquisition was partially financed through loan proceeds at the cost of plan participants with millions of dollars of debt payable.
- Putnam Investments agreed to pay $12.5 million to settle an ERISA suit alleging that the plan failed to maintain a prudent investment lineup.
- Liberty Mutual Group’s 401(k) plan participants filed an ERISA lawsuit against the firm claiming that they made irresponsible investment options and failed to properly monitor record-keeping fees.
Health-care organizations
- Universal Health Services Inc.’s 401(k) plan participants sued the company and its fiduciaries alleging that the plan failed to maintain a prudent investment lineup and charged excessive fees.
- Banner Health agreed to pay more than $2 million in an ERISA lawsuit filed by the company’s 401(k) plan participants claiming the plan failed to maintain a prudent investment lineup and excessive fees were charged.
- Pharmaceutical Product Development 401(k) plan participants sued the company and fiduciaries for charging high investment option fees and failing to seek lower-price alternatives.
- Teva Pharmaceuticals USA Inc.’s petition to dismiss an ERISA complaint was rejected by the U.S. District Court in Philadelphia. Plan participants sue the company and fiduciaries for failing to reduce plan expenses and maintain a prudent investment lineup.
- Abbott Laboratories 401(k) plan participant Heide K. Bartnett sued the company and its record keeper, Alight Solutions LLC, accusing plan fiduciaries for unauthorized withdrawal from her 401(k) account and allowing the money to be transferred to an internet address in India.
- A federal appeals court upheld a lower court’s ruling that Mercy Health could be exempt as a church plan while asking the lower court to reconsider whether the participants might have standing to sue over whether that status deprived them of ERISA protections, including ERISA's funding requirements, Pension Benefit Guarantee Corp. insurance, and notice requirements.
Universities
- Emory University agreed to pay $16.75 million to settle an ERISA complaint filed by two 403(b) plan participants who claimed that the plans charged excessive fees for administration and investment options.
- A federal appeals court revived an ERISA lawsuit against Washington University in St. Louis by several 403(b) plan participants who allege fiduciaries condoned excessive fees and kept poor-performing investments in the plan menu.
- University of Miami 403(b) plan participants sued the university alleging plan fiduciaries violated their ERISA duties by paying excessive administrative and investment fees.
- Princeton University trustees agreed to settle an ERISA lawsuit filed by 403(b) plan participants who claimed that the plans paid excessive fees for investment and administrative services.
Other organizations
- Estee Lauder Inc. 401(k) plan participants sued the company and its fiduciaries alleging that they failed to maintain a prudent investment lineup.
- The 2nd U.S. Circuit Court of Appeals ruled that an ERISA stock-drop lawsuit against IBM can proceed. An IBM 401(k) plan participant alleged that plan fiduciaries failed to prudently manage an IBM company stock fund within the plan's investment lineup.
- A federal appeals court in New Orleans has upheld a lower court's dismissal of an ERISA lawsuit filed by Phillips 66 Co. 401(k) plan participants who alleged that fiduciaries imprudently held a single-stock fund. Judges ruled that ERISA contains no prohibition on individual account plans' offering single-stock funds.
- Costco 401(k) plan participants sued the company claiming that fiduciaries violated ERISA duties by charging high record-keeping fees.
- A federal judge dismissed a class-action lawsuit filed by DuPont U.S. Pension and Retirement Plan participants who alleged that Dow, DuPont and Corteva failed to sufficiently advise participants of the plan status after the split of DowDuPont in 2019.
- A federal judge dismissed a stock drop lawsuit filed by Johnson & Johnson’s 401(k) plan participants who claimed plan executives should have protected the assets of participants who had purchased company stock as a retirement investment.
- McKinsey & Co. agreed to settle an ERISA complaint by a participant in McKinsey and subsidiary MIO Partners’ two retirement plans who claimed that McKinsey operated plans at costs more than 13 times the median costs of plans of similar asset sizes.
Non-ERISA stories
During the second quarter of 2020, 35 COVID-19-related stories were written; 27 stories were written on non-ERISA lawsuits that involve legal prosecution or settlements; and an additional 31 legislation and regulation stories were written.
June
- The Supreme Court backed the Securities and Exchange Commission's practice of seeking disgorgement of profits from companies involved in fraud and giving it to harmed investors. The SEC sued Charles C. Liu for his investment scheme that raised $27 million from Chinese investors in a visa investment program.
- The Supreme Court upheld that the Financial Oversight and Management Board overseeing Puerto Rico's bankruptcy and fiscal recovery plans was properly appointed.
- Blueprint Capital Advisors sued the New Jersey Department of the Treasury, New Jersey Division of Investment, BlackRock Alternative Advisors and Cliffwater for alleged racial discrimination, retaliation and fraud.
- The Detroit Policemen & Firemen Retirement System filed two lawsuits against Tesla Inc. and Walmart Inc. alleging board members awarded themselves unfair and excessive compensation.
- U.S. Court of Appeals for the District of Columbia ruled the SEC and SIFMA did not have the authority to challenge market data fees already in effect.
- The Australian Securities and Investments Commission begun civil penalty proceedings against Commonwealth Bank of Australia and subsidiary Colonial First State Investments over alleged "conflicted remuneration" relating to a superannuation fund.
- The SEC and the Department of Justice's antitrust division signed a memorandum of understanding to enhance competition in the securities industry.
- House Democrats unveiled a $1.5 trillion infrastructure package to address investment needs in roads, public housing climate change and clean energy.
May
- A class-action lawsuit was filed against Georgetown University for continuing to charge students for tuition and room and board despite the COVID-19 pandemic forcing the university to close campus.
- Under the Holding Foreign Companies Accountable Act, foreign companies registered with the Securities and Exchange Commission would be required to meet Public Company Accounting Oversight Board standards.
- President Donald Trump said he could potentially curb Hong Kong's autonomy by ending the territory's special trade status with the U.S. and denying visas to Chinese officials.
- Certares sued Carlyle Group and Singapore sovereign wealth fund GIC for scraping the deal to buy 20% of American Express Global Business Travel. Carlyle and GIC responded that the COVID-19 pandemic didn't provide legitimate legal grounds for the purchase.
- Morningstar Credit Ratings agreed to pay $3.5 million to settle SEC charges that it violated conflict-of-interest rules by not separating credit ratings and analysis from sales and marketing.
- Wilmington Trust agreed to pay a combined $80 million to 21 employee stock ownership plans to settle EBSA probes for authorizing ESOPs to pay more than fair market value for privately held employer stock. Wilmington Trust would also pay $8 million to the federal government and reimburse plan sponsors of ESOPs for legal costs and expenses related to investigations and litigation.
- Baltimore County agreed to pay about $5.4 million to resolve a federal age discrimination lawsuit filed by the Equal Employment Opportunity Commission.
- Federal Retirement Thrift Investment Board paused its implementation of plans to shift billions of dollars in retirement assets to an index fund that includes Chinese companies.
- People's Bank of China and China's State Administration of Foreign Exchange have removed restrictions on investment quotas for foreign investors to open markets.
April
- Monomoy Capital Management agreed to pay $1.9 million to settle charges filed by the Securities and Exchange Commission for making investors pay for the services of its operations group without their knowledge or consent.
- The Securities and Exchange Commission finalized reforms to streamline the registration, offering and investor communications processes for business development companies and registered closed-end funds.
- Athene Holding Ltd. agreed to pay a $45 million penalty to New York state for state insurance law violations related to the pension risk transfer business of subsidiary Athene Annuity & Life Co.
- Nasdaq Inc. agreed in a settlement to drop its patent infringement lawsuit against IEX Group Inc.
