Q4 2021 legal overview report

During the fourth quarter of 2021, 32 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 fourth quarter included four financial firms, three prominent health-care firms, and other prominent companies such as Adidas America, Deloitte, Nokia of America Corp., Delta Air Lines Inc., LinkedIn Corp., The Kroger Co. and KPMG LLP.

Northwestern University’s case was heard by the U.S. Supreme Court in December, with the court issuing a landmark ruling in favor of the plan's participants on Jan. 24, 2022.

• Natixis Investment Managers’ request to dismiss an ERISA complaint filed by a 401(k) plan participant was denied. Natixis Investment Managers was sued for offering poor-performing proprietary mutual funds with higher fees.
• Voya Financial Inc. was sued by 401(k) plan participants for self-dealing and the inclusion of various deficient proprietary retirement investment funds for its own interests.
• Transamerica Retirement Solutions was sued as a retirement plan administrator for data breach and its failure to prevent identity theft.
• Allstate Corp.’s request to dismiss an ERISA complaint filed by 401(k) plan participants was denied. The plaintiffs claimed that Allstate chose poor-performing investments with excessive fees instead of replacing them with better products.

• UnitedHealth Group Inc.’s motion to dismiss a lawsuit filed by a 401(k) plan participant was denied. UnitedHealth Group was sued for continuing to offer underperforming target-date funds managed by Wells Fargo Asset Management; WFAM isn’t named as a defendant in the lawsuit and is now Allspring Global Investments.
• A $3.9 million settlement of an ERISA complaint between Mercy Health System Corp. and its retirement plan participants was rejected and extra time was given to parties to file an amended agreement. The plaintiffs claimed that Mercy Health System failed to select cheaper investments with better results. The judge refused to enter a preliminary injunction that would bar class members from filing other claims against the defendants based on the proposed preliminary settlement.
• Walgreen Co. reached a $13.75 million ERISA settlement with its plan participants and agreed to remove underperforming target-date funds managed by Northern Trust Asset Management.

• The U.S. Supreme Court heard an ERISA case against Northwestern University because consensus could not be reached between lower courts and federal appeals courts regarding the pleading standards. Plaintiffs alleged that Northwestern University charged excessive fees and maintained poor-performing investment options. In January, the U.S. Supreme Court, in an 8-0 ruling, decided that DC sponsors should monitor all investments and remove imprudent funds/options even if plan participants can choose which options to invest in.
• An ERISA lawsuit against Adidas America for charging high fees with suboptimal results was dismissed because the judge determined that plaintiffs faultily compared four cheaper passively managed alternative target-date funds that could’ve been offered with the actively managed T. Rowe Price fund options in its investment lineup.
• Deloitte was sued for charging high administrative and record-keeping fees.
• Nokia of America Corp. was sued by its 401(k) plan participants for charging excessive fees and failure to maintain a prudent investment lineup.
• Delta Air Lines Inc. was sued by a former flight attendant for using incorrect conversion factors that resulted in calculated pension benefits lower than actuarial equivalence requirements per ERISA’s standards.
• A judge allowed claims to move forward in a lawsuit accusing LinkedIn Corp. of imprudently retaining actively managed Fidelity Investments target-date funds with excessive fees charged. The judge granted LinkedIn’s motion to dismiss allegations of retaining a poor-performing and high-fee AMCAP fund.
• The Kroger Co. was sued by its 401(k) participants for charging excessive fees.
• KPMG was sued by 401(k) plan participants for high record-keeping fees.

During the fourth quarter of 2021, nine stories were written on non-ERISA lawsuits that involve legal prosecution or settlements, and an additional 69 legislation and regulation stories were written.

December

• Catalyst Capital Group was sued by Missouri State Employees' Retirement System for its failure to manage investments honestly, and the plaintiff claimed that the unfair and conflicted investments led to losses.
• The SEC issued new guidance that Chinese companies trading in the U.S. need to make more prominent risk disclosures and SPACs should disclose their sponsors’ or executives’ ties to China.
• The House introduced the Holding Foreign Companies Accountable Act that aims to delist foreign companies that are uncooperative with PCAOB.
• The SEC approved a rule that enhances disclosure requirements and imposes stricter restrictions on insider trading, stock buybacks and security-based swaps.
• The Adjustable Interest Rate (LIBOR) Act of 2021 was passed in the House.

November

• Boeing Co. reached a proposed $237.5 million settlement with New York state Comptroller Thomas P. DiNapoli and the Colorado Fire & Police Pension Association, which alleged that the flawed design of Boeing’s 737 MAX airplane had led to a share price drop.
• The House passed the $2 trillion social spending bill Build Back Better Act, with potential investments in clean energy, Medicare and universal prekindergarten. The Senate has not acted on the bill.
• Michael F. Gerber was nominated to the Federal Retirement Thrift Investment Board.
• $1.2 trillion Infrastructure Investment and Jobs Act to improve nation's infrastructure and transportations was signed by President Joe Biden.

October

• AP7 and Louisiana Sheriffs’ Pension & Relief Fund sued Luckin Coffee for its fabricated sales figures, and an agreement was reached.
• New rules were introduced to prohibit Federal Reserve policymakers and senior staff from purchasing individual stocks and to restrict their trading activities. In January 2022, Richard H. Clarida, the Federal Reserve's vice chairman, stepped down; Mr. Clarida had admitted that he rotated between $1 million and $5 million out of a bond fund into stock funds ahead of Jerome Powell’s policy announcements.