ERISA Class Action Watch

New Suits Update

Michael Hoes — Wed, 07 Nov 2007 16:38:34 +0000

Fresh ERISA class actions for your enjoyment:\n

Gipson et al v. Wells Fargo Complaint – Wells Fargo is the latest financial corporation accused of self-dealing in selecting mutual funds for its 401(k) plan.

Gray et al v. Citigroup Complaint – Plaintiffs are piling on Citigroup using the now run-of-the-mill stock drop claims.

Proesel v. Colgate-Palmolive Complaint – Another ”me too” suit against Colgate-Palmolive\’s cash balance plan.

Stewart et al v. AT&T Complaint – This case alleges that an AT&T pension plan for managers used an improper mortality discount in computing the lump-sum benefits of participants from a merged Ameritech plan.

New Complaints Of Note During October

Michael Hoes — Fri, 26 Oct 2007 16:03:15 +0000

Rosen Preminger & Bloom has brought a suit against Citigroup in the SDNY. The complaint alleges that self-dealing by Citigroup caused Citigroup 401(k) Plan participants to pay excessive fees and suffer inferior returns: Leber v. Citigroup Complaint
Macy’s has been hit with a company stock drop suit in Ohio: Shanehchian v. Macy’s Complaint

Miscellaneous 401(k) Fee Updates

Michael Hoes — Fri, 28 Sep 2007 21:23:27 +0000

For those of you who want an update on the 401(k) fee actions filed by Schlichter, I have some small updates.

Here are two answers from defendants:

Taylor v. United Technologies answer (D. Conn.)
Abbott v. Lockheed answer (S.D. Ill.)

Don’t expect much progress in the cases in the Southern District of Illinois. Class certification of the cases in that district has been stayed pending resolution of Lively v. Dynegy, Inc., which holds that a defense under ERISA § 404(c) does not defeat the commonality and typicality requirements for class certification under Rule 23 in a class action asserting ERISA breaches of fiduciary duty with respect to a 401(k) plan. The order below explains:

Spano v. Boeing sua sponte stay

New Suit Against AT&T

Michael Hoes — Mon, 17 Sep 2007 00:33:44 +0000

Gottesdiener v. Skadden

Michael Hoes — Fri, 31 Aug 2007 00:41:25 +0000

Gottesdiener has sued a firm for failing to credit participants in a cash balance plan with whipsaw benefit calculations. What’s new, you say? Well, this time the target is none other than Skadden, Arps, Slate, Meagher, and Flom LLP. One way or another, this should be entertaining …

Flagg et al. v. Skadden Arps complaint

Suit against Principal alleges misleading mutual fund sales

Michael Hoes — Thu, 30 Aug 2007 15:12:45 +0000

An Iowa plaintiffs’ firm has filed suit in the S.D. Iowa against Principal Financial Group on behalf of participants in 401(k) plans to which Principal provided bundled services. The purported class action alleges that a Principal subsidiary advises participants in retirement plans serviced by Principal that they should rollover their retirement assets to a Principal IRA offering “J Shares” class mutual funds. The complaint alleges that these J Shares had high expenses (particularly “internal” expenses – presumably meaning trading and similar expenses), and that participants would have been better off leaving their money in their retirement plans.

Principal is an ERISA fiduciary to the plans it services, plaintiffs further allege, because it exercises effective control over each plan’s choice of investment options. As a fiduciary, Principal’s methods of selling J Shares constituted breach of fiduciary duty and prohibited self-dealing under ERISA.

Although the complaint is hazy in parts, this suit still represents an important development. Plaintiffs’ lawyers are clearly attempting to extend the present fee lawsuits—which have been mostly aimed at the 401(k) plans of very large companies—to smaller 401(k) plans and IRAs, which typically charge much higher fees than large plans. (For a different approach, see Ruppert v. Principal Life Ins. Co., which is a purported class action by a class of plans.)

The suit also illustrates the difficulties that ERISA can pose for bundled service providers. Employers, especially smaller employers, want turnkey solutions for their retirement plans. But a service provider that attempts to take on too much responsibility risks becoming an ERISA fiduciary subject to extraordinary standards of conduct. Trying to meet the needs of employers while staying outside of the grasp of ERISA can be like walking a tight rope for these bundled service providers.

That said, successfully pursuing these claims will be an uphill battle for plaintiffs. In particular, all the claims hinge on proving that Principal was an ERISA fiduciary for these plans. This will be a highly factual inquiry, and it is difficult to see how Principal’s fiduciary status could be determined other than on a case-by-case basis. That would appear to preclude class certification.

New Suit Against PricewaterhouseCoopers

Michael Hoes — Thu, 23 Aug 2007 16:36:05 +0000

A new suit brought by former employees of Coopers & Lybrand alleges that PricewaterhouseCoopers improperly denied them credit for service with a predecessor employer. The Gottesdiener Law Firm is counsel for plaintiffs.

Wyatt v. PricewaterhouseCoopers complaint

JP Morgan Cash Balance Update

Michael Hoes — Wed, 22 Aug 2007 00:28:22 +0000

Judge Harold Baer, S.D.N.Y., has partially granted the motion for class certification in the suit against the J.P. Morgan Chase cash balance plan. Notably, Judge Baer excluded all proposed class members who had already received their distribution because, as he reasoned, they lack standing under ERISA. This holding is in direct conflict with recent decisions by the 3rd, 6th, and 7th Circuit Court of Appeals.

District Court Declines to Dismiss 401(k) Fee Case Against Lockheed

Michael Hoes — Tue, 14 Aug 2007 14:42:42 +0000

The Southern District of Illinois has declined to dismiss a complaint that alleges that Lockheed’s 401(k) plan permitted participants to pay excessive and unreasonable fees. In a very short opinion, Judge Michael Reagan held that while “The Court agrees that Plaintiffs’ pleading is not necessarily a model of legal draftsmanship … it adequately performs its function of making a ’showing’ of entitlement to relief and giving notice to Lockheed of the relevant facts and the legal basis of Plaintiffs’ claims.”

Judge Reagan’s ruling contrasts sharply with the Western District of Wisconsin’s recent decision in Hecker et al v. Deere. In that case, Judge John Shabaz threw out virtually identical claims against Deere and its recordkeeper, Fidelity. This disagreement between district courts would seem to call for a resolution by the Seventh Circuit Court of Appeals.

District Court Declines to Dismiss 401(k) Fee Case Against UTC

Michael Hoes — Tue, 14 Aug 2007 13:49:25 +0000

The District Court of Connecticut declined to dismiss the class action against United Technologies’ 401(k) plan on the pleadings. Judge Warren Eginton held that plaintiffs had stated a claim alleging that defendants breached their fiduciary duties by permitting the plan to charge unreasonable and excessive fees. While Judge Eginton dismissed claims for failure to disclose revenue sharing, finding (consistent with the ruling of the W.D. Wis. in Deere) that there was no statutory duty to do so, the core of suit will continue on.

Taylor v. UTC Ruling on Motion to Dismiss