DOL Urges 7th Circuit to Vacate Dismissal of Northwestern ERISA Case

The U.S. Department of Labor (DOL) recently sent a letter to the U.S. Court of Appeals, for the 7th Circuit, urging the court to vacate its dismissal of an ERISA class action concerning Northwestern University’s 403(b) retirement plan. The case at issue is Laura Divane et al. v. Northwestern University et al., case number 18-2569.

An Illinois federal district court originally dismissed the ERISA suit filed by Northwestern employee retirement plan participants for failure to state a valid claim. The 7th Circuit agreed and upheld the district court’s decision. The U.S. Supreme Court then disagreed.

The Supreme Court issued an opinion, in January 2022, remanding the case to the 7th Circuit for further consideration consistent with its opinion. Writing for the Court, Justice Sonia Sotomayor concluded that the 7th Circuit had failed to apply the reasoning outlined in the 2015 Supreme Court decision of Tibble v. Edison International to the case at issue.

The Supreme Court found that the court should have considered the plan participants’ claims in the context of the fiduciaries’ duties, under ERISA, to monitor all plan investments and remove or replace poorly performing investment options, or those that charged unreasonable fees. Relying on the high Court’s analysis, the DOL asked the 7th Circuit to reinstate the ERISA case and allow the plaintiffs another chance to pursue their breach of fiduciary duty claims in federal district court.

The DOL cited its amicus brief before the Supreme Court in taking the position that the plan participants had articulated a plausible claim for relief under ERISA. According to the DOL, fiduciaries must ensure that every investment option on a plan subject to ERISA is prudent; the fact that the investor has a choice of investment options does not diminish the fiduciary’s duty of prudence in this regard.

As a result, the DOL argued that the 7th Circuit could and should reverse the district court’s dismissal of the case and remand it to the Illinois federal district court for further proceedings. Meanwhile, a spokesperson for Northwestern maintained that the 7th Circuit should uphold the district court’s dismissal of the ERISA claim.

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