As 2023 begins, cases involving various aspects of the Employee Retirement Income Security Act (ERISA) are pending before various federal courts, including the U.S. Supreme Court. The following five cases merit close attention as they progress through the courts.
Lloyd v. Argent Trust Company, Case Number 22-3116, U.S. Court of Appeals for the Second Circuit
The first case is a proposed class action lawsuit in which workers allege that a barbecue chain’s employee stock ownership plan (ESOP) overpaid for company shares. Argent Trust Company filed an interlocutory appeal to the U.S. Court of Appeals for the Second Circuit after a federal district court judge denied its motion to compel arbitration. The judge ruled that participants in the ESOP plan did not have to arbitrate their claims because the agreement within the plan documents prohibiting representative actions, seeking relief on behalf of the plan, was invalid. ERISA expressly provides for such representative actions, contrary to the relevant plan provision.
This interlocutory appeal is pending along with several other arbitration-related cases on appeal. Oral arguments in another ESOP case involving Argent Trust’s request for arbitration are expected in the Second Circuit in January or February 2023. Meanwhile, a panel of the Third Circuit appeared skeptical of similar claims by Wilmington Trust at oral arguments in November 2022.
Matney et al. v. Barrick Gold of North America et al., Case Number 22-4045, U.S. Court of Appeals for the Tenth Circuit
Former workers at a gold and copper mining company have appealed the April 2022 dismissal of their proposed class action lawsuit by a federal district court judge to the U.S. Court of Appeals for the Tenth Circuit. The workers allege that the employer mismanaged their defined contribution retirement plan by providing subpar investment options instead of cheaper funds with better performance.
Several major industry groups have submitted amicus briefs asking the Tenth Circuit to affirm the dismissal of the case, including the U.S. Chamber of Commerce. They argue that the U.S. Supreme Court decision in Hughes v. Northwestern requires courts to carefully consider the full range of reasonable judgments that plan fiduciaries may make in managing retirement plans. They also point to recent decisions by the Sixth and Seventh Circuits that affirmed the dismissal of similar ERISA excessive fee suits.
Disberry v. Employee Relations Committee of the Colgate-Palmolive Co. et al., Case Number 1:22-cv-05778, U.S. District Court for the Southern District of New York
Retired Colgate-Palmolive marketing executive Paula Disberry alleges that her former employer and the companies that provided services to its employee retirement plan should be liable for her losses after a thief took control and drained her retirement account of more than $750,000. Colgate, Alight Solutions LLC, and Bank of New York Mellon Corp (BNY) filed motions to dismiss the suit in September 2022. The judge dismissed the suit as to plan trustee BNY but denied Colgate and Alight’s motions to dismiss.
The ruling leaves intact Disberry’s claim that the companies breached their duty under ERISA when they allowed a thief to empty her 401(k) plan and raises questions about fiduciary duties under ERISA concerning the cybersecurity of plan participant accounts.
Beldock et al. v. Microsoft Corporation et al., Case Number 2:22-cv-01082, United States District Court for the Western District of Washington
Microsoft has moved to dismiss a proposed class action lawsuit challenging its offering and retention of BlackRock target-date funds (TDF) in its employees’ 401(k) plan. The workers’ response to the motion to dismiss was due in December 2022. In addition, various industry groups have obtained permission to submit amicus briefs, including the U.S. Chamber of Commerce, an unusual development in a federal district court case.
This lawsuit is one of several suits targeting the same BlackRock TDF funds. Two similar suits have already been dismissed in Wisconsin federal district court.
United Mine Workers of America 1974 Pension Plan et al. v. Energy West Mining Co., Case Number 22A409, U.S. Supreme Court of the United States
The United Mine Workers of America has obtained an extension until February 3, 2023, to file its petition for certiorari to the U.S. Supreme Court in a pension liability case against Energy West Mining Company. United intends to challenge a D.C. Circuit decision that threw out a $115 million pension liability ruling in its favor against Energy West. According to the appellate court, a pension fund actuary improperly calculated how much was owed using a rate not based on actual plan investments.
Regulations governing interest rate assumptions for calculating withdrawal liability that the Pension Benefit Guaranty Corp. proposed in October 2022 also may be an issue. Withdrawal liability occurs when a business pulls out of a multi-employer pension plan. As a result, attorneys are closely watching the outcome of this case and how those regulations might affect it and similar cases.
HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.
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