A U.S. Court of Appeals determined that arbitration on an individual basis is the proper forum for a participant’s claim that Charles Schwab breached its fiduciary duties and engaged in prohibited transaction under the Employee Retirement Income Security Act of 1974 (ERISA) by holding proprietary funds in its 401(k) plan.
On Friday, June 28, 2019, the U.S. Supreme Court agreed to hear a case involving a hotly debated ERISA topic: standing to bring breach of fiduciary duty claims in defined benefit plans. The court will review Thole v. U.S. Bank, Nat’l Ass’n, 873 F.3d 617, 628 (8th Cir. 2017), which the Eighth Circuit decided on statutory standing grounds. In accepting the case, the Supreme Court also certified the additional issue of whether the defined benefit plan participants have demonstrated Article III standing.
After more than two years since the U.S. Supreme Court issued its last decision* in a case involving the Employee Retirement Income Security Act (ERISA), the court’s next term looks to be flush with ERISA issues. On June 10, 2019, the Supreme Court granted certiorari in a Ninth Circuit case addressing the “actual knowledge” standard in the statute of limitations for fiduciary breaches. Intel Corp. Investment Policy Committee, v. Sulyma, No. 18-1116. The Supreme Court has granted certiorari in two ERISA cases in as many weeks, and it seems likely the court may grant review in at least one other case. Below is a summary of the cases that are or may be in front of the Supreme Court in the coming term.
In April 2018, New York University was the first university to take to trial a case claiming it violated its ERISA fiduciary duties. And on July 31, 2018, it became the first university to win. Sacerdote v. New York Univ., No. 16-CV-6284 (KBF), 2018 WL 3629598 (S.D.N.Y. July 31, 2018).
More than a dozen lawsuits have been filed against prestigious colleges and universities claiming that they violated the Employee Retirement Income Security Act of 1974 (ERISA) in the operation of their Code Section 403(b) plans. Within the last year, University of Pennsylvania and Northwestern each won dismissal of their cases, and the University of Chicago settled its claims for $6.5 million. But NYU’s victory was the first to come after a trial, and the court’s finding of facts and conclusions of law provide lessons for ERISA fiduciaries — and not just those embroiled in their own fee cases.
The U.S. Court of Appeals for the Ninth Circuit affirmed a district court’s opinion that the University of Southern California could not compel arbitration of ERISA claims brought by its employees despite the fact that the parties entered into a broad arbitration agreement. Munro v. University of Southern California, No. 17-55550 (July 24, 2018). The reason? The agreement did not extend to claims brought on behalf of the employees’ retirement plan.
As discussed below, even though a church plan was operated in accordance with ERISA and the plan sponsor may have thought it was required to do so, as long as no 410(d) election was made, it is “no harm, no foul” for the plan’s status as a church plan.
In an unpublished opinion, the U.S. Court of Appeals for the Fourth Circuit found a lower court did not err when awarding no relief for a breach of fiduciary duty. (Pender v. Bank of America Corp., No. 17-1485, June 5, 2018.) Although Bank of America violated the Employee Retirement Income Security Act of 1974 (ERISA), the court found that it did not profit from its actions and, therefore, awarding damages would not be appropriate equitable relief.
Northwestern University recently defeated a lawsuit alleging that it violated the Employee Retirement Income Security Act (ERISA) while managing its retirement plans. The plaintiffs brought ERISA breach of fiduciary duty and prohibited transaction claims, alleging the university’s retirement plans featured imprudent investments and paid excessive fees. On May 25, 2018, the U.S. District Court for the Northern District of Illinois dismissed the lawsuit in its entirety and denied the plaintiffs’ motion to amend to add additional counts, finding them futile.
On January 22, 2018, the U.S. Supreme Court requested the Solicitor General’s opinion on whether a plaintiff can simultaneously bring a claim for benefits and a claim for breach of fiduciary duty under the Employee Retirement Income Security Act of 1974 (ERISA). A request for the view of the Solicitor Generally typically indicates the court’s interest in hearing a case.
The U.S. Supreme Court recently declined to address the issue of whether forum selection clauses are valid and enforceable in plans governed by the Employee Retirement Income Security Act of 1974 (ERISA). Three U.S. Courts of Appeals have allowed enforcement of plans’ forum selection clauses.