Fiduciary Duties

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In 2013, the 6th Circuit made waves in the ERISA world when it held that LINA could be ordered to disgorge almost $3 million in profits it allegedly made on benefits it had improperly withheld, on top of payment of the benefits themselves. A few months later, the court granted LINA’s petition for en banc review, and vacated the 2013 decision .

Last week a divided 6th Circuit vacated the disgorgement of profits in a ruling that restores sanity to ERISA benefits litigation.
Continue Reading Rochow Part 3: En Banc Panel Vacates Disgorgement Award

In Santomenno ex rel. John Hancock Trust v. John Hancock Life Ins. Co. (U.S.A), — F.3d –, 2014 WL 4783665 (3d Cir. Sept. 26, 2014), the plaintiffs, who were participants in employer-sponsored 401(k) benefit plans, claimed that John Hancock, an administrator that provided investment services to plans, breached its fiduciary duty by allegedly charging the retirement plans excessive fees.
Continue Reading Court Requires Nexus Between Alleged Fiduciary Duty and Alleged Damage

In Gabriel v. Alaska Electrical Pension Fund, 755 F.3d 647 (9th Cir. 2014), a venal claimant met a not-very competent plan administrator, and the result was a helpful discussion of limits on make-whole equitable claims. [Note, on December 16, 2014, the Ninth Circuit panel withdrew this opinion, and replaced it with a new one, at 773 F.3d 945]
Continue Reading Ninth Circuit Discusses Limits On Make-Whole Equitable Remedies for Breach of Fiduciary Duty

In a recent decision involving fiduciary duties in Employee Stock Ownership Plans (ESOPs), the Supreme Court emphasized an important limit on the pre-eminence of the plan document. Recent Supreme Court decisions, primarily in the welfare benefit plan context, have emphasized the primary importance of the plan document in establishing a fiduciary’s obligations and a participant’s rights.
Continue Reading Supreme Court Emphasizes that ERISA Plans Are Not Always Pre-Eminent

The Sixth Circuit has just taken an “unprecedented and extraordinary step to expand the scope of ERISA coverage” (in the words of the dissent) by affirming a judgment directing a disability insurer to pay about $900,000 in improperly denied benefits plus disgorge an additional $3,800,000, representing profits it allegedly made on the benefits. I agree with the dissent; this represents a significant expansion of potential liability for ERISA fiduciaries in the Sixth Circuit.
Continue Reading Disgorgement of $3,800,000 ordered for failure to pay $900,000 in disability benefits

ERISA requires fiduciaries to follow a prudent person standard regarding investment decisions. For plans requiring investment in the employer’s stock, often called Employee Stock Ownership Plans, or ESOPs, courts have developed a presumption that the investment in employer stock is prudent. A recent 9th Circuit case has addressed the limits of that presumption. Harris v. Amgen, Inc., — F.3d –, 2013 WL 2397404 (9th Cir. June 4, 2013).
Continue Reading Presumption that Plan Administrator Acted Prudently Does Not Apply in Stock-Drop Case

Life insurance plans, accidental death and dismemberment plans, and disability plans often exclude coverage for losses that occur while the participant is intoxicated, or where the loss is intentionally self-inflicted. Though these exclusions are often very clear, they are often the subject of contentious disputes over what, exactly, they mean, or were intended to mean, or should be interpreted as meaning.

A example of this can be found in Rau v. Hartford Life & Acc. Ins. Co., 2013 WL 1985305 (D. Conn. May 13, 2013). In Rau, Katie Rau went out one night and got monumentally intoxicated (0.3% blood alcohol level). While being driven home by a friend, she pulled herself from the passenger seat into the open window of the pickup truck, with only her legs inside. After exclaiming “look what I can do,” she fell backwards out of the pickup, hit her head on the pavement, and died.
Continue Reading “Injured While Intoxicated” Means What It Says

Revenue sharing is an arrangement under which a mutual fund in which pension assets are invested pays a portion of its fees to the entity that services the pension plan. In Leimkuehler v. American United Life Ins. Co., 713 F.3d 905 (7th Cir. 2013), the Seventh Circuit held that the arrangement did not violate ERISA fiduciary duties (at least as implemented in the case at hand). The court provided a helpful explanation of what revenue sharing was in general, and how it fits into the context of the management and operation of a 401(k) plan.
Continue Reading Revenue Sharing in 401(k) Plans is OK, According to the Seventh Circuit