June 28, 2021

Benefits litigators have no shortage of cases to watch in 2021's second half, as courts consider high-profile questions such as when a retirement plan's investments are adequately diversified, how suits over plan fees can clear dismissal bids, and whether plans can make workers arbitrate claims of plan mismanagement.

Here, Law360 offers a guide to Employee Retirement Income Security Act litigation to keep an eye on for the rest of the year.

When Workers Can Sue

A war over when workers can sue over benefit plan mismanagement has raged in the courts for years, with the U.S. Supreme Court weighing in last year on the circumstances that must be present for workers to sue pension plans.

The lower courts have begun interpreting that decision, largely ruling that it doesn't apply to suits against 401(k) plans, but it can be used to curtail litigation against health insurance plans.

These arguments over workers' standing to sue have played out at the motion to dismiss stage of ERISA litigation. But the argument also arises at the class certification stage, when courts decide whether workers are adequately positioned to represent their coworkers in the lawsuit.

The defense bar has mounted the same argument at the class certification stage that it tried at the motion to dismiss stage, claiming workers don't have standing to sue over a 401(k) plan investment unless they personally kept money in that fund.

An appellate court is set to weigh in on the validity of that argument now that the Third Circuit has taken up a case called Boley v. Universal Health Services Inc.

The plaintiffs bar has notched notable wins against the argument at the motion to dismiss stage, but if they lose it at the class certification stage, those victories could be for naught.

"If the court [accepts this argument], then it makes the standing holdings not that helpful," said Karen Handorf, a partner at the plaintiff-side firm Cohen Milstein Sellers & Toll PLLC. "You win a battle, but you've lost the war."

The case is Boley et al. v. Universal Health Services Inc. et al., case number 2:20-cv-02644, in the U.S. District Court for the Eastern District of Pennsylvania.

The Arbitration Question

Courts have already considered the question of when workers are compelled to arbitrate ERISA mismanagement suits this year, but they're set to continue mulling this far-from-settled issue in 2021's second half.

The Seventh Circuit will consider whether Triad Manufacturing Inc. was allowed to write a mandatory consent-to-arbitration provision into its employee stock ownership plan document, booting all ERISA mismanagement cases from court. The company is fighting an Illinois federal judge's decision that it was not allowed to do so.

Meanwhile, a New York federal judge will consider whether the consent-to-arbitration provision in DST Systems Inc.'s 401(k) plan grants workers the right to arbitrate their claims against the company even if a class action advancing the same allegations has settled.

DST argues workers should be forced to drop their arbitrations and participate in the settlement — in the process, making the same argument against arbitration provisions' power usually advanced by the plaintiffs bar.

"As plaintiffs attorneys, we read that brief with a fair amount of satisfaction," said Mark Boyko, a partner at Bailey & Glasser LLP, adding that he's looking forward to seeing how the Triad and DST cases play out.

The cases are Smith v. Board of Directors of Triad Manufacturing Inc. et al., case number 20-2708, in the U.S. Court of Appeals for the Seventh Circuit, and Ferguson et al. v. Ruane Cunniff & Goldfarb Inc. et al., case number 1:17-cv-06685, in the U.S. District Court for the Southern District of New York.

Fee Suits' Foundation

Ever since the plaintiffs firm Schlichter Bogard & Denton LLP began filing suits challenging benefit plans' administrative fees in the mid-2000s, litigation of this type has become common, hitting corporations, universities, and, more recently, health insurance plans and multiple employer plans.

Now, the U.S. Supreme Court is considering taking up the question of what's needed to plead an ERISA fee suit, through a case called Hughes v. Northwestern University.

The justices asked the federal government to weigh in on whether it should take the case in October. In May, the government answered in the affirmative.

A Supreme Court ruling in the case could have a "big impact," because "obviously, there's a lot of fee cases out there," Handorf said.

. . . 

The case is April Hughes et al. v. Northwestern University et al., case number 19-1401, in the Supreme Court of the United States.

The complete article can be viewed here.