The Northern District of California dismissed with prejudice a lawsuit alleging a 401(k) plan’s sponsor and fiduciaries included unreasonably expensive funds in the plan’s investment lineup.  The court previously dismissed the plaintiffs’ claims without prejudice, finding their complaint failed to plead facts from which the court could infer the defendants breached their fiduciary duties.  In response, the plaintiffs filed an amended complaint.  The court held that the plaintiffs’ amended complaint suffered from the same infirmities as their initial complaint and dismissed the case again.

In particular, the court rejected the plaintiffs’ reliance on an industry publication’s calculation of median fees charged by a few plan funds because the data amalgamated fees charged by funds with disparate characteristics.  Thus, the court held the median fees were not an apt comparator for the fees charged by the specific challenged funds.  Similarly, the court nixed the plaintiffs’ comparison of actively managed funds to passively managed funds because the two types of funds “have different aims, different risks, and different potential rewards that cater to different investors.”  Finally, the court dismissed the plaintiffs’ claim that the plan should have offered less expensive share classes of some plan funds.  The court found unavailing comparisons between the less expensive share classes and those included in the plan because while the fees charged by the plan funds paid for the plan’s recordkeeping and other administrative services, the less expensive share classes’ fees did not.  Accordingly, the court held that the plaintiffs failed to cure the multiple fatal defects in their initial complaint and dismissed the amended complaint with prejudice.  The plaintiffs have not yet noted an appeal of the dismissal.

The case is Davis v. Salesforce.com, Inc., No. 20-cv-01753 (N.D. Cal. April 15, 2021).

The Ninth Circuit recently affirmed the dismissal of an ERISA employer-stock drop putative class action, holding that the plaintiff’s failure to identify specific, viable alternative actions that plan fiduciaries should have taken instead of the challenged actions was fatal to her claim. In so holding, the Ninth Circuit joined the Second, Fifth, Sixth, and Eighth Circuits, which require a plaintiff to articulate in the complaint the specific actions that the defendants should have taken rather than those that allegedly caused the plaintiff’s damages.

The plaintiff alleged that two executives of the plan sponsor who were fiduciaries of the company’s employee stock ownership plan (ESOP) breached their duty of prudence by failing to disclose to shareholders the company’s difficulties in managing a retired nuclear generating station. The plaintiff alleged that, as a result, employees retained “artificially inflated” company stock and that once the company disclosed its problems with the nuclear generation station, the price of the stock declined causing employees to lose millions of dollars in retirement savings.

The Ninth Circuit applied the pleading standard first espoused by the Supreme Court in Fifth Third Bancorp v. Dudenhoeffer, holding that the plaintiff’s “recitation of generic economic principles, without more, is not enough to plead a duty-of-prudence violation.” The court held that the plaintiff failed to articulate the alternative actions so clearly beneficial that a prudent fiduciary could not conclude it would be more likely to harm the Plan than to help it and instead relied on unspecified “generic economic principles,” including “key metrics reflecting the underlying risk and volatility” of the company’s stock, to support her claim. The court distinguished the Second Circuit’s decision in Jander v. Ret. Plans Comm. of IBM by holding that while a district court may consider “allegations reciting general economic principles,” those general allegations are insufficient without more to support a prudence claim. Accordingly, the court concluded the plaintiff failed to satisfy the Dudenhoeffer standard and affirmed the dismissal of her complaint.

The case is Wilson v. Craver, No. 18-56139 (9th Cir. Apr. 19, 2021)

The Ninth Circuit Court of Appeals recently addressed several issues of first impression in Bafford v. Northrop Grumman (9th Cir. April 15, 2021), a lawsuit involving retirees who received vastly overstated pension benefit estimates from the plan’s recordkeeper reminds employers of the importance of careful administration.   The case highlights the need to ensure that electronic recordkeeping systems and tools align with the plan terms.  Participant requests for plan or benefit information using online portals or other electronic means still demand timely and accurate responses as required by ERISA’s disclosure requirements.

Read the full article at Jackson Lewis Benefits Law Advisor Blog.

Aligning itself with other circuit courts that have ruled on the issue, the Ninth Circuit recently held that ERISA does not bar forum selection clauses in benefit plans.  The background of the case and the Ninth Circuit’s ruling are straightforward.  Plaintiff filed a putative class action in the Northern District of California challenging the management of Wells Fargo’s 401(k) plan.  Wells Fargo moved to transfer venue to the District of Minnesota under the 401(k) plan’s forum selection clause.  The California district court granted the motion to transfer and Plaintiff sought a writ of mandamus to stop the transfer.

Read the full article at Jackson Lewis Benefits Law Advisor Blog.

The U.S. Court of Appeals for the Second Circuit recently concluded that investment advisor Ruane Cunniff & Goldfarb must face a proposed class action under ERISA Section 502(a)(2) for breach of fiduciary duty relating to its alleged mismanagement of a profit-sharing plan sponsored by DST Systems, Inc.  Cooper v. Ruane Cunniff & Goldfarb Inc., No. 17-2805 (2d Cir. March 4, 2021).  The suit challenges Ruane’s allegedly “catastrophic over-allocation” of plan assets to shares in Valeant Pharmaceuticals, which dramatically declined in value in 2015-2016.

Read the full article at Jackson Lewis Benefits Law Advisor Blog.

In a 5-4 decision, the U.S. Supreme Court has ruled that federal courts can review decisions by the U.S. Railroad Retirement Board denying claimants’ requests to reopen prior benefits denials. Salinas v. U.S. R.R. Ret. Bd., No. 19-199 (Feb. 3, 2021).

Read the full article at Jackson Lewis Benefits Law Advisor Blog.

A class action alleging that BlackRock entities favored their own proprietary funds when selecting investment options for BlackRock’s 401(k) Plan is headed for trial after Judge Haywood S. Gilliam, Jr. denied both parties’ motions for summary judgment on January 12, 2021. Baird v. BlackRock Inst’l. Trust Co., No. 17-1892 (N.D. Cal. Jan. 12, 2021).

Read the full article at Jackson Lewis Benefits Law Advisor Blog.

An Arkansas law regulating pharmacy benefit managers’ (PBMs) generic drug reimbursement rates, and affecting the cost of prescription drugs provided under ERISA-governed benefit plans and the administration of those plans, is not preempted by ERISA, the U.S. Supreme Court has held unanimously. Rutledge v. Pharmaceutical Care Management Association, No. 18-540, 2020 U.S. LEXIS 5988 (Dec. 10, 2020).

Read the full article at Jackson Lewis Benefits Law Advisor Blog.

This term, the U.S. Supreme Court returns to a challenge to the Affordable Care Act (ACA). In the consolidated cases of California v. Texas (No. 19-840) and Texas v. California (No. 19-1019), the Court will consider whether a group of states and private individuals have standing to challenge the ACA. If that procedural hurdle is cleared, the Court then must consider whether the ACA’s individual mandate is constitutional, and, if it is not, whether that requirement can be severed from the ACA or whether the entire ACA must fall.  More…

The U.S. Supreme Court will hear the second of several ERISA disputes this term, the first issue we discussed as the term began, October 5, 2020.  Monday, November 2, 2020, the Justices will consider whether the Railroad Retirement Board’s denial of a claimant’s request to open a prior benefits decision is a “final decision” reviewable by the courts in Salinas v. U.S. R.R. Ret. Bd. (No. 19-999).

Read the full article at Jackson Lewis Benefits Law Advisor Blog.