Today, September 24, 2013, the oral arguments in the appeal of Tussey v. ABB, Inc. were heard in the 8th Circuit Court of Appeals. Because they were heard in downtown St. Louis, where I am based, I attended.
The judges that heard the oral arguments and will decide the case are:
I’ve linked to each judge’s Wikipedia page for more information. (Most interesting facts: Judge Bright was appointed by President Johnson in 1968 and Judges Bye and Bright are both from North Dakota!).
It is also worth pointing out that Judges Riley and Bright were 2 of the 3 judges that decided Braden v. Wal-Mart Stores, Inc. The Braden case is one of the more important excessive fee case decisions for plan participants. There, the panel reversed a district court decision throwing the case out and found that the claims of excessive fees were plausible enough for the case to go forward. The case ultimately settled for $13.5 million.
Thomas E. Wack from the law firm of Bryan Cave represented ABB, Inc. and Jonathan Hacker of O’Melveny & Myers represented Fidelity Investments. (by way of background, Mr. Hacker’s name has appeared on appellate briefs in many of the excessive fee cases, including Hecker v. Deere & Co., Renfro v. Unisys Corp., and Tibble v. Edison Int’l, each time representing either a plan sponsor or a service provider)
Representing the plaintiffs was Jerome J. Schlichter of Schlichter, Bogard & Denton. David Ellis represented the Secretary of Labor Thomas E. Perez who filed an amicus brief on behalf of the plaintiffs.
The Oral Arguments
For those who are inclined, the 8th Circuit has uploaded the audio of the oral arguments. To download the audio, click here (on my Mac I had to right click to download). To play the audio in your browser, click here.
Like I’ve said before with the Abbott case, I’m not going to get into the game of tea leaf reading. Oral arguments are notoriously bad indicators of outcomes in cases. In fact, in my personal experience with the 8th Circuit in a non-ERISA case, I was convinced sitting in the gallery that we would ultimately win an issue based on the favorable questions asked at argument. When the opinion was published, we didn’t. Lesson learned.
That being said, I thought the judges today asked tough questions of both sides. Topics covered included whether an IPS is a plan document, when is the 6 year statute of limitations triggered, what is the proper measure of damages for a performance claim, how much discretion should a plan fiduciary have, what exactly is float, and whether target data funds are better than balanced funds because they are dynamic rather than static. It wasn’t clear that the judges agreed with one side completely, or the other. Instead, the judges seemed to still be making up their minds as they sought additional information outside the briefs.
Relevant to our readership, the Department of Labor attorney made a few arguments worth noting. First, under the Field Assistance Bulletin 2002-3, all fiduciaries have an obligation to understand and negotiate over float. And second, having an Investment Policy Statement is consistent with prudent fiduciary behavior and that they should be considered plan documents and thus binding on plan fiduciaries. These are two common compliance issues for many retirement plans and should be addressed by all fiduciaries.
Finally, it is worth noting the particular interest the court took in the case. Only 30 minutes per side was scheduled, but the court repeatedly allowed additional time to all parties, with oral arguments going a full hour and 17 minutes plus.
So when will we see a decision? Sometimes as short as 6 weeks, sometimes as long as 6 months (or more). It all depends on the complexity of the case and the workload of the court on other cases. If I were a betting man, I’d say we might see an opinion before Christmas.