Category Archives: ERISA Litigation Index

7th Circuit decides in favor of Defendant in Leimkuehler v. American United Life Insurance Co.

The 7th Circuit has decided in favor of the defendant in Leimkuehler v. American United Life Insurance Co. (AUL).

A copy of the decision can be found here.

Previously, the district court had decided in favor of AUL finding that they were not a fiduciary to the retirement plan at issue. The district court had granted summary judgment to AUL. The plaintiff had sued alleging that AUL’s control over the revenue sharing paid to AUL from the mutual funds wrapped by separate accounts was a violation of ERISA.

The 7th Circuit affirmed on three grounds.

First, the 7th Circuit found that AUL was not an ERISA 3(21) fiduciary just because it winnowed the universe of 7,500 mutual funds to offering about 400 on their platform for selection by a plan sponsor.  AUL decides which mutual funds to include and which share classes of those funds to select. The 7th Circuit found that this situation is no different than the one alleged in Hecker v. Deere & Co. against Fidelity, where they concluded that Fidelity was not a fiduciary. The 7th Circuit also found that this reasoning equally applies to AUL’s selection of share classes of the mutual funds. Key to this decision is that the plan sponsor chooses the final line up, and regardless of whether AUL has the ability to change the investments offered at their discretion, if they don’t exercise that discretion, then they are not a 3(21) fiduciary.

Second, the 7th Circuit found that while AUL was a fiduciary because of their management and control of the separate accounts, “AUL’s control over the separate account can support a finding of fiduciary status only if Leimkuehler’s claims for breach of fiduciary duty arise from AUL’s handling of the separate account.” The court concluded that they do not, stating “Leimkuehler’s claims focus on share-class selection and revenue sharing, and AUL’s maintenance of the separate account involves neither.”

Third, the 7th Circuit addressed the issue raised by the Department of Labor in their amicus brief that “AUL is a fiduciary because, in section 3.3 of its contract with the Plan, it retains the right to delete or substitute the funds Leimkuehler has selected for the Plan.” The court rejected this theory as “unworkable” finding that there was no evidence that AUL had actually exercised this authority they retained. “AUL’s decision not to exercise its contractual right to substitute different (less expensive) funds for the Leimkuehler Plan does not make it a fiduciary.”

Of interest, the 7th Circuit expressed something less than positive views on revenue sharing and mutual funds.

“Although [revenue sharing] has been commonplace for years, until quite recently it was opaque to both individual investors and many 401(k) plan sponsors.”

“Although very little about the mutual fund industry or the management of 401(k) plans can plausibly be described as trans- parent, we agree with the district court that AUL is not acting as a fiduciary for purposes of 29 U.S.C. § 1002(21)(A) when it makes decisions about, or engages in, revenue sharing.”

Also of interest, the 7th Circuit reserved for another day the issue of “whether revenue sharing yields net benefits to individual 401(k) investors.”

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If you know of other cases that you would like tracked here, please email Tom at tclark@fraplantools.com.

Follow us on Twitter @PlanTools or subscribe via email to receive all future updates about this case and others we are tracking on the ERISA Litigation Index. We will post information as soon as possible after it becomes available.

Fidelity is Targeted Again and This Time Regarding Its Own In House Plan

Fidelity Investments has been targeted…again.

First, Fidelity, and its related entities, were named as defendants in three sister cases regarding Fidelity’s handling of float in the defined contribution plans they administer. See Kelley v. Fidelity Management and Trust Co.Boudreau v. Fidelity Management and Trust Co.; and Columbia Air Services, Inc. v. Fidelity Management and Trust Co. As has been written about before, these cases are based upon the successful theory that the plaintiffs in the Tussey v. ABB, Inc. case won at trial against Fidelity. See Tussey v. ABB, Inc. Trial Order.

Now, Fidelity has been named as a defendant in a suit brought by a participant in its own in-house 401(k) plan. See Bilewicz v. FMR LLC (Fidelity Investments). The chief allegation is that it was disloyal and a prohibited transaction to only offer Fidelity proprietary funds. Here is a copy of the complaint. As far as we are aware, this lawsuit has received no attention in the retirement community. Fidelity has yet to file a motion to dismiss, but if the plaintiff can get into the discovery stages, it has the potential to be quite explosive. To note, the plaintiffs in this case are represented by most of the law firms that represent the plaintiffs in the Kelley case.

These lawsuits against Fidelity come after they were previously made defendants in Tussey v. ABB, Inc. (as mentioned above), Hecker v. Deere & Co., Loomis v. Exelon Corp., and Renfro v. Unisys Corp., of which Fidelity secured favorable outcomes for itself in the latter three cases.

To note, this is not the first time Columbia Air Services has sued Fidelity. They did so in 2007 and their case was dismissed in 2008. The lawsuit was over the alleged improper retention of revenue sharing by Fidelity. The court dismissed the case finding that Columbia Air Services failed to properly allege that Fidelity was an ERISA fiduciary. Here is a post from 2008 by attorney Stephen Rosenberg. Here is a copy of the order.

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If you know of other cases that you would like tracked here, please email Tom at tclark@fraplantools.com.

Follow us on Twitter @PlanTools or subscribe via email to receive all future updates about this case and others we are tracking on the ERISA Litigation Index. We will post information as soon as possible after it becomes available.

Tibble v. Edison International – 9th Circuit Requests Rehearing Response from Defendants

Although much commentary has been written on the 9th Circuit’s affirming of the district court in Tibble v. Edison International, the story is not quite over. On April 4, 2013, the Plaintiffs filed a Petition for Rehearing to both the original panel and en banc (all of the active judges of the 9th Circuit). A copy of the Petition is available here.

Last Friday, April 12, the 9th Circuit requested that the Defendants in the case respond to the Plaintiffs’ Petition. Their response is due in 21 days from the 12, or on Friday, May 3, unless an extension is sought. More or less, three outcomes can come of this. First, both the original panel and the en banc judges can vote no for a rehearing. This means that as far as the 9th Circuit is concerned, the Opinion from March stands. The second outcome is that the three judge panel could address the issues raised in Plaintiffs’ Petition. This would result in an additional opinion. The third outcome is that the three judge panel votes no on rehearing, but the en banc judges of the 9th Circuit vote in favor of the rehearing. This could result in new oral arguments before all of the en banc judges. The outcome would be a new written opinion that either replaces the original opinion or modifies it.

This entire situation is interesting for a variety of reasons, but most notably because only one of the judges on the Tibble panel, Circuit Judge O’Scannlain, is an active 9th Circuit judge and thus eligible to vote for the en banc rehearing. Circuit Judge Goodwin is Senior Status and District Judge Zouhary is from the Northern District of Ohio and sat by designation on the panel, presumably because of the massive caseload of the 9th Circuit.  To note, the writer of the Opinion was Circuit Judge O’Scannlain. Thus, there is at least a possibility of a split between the original panel and the en banc judges over rehearing.

Another interesting fact is that the Plaintiffs have hired the appellate law firm of Stris & Maher, LLP, who signed and filed the Petition. If you are not aware of the reputation of Stris & Maher directly, you have certainly heard of their most successful representation to date of the plaintiff in LaRue v. DeWolff Boberg & Associates, Inc., 552 U.S. 248 (2008) before the United States Supreme Court. Click here for more information.

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If you know of other cases that you would like tracked here, please email Tom at tclark@fraplantools.com.

Follow us on Twitter @PlanTools or subscribe via email to receive all future updates about this case and others we are tracking on the ERISA Litigation Index. We will post information as soon as possible after it becomes available.

The ERISA Litigation Index

For the ERISA fiduciary, there are three primary sources that inform the duties that must be followed:

(1) the ERISA statute as passed and amended by Congress and the President
(2) regulations and other guidance as written by the Department of Labor, and
(3) the written decisions of federal judges.

FRA/PlanTools is proud to announce the ERISA Litigation Index , a resource that will keep interested readers better informed about ERISA cases in federal court. The ERISA Litigation Index will list for each case (1) basic case information such as the name of the district court, the case number, and the names of the judges, (2) the basic issues being litigated, (3) the lawyers involved, (4) a copy of
the latest operative complaint and significant motions and orders, and (5) selected commentary about the cases.

Most importantly, we have the capability to track the docket for each case (the list of all documents filed by the attorneys and judges) and whenever an important court order or motion is filed, you will hear about it first from us.

Given my previous history as an attorney litigating ERISA claims on behalf of plan participants, FRA/PlanTools is uniquely qualified to provide this important service to the industry. The following cases are being tracked and updated:

(1) Tussey v. ABB, Inc.

(2)  Krueger v. Ameriprise Financial, Inc.

(3) Nolte v. CIGNA Corp.

(4)  Tibble v. Edison International

(5) Kelley v. Fidelity Management and Trust Co.

(6)  Boudreau v. Fidelity Management and Trust Co.

(7)  Columbia Air Services, Inc. v. Fidelity Management and Trust Co.

(8)  Bilewicz v. FMR LLC (Fidelity Investments)

This list is not exhaustive and will be updated with other cases as they are identified or newly filed. If you know of a case that you would like to see tracked on the ERISA Litigation Index, please email Tom at tclark@fraplantools.com .

Follow us on Twitter  @PlanTools  or  subscribe via email  to receive all future updates about these cases and others we will be tracking on the ERISA Litigation Index. We will post information as soon as possible after it becomes available.