Justia ERISA Opinion Summaries

The Court of Appeal reversed the trial court's judgment in favor of CCCERA following the denial of plaintiff's fourth amended petition for writ of mandate (petition) filed under Code of Civil Procedure section 1085. Plaintiff alleged that CCCERA and its governing Board improperly reduced his retirement benefits retroactively, pursuant to Government Code section 31539.The court concluded that the trial court abused its discretion by deciding to reduce plaintiff's retirement allowance. The court explained that, in light of legislative history and the law in existence at the time of plaintiff's retirement, the Board's determination that plaintiff caused his pension to be improperly increased at the time of retirement, pursuant to subdivision (a)(2) of section 31539, was not in conformity with the spirit of the law and did not subserve substantial justice. In this case, although the court recognized plaintiff's pre-retirement efforts to increase his compensation earnable in the period before his retirement, which allowed him to maximize his pension and epitomized the act of pension spiking which led to the subsequent enactment of the California Public Employees' Pension Reform Act of 2013 (PEPRA), the court cannot sanction the Board's legally unsupported use of section 31539 to penalize plaintiff for conduct that—while now prohibited under the PEPRA—was expressly permitted at the time of his retirement. View "Nowicki v. Contra Costa County Employees' Retirement Ass'n" on Justia Law

Frank embezzled $19 million from his former employer, NCI, and pleaded guilty to wire fraud, 18 U.S.C. 1343. The district court sentenced Frank to 78-months’ imprisonment and ordered Frank to pay restitution of $19,440,331. The government has recovered over $7 million and attempted to garnish Frank’s 401(k) retirement account under the Mandatory Victims Restitution Act (MVRA), filing an Application for Writ of Continuing Garnishment, 18 U.S.C. 3664(m)(1)(A)(i), naming Schwab as the garnishee. Schwab currently holds approximately $479,504 in Frank's 401(k) account, which is covered by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001. Frank argued that ERISA’s anti-alienation provision protects retirement plans against claims by third parties. The Fourth Circuit affirmed that the MVRA permits the seizure of Frank’s 401(k) retirement account, notwithstanding ERISA’s protections. When the government enforces a restitution order under the MVRA, it stands in the shoes of the defendant, acquiring whatever rights to 401(k) retirement funds he possesses; the government’s access to the funds in Frank’s 401(k) account may be limited by terms set out in Frank’s plan documents or by early withdrawal penalties to which Frank would be subject. The court remanded so that the district court may decide what present property right Frank has in his account. The court rejected an argument that the Consumer Credit Protection Act, 15 U.S.C. 1673(a), limits the government to taking 25 percent of the funds. View "United States v. Frank" on Justia Law

Trustees of five multi-employer benefits funds filed suit against Green Nature under section 515 of the Employee Retirement Income Security Act (ERISA) and section 301 of the Labor Management Relations Act (LMRA), alleging that Green Nature failed to contribute to the funds on behalf of its non-union employees and sought to collect from Green Nature the delinquent contributions, interest, costs, and attorney's fees.The Eighth Circuit affirmed the district court's grant of summary judgment in favor of the trustees. The court concluded that the district court correctly determined that the collective bargaining agreement (CBA) unambiguously required fringe benefit contributions for non-union employees. The court also found that an award of delinquent fringe benefit contributions would not improperly require Green Nature to "duplicate fringe contributions." The court need not determine whether issue preclusion could ever be a valid defense to a collection action because the substantive elements of issue preclusion are not satisfied. Finally, the district court did not abuse its discretion in awarding the trustees attorney's fees and in declining to reduce the amount. View "Nesse v. Green Nature-Cycle, LLC" on Justia Law

While Appvion was in financial distress, 2012-2016, the defendants allegedly fraudulently inflated stock valuations to enrich the directors and officers, whose pay was tied to the valuations of its ERISA-covered Employee Stock Ownership Plan (ESOP). They allegedly carried out this scheme with knowing aid from the ESOP trustee, Argent, and its independent appraiser, Stout. Appvion directors allegedly provided unlawful dividends to its parent company by forgiving intercompany notes. Appvion filed for bankruptcy protection. Appvion’s bankruptcy creditors were given authority to pursue certain corporation-law claims on behalf of Appvion to recover losses from the defendants’ alleged wrongs against the corporation; they brought state law claims against the directors and officers for breaching their corporate fiduciary duties; alleged that Argent and Stout aided and abetted those breaches, and asserted state-law unlawful dividend claims. The defendants argued that their roles in Appvion’s ESOP valuations were governed by the Employee Retirement Income Security Act (ERISA), which preempted state corporation-law liability and that, despite their dual roles as corporate and ERISA fiduciaries, they acted exclusively under ERISA when carrying out ESOP activities, 29 U.S.C. 1002(21)(A). The district court agreed and dismissed.The Seventh Circuit reversed in part. ERISA does not preempt the claims against directors and officers. ERISA expressly contemplates parallel corporate liability against those who serve dual roles as both corporate and ERISA fiduciaries. ERISA preempts the claims against Argent and Stout. Corporation-law aiding and abetting liability against these defendants would interfere with the cornerstone of ERISA’s fiduciary duties—Section 404's exclusive benefit rule. View "Halperin v. Richards" on Justia Law

Algozine employed members of the Union and, pursuant to a collective bargaining agreement, was required to submit contributions to three employee benefit funds on behalf of employees who performed covered work: the Welfare Fund; the Pension Fund; and the Annuity Fund. All are multi-employer benefit funds under the Employee Retirement Income Security Act of 1974, 29 U.S.C. 1002. Algozine fell behind on its contributions and filed a Chapter 11 bankruptcy petition.The Funds filed separate proofs of claims under 11 U.S.C. 507(a)(5) for unpaid contributions. Section 507(a) affords priority status up to a specified point to certain types of unsecured claims, including claims for unpaid contributions to an employee benefit plan. The Welfare Fund sought $21,334.30, the Pension Fund sought $18,453.40, and the Annuity Fund sought $11,607.16. Algozine argued that the total should be reduced to $5,556.34 because the Funds erred by applying the priority cap that appears in section 507(a)(5) to each individual Fund’s claims rather than the Funds’ aggregate claims. The bankruptcy court, district court, and the Seventh Circuit agreed with the Funds that section 507(a)(5) does not require assessing distinct benefit plans collectively. View "In re: Algozine Masonry Restoration, Inc." on Justia Law

Plaintiffs filed suit, on behalf of themselves and others similarly situated, alleging that defendants breached their fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA). Plaintiffs asserted that AA and the PAAC breached their fiduciary duties of loyalty and prudence under 29 U.S.C. 1104(a)(1)(A)–(B) by failing to remove the FCU Option from the Plan (Count I); contended that FCU breached its fiduciary duty of loyalty under 29 U.S.C. 1106(b)(1) by dealing with plan assets held by the FCU Option for its own benefit (Count II); and averred that AA and the PAAC engaged in a "prohibited transaction" under 29 U.S.C. 106(a)(1) by offering the FCU Option. The district court ultimately granted summary judgment to defendants and denied approval of the settlement.The Fifth Circuit concluded that the district court correctly determined that plaintiffs lacked standing as to Count I. The court also concluded that the district court erred in concluding that plaintiffs had standing with respect to their claim against FCU. The court explained that it is a settled rule that, in reviewing the decision of a lower court, it must be affirmed if the result is correct although the lower court relied upon a wrong ground or gave a wrong reason. Given the court lacked jurisdiction over these claims, the court did not reach the parties' arguments as to the merits. Finally, the court concluded that plaintiffs failed to demonstrate that the district court abused its discretion in denying approval of the settlement. Accordingly, the court affirmed in part, reversed part, and vacated in part. The court remanded with instructions to dismiss plaintiffs' claim against FCU. View "Ortiz v. American Airlines, Inc." on Justia Law

Gradei’s withdrew from a multi-employer pension plan, asserting that it had ceased all operations covered by the governing multi-employer collective bargaining agreement and was no longer required to contribute to the Fund, which sought to collect $221,932.55 in withdrawal liability. Gradei’s did not respond to payment demands and filed for bankruptcy. The Fund sued the Pitellos (Gradei’s owners) and another corporation owned by the Pitellos (GX), on the theory that they were businesses under common control. The district court found that Gradei’s and GX were conducting business rent-free on property owned by the Pitellos, which was enough to establish common control.The Seventh Circuit affirmed. Under the Employee Retirement Income Security Act, 29 U.S.C. 1381(a), 1404(a) withdrawal liability applies to the withdrawing employer and to “all trades or businesses ... under common control” with that employer. The court rejected Pitello’s argument that the property was only a passive investment. It is possible to rebut the presumption that leasing property to a withdrawing employer is a business but the Pitellos failed to do that. The court noted the economic equivalence between a return on investment in the form of rent collection and return on investment in the form of dividends or salaries made possible by the absence of any rent obligation. The land is part of the business. View "Local 705 International Brotherhood of Teamsters Pension Fund v. Pitello" on Justia Law

Plaintiff appealed the district court's grant of summary judgment in favor of Aetna, as well as the denial of her motion for class certification. In this case, Mars operated a self-funded health care plan and hired Aetna as a claims administrator of the plan pursuant to a Master Services Agreement (MSA). Aetna subsequently executed subcontracts with Optum for Optum to provide chiropractic and physical therapy services to the plan participants for more cost-effective prices. From 2013 to 2015, in addition to obtaining other non-Optum medical services, plaintiff received treatment from chiropractors and physical therapists provided by Optum under its contract with Aetna.In 2015, plaintiff filed suit against appellees, alleging violations of the Employee Retirement Income Security Act (ERISA), claiming that appellees breached their fiduciary duties to her and the plan based on Aetna's arrangement to have the plan and its participants pay Optum's administrative fee via the bundled rate. Plaintiff also alleged that appellees engaged in comparable violations in their dealings with similarly situated plans and their participants, requesting to represent two classes of such similarly situated plans and their participants.The Fourth Circuit held that plaintiff experienced no direct financial injury as a result of appellees' use of the bundled rate in the claims process. Therefore, the court affirmed the district court's judgment on plaintiff's personal claim for restitution under section 502(a)(1) and (3). However, because the court is unable to conduct appellate review of plaintiff's restitution claim on behalf of the plan under section 502(a)(2), the court vacated and remanded that claim to the district court for development of the record as necessary and resolution in the first instance under Donovan v. Bierwirth, 754 F.2d 1049 (2d Cir. 1985).In regard to plaintiff's claims for surcharge, disgorgement, and declaratory and injunctive relief, which do not require a showing of direct financial injury, the court is persuaded that she has produced sufficient evidence for a reasonable factfinder to conclude that Aetna was operating as a functional fiduciary under ERISA and breached its fiduciary duties. The court also concluded that there is sufficient evidence in the record upon which a reasonable factfinder could find that Optum was acting as a party in interest engaged in prohibited transactions, but not as a fiduciary. Accordingly, the court reversed the district court's judgment as to plaintiff's claims for surcharge, disgorgement, and declaratory and injunctive relief under section 502(a)(1) and (3), and for her claims on behalf of the plan for surcharge, disgorgement, and declaratory and injunctive relief under section 502(a)(2) and remanded those claims for further proceedings. Finally, the court held that the district court abused its discretion in denying plaintiff's motion for class certification when it failed to properly ascertain the full measure of available remedies. Accordingly, the court vacated and remanded the district court's order denying class certification for a full reevaluation under Federal Rule of Civil Procedure 23. View "Peters v. Aetna Inc." on Justia Law

A class of employees who participated in Banner Health, Inc.’s 401(k) defined contribution savings plan accused Banner and other plan fiduciaries of breaching duties owed under the Employee Retirement Income Security Act (ERISA). A district court agreed in part, concluding that Banner had breached its fiduciary duty to plan participants by failing to monitor its recordkeeping service agreement with Fidelity Management Trust Company: this failure to monitor resulted in years of overpayment to Fidelity and corresponding losses to plan participants. During the bench trial, the employees’ expert witness testified the plan participants had incurred over $19 million in losses stemming from the breach. But having determined the expert evidence on losses was not reliable, the court fashioned its own measure of damages for the breach. Also, despite finding that Banner breached its fiduciary duty, the district court entered judgment for Banner on several of the class’s other claims: the court found that Banner’s breach of duty did not warrant injunctive relief and that Banner had not engaged in a “prohibited transaction” with Fidelity as defined by ERISA. The class appealed, arguing the district court adopted an improper method for calculating damages and prejudgment interest, abused its discretion by denying injunctive relief, and erred in entering judgment for Banner on the prohibited transaction claim. Finding no abuse of discretion or other reversible error, the Tenth Circuit affirmed the district court in each instance. View "Ramos v. Banner Health" on Justia Law

The Ninth Circuit reversed the district court's dismissal, based on the doctrine of equitable estoppel, of an Employee Retirement Income Security Act (ERISA) action in which the Trustee of the Anaplex Corporation Employee Stock Ownership Plan (ESOP) sought equitable and declaratory relief against the holder of a promissory note from Anaplex.The panel joined the Fourth Circuit in barring the defensive use of equitable estoppel when estopping the plaintiff would contradict an ERISA plan's express terms. The panel deferred to ERISA's focus on what a plan provides, consistent with US Airways, Inc. v. McCutchen, 569 U.S. 88, 100 (2013). The panel explained that equitable estoppel has no place at any stage in this litigation, and the district court erred in dismissing the case based on it.The panel held that, in addition to satisfying the traditional equitable estoppel requirements, a party bringing a federal equitable estoppel claim in the ERISA context must also allege: (1) extraordinary circumstances; (2) that the provisions of the plan at issue were ambiguous such that reasonable persons could disagree as to their meaning or effect; and (3) that the representations made about the plan were an interpretation of the plan, not an amendment or modification of the plan. Furthermore, a party cannot maintain a federal equitable estoppel claim against a trust fund where recovery on the claim would contradict written plan provisions. In this case, allowing the holder to assert her equitable estoppel claim against the trustee would contradict the clear terms of the ESOP. The panel remanded. View "Wong v. Flynn-Kerper" on Justia Law