Justia ERISA Opinion Summaries

The plaintiff's investment in his former employer's ERISA plan (Employee Retirement Income Security Act) was primarily in the employer's stock. The employer went out of business. The plaintiff, unable to recover from the plan, filed suit against the fiduciaries and an insurer. The district court found breach of fiduciary duty, but held that the plaintiff lacked standing to sue the insurer. The Seventh Circuit plan affirmed in part and remanded for calculation of damages. The plaintiff established breach of fiduciary duty. Although the plan was exempt from ERISA's diversification requirement, a prudent investor would not have remained so heavily invested in the employer's stock as its fortunes fell. It is arguable that the plaintiff waived the claim by initially agreeing to investment in the stock and not requesting diversification, but the burden of proving that defense was on the fiduciaries. The plan's exchange of "worthless stock for a worthless loan" was a violation of ERISA, but resulted in no damages. Rejecting a claim of adverse domination, the court affirmed that the plaintiff lacked standing to sue the insurer.

Participants in a defined-contribution retirement plan filed a class action suit under the Employee Retirement Income Security Act (ERISA, 29 U.S.C. 1002(34)), alleging mismanagement and payment of excessive funds. The district court certified the class, but entered summary judgment in favor of the defendants. The Seventh Circuit reversed in part, first upholding denial of a motion to amend the complaint and the court's decision to strike expert testimony relating to matters not in the original complaint. The court remanded a count it characterized as alleging that prudent fiduciaries, armed with the information presented to fiduciaries between 2002 and 2004, would have at least decided between maintaining the status quo and making changes to the common stock funds to limit investment and transactional drag. There is a genuine issue of material fact as to whether defendants breached the prudent man standard of care by failing to make a reasoned decision under circumstances in which a prudent fiduciary would have done so. The court also remanded a claim that prudent fiduciaries would have solicited competitive bids for record-keeping services on a periodic basis. The court affirmed summary judgment on a claim relating to the trustee's compensation including interest income from "float."