Justia U.S. 7th Circuit Court of Appeals Opinion SummariesArticles Posted in ERISA
Albert v. Oshkosh Corp.
Albert claimed that his former employer, a subsidiary of Oshkosh, violated the Employee Retirement Income Security Act, 29 U.S.C.1132(a)(2), by mismanaging its retirement plan. Albert alleged that the defendants breached their fiduciary duties by authorizing the Plan to pay unreasonably high fees for recordkeeping and administration, failing to adequately review the Plan’s investment portfolio to ensure that each investment option was prudent, and unreasonably maintaining investment advisors and consultants for the Plan despite the availability of similar service providers with lower costs or better performance histories.The district court dismissed the complaint. While Albert’s appeal was pending, the Supreme Court issued Hughes v. Northwestern University (2022), vacating Seventh Circuit precedent (Divane) and remanding. The district court had cited Divane repeatedly in its opinion, albeit not for the proposition that the Supreme Court rejected in Hughes. The Seventh Circuit affirmed the dismissal of all claims for failure to state a claim. The complaint is devoid of allegations as to the quality or type of services the comparator plans provided; the cheapest investment option is not necessarily the one a prudent fiduciary would select. Plaintiffs “must do more than recast allegations of purported breaches of fiduciary duty as disloyal acts.” View "Albert v. Oshkosh Corp." on Justia Law
Posted in: ERISA
Dean v. National Production Workers Union, Local 707
The NPWU previously represented the plaintiffs, Parsec employees, participating in the NPWU’s retirement multiemployer defined-contribution plans. A lawsuit brought by the Department of Labor settled, requiring the Severance Plan to pay back loans and approving the Plan’s administrators and its third-party accounting firm, Krol. Parsec employees later voted to decertify the NPWU and elect the Teamsters as their new bargaining representative. The Teamsters told Parsec employees that their retirement accounts would roll over to the Teamsters’ plan. NPWU stated that the retirement accounts would become inactive but remain under NPWU control. After the election, Parsec stopped contributing to the NPWU plan and began contributing to the Teamsters’ plan. Parsec employees’ accounts became inactive but remained under NPWU control. Plaintiffs alleged excessive expenses, undisclosed payments to NPWU officers and their relatives, and high salaries. Plaintiffs requested copies of documents, to which they were entitled under the Employee Retirement Income Security Act (ERISA). The Plans responded but did not provide certain documents, including a “summary plan description” for the 401(k) Plan, which did not exist. Plaintiffs sent several letters requesting that the Plans roll over their accounts to the Teamsters’ plan. The Plans refused.Plaintiffs filed a putative class action. The Seventh Circuit affirmed the dismissal of the suit. The Plans terms did not require rollover and the allegations failed to show that the trustees breached their fiduciary duties. View "Dean v. National Production Workers Union, Local 707" on Justia Law
Walsh v. Alight Solutions, LLC
Alight provides recordkeeping services for employee healthcare and retirement benefit plans, some of which are governed by ERISA, 29 U.S.C. 1001–1461 The Department of Labor investigated Alight, following a discovery that Alight processed unauthorized distributions of plan benefits due to cybersecurity breaches, and sent Alight an administrative subpoena duces tecum, seeking documents in response to 32 inquiries, including broad demands, such as “[a]ll documents and communications relating to services offered to ERISA plan clients.” Alight produced some documents but objected to several inquiries, citing its duty to keep certain information confidential. The Department petitioned for enforcement of the subpoena. Alight produced additional materials but redacted most of the documents to remove client identifying information, preventing the Department from discerning potential ERISA violations. Alight asked the court to quash or limit the subpoena and permit redactions. Alight’s legal consultant projected full compliance would require “thousands of hours of work.” The Department clarified or narrowed its requests.The Seventh Circuit affirmed an order granting the Department’s petition to enforce the subpoena with some modifications. The court rejected Alight’s arguments that the subpoena is unenforceable because the Department lacks authority to investigate the company because it is not a fiduciary under ERISA, or cybersecurity incidents generally; that the subpoena’s demands are too indefinite and unduly burdensome, and that the district court abused its discretion by denying Alight’s request for a protective order to limit production of certain sensitive information. View "Walsh v. Alight Solutions, LLC" on Justia Law
Burke v. Boeing Co.
In this putative class action filed shortly after two fatal crashes of new Boeing 737 MAX airliners led to a worldwide grounding of those planes and a halt to production, resulting to a significant drop in the value of Boeing stock, the Seventh Circuit affirmed the judgment of the district court granting Defendants' motion to dismiss under Fed. R. Civ. P. 12(b)(6), holding that there was no error.At issue was The Boeing Company's employee stock ownership plan (ESOP) and whether Boeing plan fiduciaries' delegation to an independent outside fiduciary the selection and management of investment options for the ESOP protected the company and company insiders from liability for the plan's continued offering of Boeing stock as an independent option for employees before and during the time when the Boeing stock dropped. Plaintiffs argued that Boeing's continuous concealment of material facts relating to the 737 MAX jets caused the price of the stock to be artificially inflated and that Defendants should disclosed the safety issues to the public immediately. The district court dismissed the action. The Seventh District affirmed, holding that the delegation of investment decisions to an independent fiduciary meant that Boeing did not act in an ERISA fiduciary capacity in connection with the continued investments in Boeing stock. View "Burke v. Boeing Co." on Justia Law
Canter v. AT&T Umbrella Benefit Plan No.3
Canter worked as a premises technician, installing wires, lifting heavy loads, and climbing tall ladders. After he began to suffer from severe migraines, lightheadedness, and dizziness, Canter concluded that he no longer could perform that work. He applied for short-term disability benefits in February 2017 through an AT&T plan. The plan administrator granted benefits for a few months, but AT&T terminated benefits after an independent medical reviewer concluded that Canter’s medical tests were normal and that his symptoms had improved. After Canter unsuccessfully appealed this decision using AT&T’s internal processes, he sued under the Employment Retirement Income Security Act (ERISA), 29 U.S.C. 1132.The district court granted the defendants summary judgment in favor of the defendants. The Seventh Circuit affirmed the decision but reversed the court’s award of $181 in pro hac vice fees to the defendants as not taxable “costs” under 28 U.S.C. 1920. Extensive medical testing consistently yielded normal results, even though the medical providers and reviewers thought that a significant problem would have shown up in one or more concrete, physiological ways. Canter himself reported that he was experiencing improvement. View "Canter v. AT&T Umbrella Benefit Plan No.3" on Justia Law
RiverStone Group, Inc v. Midwest Operating Engineers Fringe Benefit Funds
RiverStone operates quarries in three midwestern states. Under a collective bargaining agreement (CBA), RiverStone contributed to the Fringe Benefit Funds for certain employees, based on hours worked by the members of the bargaining unit. The CBA expired in May 2016. Nothing in the agreement imposes on RiverStone an obligation to make contributions after the agreement. RiverStone sought a declaratory judgment that it had no obligation to make contributions to the employees’ pension fund on behalf of individuals hired after the CBA expired. The Funds filed a counterclaim.The district court granted RiverStone summary judgment, holding that RiverStone did not have a contractual duty to contribute to the Funds on behalf of the new employees and that it lacked jurisdiction to evaluate noncontractual sources of liability, such as the National Labor Relations Act (NLRA) so the dispute fell within the exclusive jurisdiction of the National Labor Relations Board. The Seventh Circuit affirmed. The dispute is over an obligation that does not arise under any contract. Once a CBA has expired, the Employee Retirement Income Security Act, 29 U.S.C. 1145, does not confer jurisdiction on the district court to determine whether the employer’s failure to make post-contract contributions violated the NLRA. View "RiverStone Group, Inc v. Midwest Operating Engineers Fringe Benefit Funds" on Justia Law
Ten Pas v. Lincoln National Life Insurance Co.
Ten Pas worked as a tax partner at the McGladrey accounting firm until he suffered a cluster of cardiovascular events in 2014. He receives total disability benefits under McGladrey’s group long-term disability insurance policy, administered by Lincoln National. Ten Pas, arguing that he is entitled to a larger monthly benefit under the policy, filed suit under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1132(a)(1)(B). The policy calculates benefits based on a percentage of an employee’s salary on “the last day worked just prior to the date the Disability begins.” Lincoln used Ten Pas’s salary as of August 31, 2014, the date of his heart attack and the first of several consecutive hospital stays. Ten Pas argues that his determination date came on or after September 1. The short difference matters because Ten Pas received a substantial raise from McGladrey on that date.The district judge granted Ten Pas summary judgment. The Seventh Circuit reversed. Lincoln’s benefits determination cannot be disturbed unless Ten Pas can show that it was arbitrary or capricious. He has not met this demanding standard. The decision rests on a reasonable construction of the contract and an evaluation of Ten Pas’s medical records. View "Ten Pas v. Lincoln National Life Insurance Co." on Justia Law
Posted in: ERISA
Smith v. Board of Directors of Triad Manufacturing, Inc.
Plaintiff filed a class action complaint under the Employee Retirement Income and Security Act (ERISA) against the fiduciaries of the retirement plan offered by his former employer, Triad, for alleged financial misconduct.The Seventh Circuit concluded that the ERISA provisions that plaintiff invokes have individual and plan-wide effect. However, the arbitration provision in Triad's defined contribution retirement plan precludes relief that "has the purpose or effect of providing additional benefits or monetary or other relief to any Eligible Employee, Participant or Beneficiary other than the Claimant." Therefore, this provision prohibits relief that ERISA expressly permits. Accordingly, the court affirmed the district court's denial of Triad's motion to compel arbitration or, in the alternative, to dismiss. View "Smith v. Board of Directors of Triad Manufacturing, Inc." on Justia Law
Halperin v. Richards
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
In re: Algozine Masonry Restoration, Inc.
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