Justia U.S. 7th Circuit Court of Appeals Opinion Summaries

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

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

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

Bell employees participated in a benefit plan, completely funded by contributions from the members of about 69 unions. The plan is administered by a Board of Trustees, governed by Trust Indenture documents that provide that plan members must contribute a fixed amount unless a member’s union has set a different contribution amount. In 2008, Bell’s union voted to increase its members’ contributions from 6% to 8% of their weekly wages. In 2014, the Trustees revealed that the plan’s financial health was deteriorating. Bell employees unsuccessfully petitioned the union to reduce their compelled-contribution rate. In 2016, Bell's collective-bargaining contract expired. During negotiations, the employees again unsuccessfully requested that the union reduce their required contribution rate. Other members of the union, working for a different employer, were either contributing at lower rates or not contributing; they were originally part of a different union that did not participate in the plan. Contract re-negotiations were unsuccessful. The employees lost certain benefits that are available only to active contributors to the plan.The Seventh Circuit affirmed the dismissal of a suit under 29 U.S.C. 1104(a)(1)(D). The Trustees’ action, interpretation of the Trust Indenture, was not a breach of fiduciary duty. The Indenture can be reasonably interpreted as permitting different segments within a union to contribute to the plan at different levels. Even if the Union controlled the amount of revenue coming into the plan, it did not act as fiduciary but as a settlor. View "Bator v. District Council 4, Graphic Communications Conference" on Justia Law

Doctors removed Haynes’s gallbladder. She was injured in the process and required additional surgery that led to more than $300,000 in medical expenses. Her father’s medical-benefits plan (the Fund) paid these because Haynes was a “covered dependent.” The plan includes subrogation and repayment clauses: on recovering anything from third parties, a covered person must reimburse the Fund. Haynes settled a tort suit against the hospital and others for $1.5 million. She and her lawyers refused to repay the Fund, which sued to enforce the plan’s terms under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1132(a)(3). Haynes argued that she did not agree to follow the plan’s rules and was not a participant, only a beneficiary. The district judge granted the Fund summary judgment and enjoined Haynes and her lawyer from dissipating the settlement proceeds. The Fund had named each of them as a defendant.The Seventh Circuit affirmed. ERISA allows fiduciaries to bring actions to obtain “equitable relief … to enforce ... the terms of the plan.” The nature of the remedy sought—enforcement of a right to identifiable assets—is equitable. Having accepted the plan’s benefits, Haynes must accept the obligations The absence of a beneficiary’s signed writing, regardless of the beneficiary's age, does not invalidate any of the plan’s terms. View "Central States, Southeast & Southwest Areas Health & Welfare Fund v. Haynes" on Justia Law

Under the Retirement Plan, participating Northwestern University employees can contribute a portion of their salary to their account and Northwestern makes a matching contribution. Employees participating in the Voluntary Savings Plan also contribute a portion of their salary, but Northwestern does not make a matching contribution. Both plans allow participants to choose the investments for their accounts from options assembled by the plans’ fiduciaries. Northwestern is the administrator and designated fiduciary of both plans. The plaintiffs sued Northwestern under the Employee Retirement Income Security Act, 29 U.S.C. 1001 (ERISA).The Seventh Circuit affirmed the dismissal of the amended complaint and rejection of the plaintiffs’ demand for a jury trial. Under the plans, no participant was required to invest in any particular product. Any participant could avoid the alleged problems with certain products--record-keeping fees and underperformance. Northwestern provided a wide range of investment options and provided prudent explanations for the challenged fiduciary decisions involving alleged losses. There was no ERISA violation with Northwestern’s record-keeping arrangement; the plaintiffs identified no alternative recordkeeper that would have accepted any fee lower than what was paid nor have they explained how a hypothetical lower-cost recordkeeper would perform at the level necessary to serve the best interests of the plans. View "Divane v. Northwestern University" on Justia Law

Dorris, a company president, had Unum long-term disability insurance. Her endometriosis became disabling; Unum started paying her benefits in 2002. Later, Dorris was diagnosed with Lyme disease. By 2007, the Social Security Administration granted her disability benefits. To maintain Unum benefits after two years, an employee had to prove that she “cannot perform each of the material duties of any gainful occupation for which [she is] reasonably fitted” or that she is “[p]erforming at least one of the material duties" of any occupation and “[c]urrently earning at least 20% less" due to the disability. In 2015, Dorris told Unum that she was improving and had started golfing and volunteering. Dorris’s Lyme disease specialist indicated that Dorris still had major symptoms and could not work. Unum’s consulting physicians found no evidence of limitations that would preclude sedentary work nor of an active Lyme infection. Unum ended her benefits.In her Employee Retirement Income Security Act (29 U.S.C. 1132(a)(1)(B)) lawsuit, Dorris was denied permission to depose witnesses to clarify the administrative record. Dorris never sought further discovery; nor objected to the ruling. Unum rested on its physician’s conclusions that Dorris could perform the duties of a president. Dorris asserted, without evidence, that such jobs required “55–70 hours a week,” and focused on how little she did as a volunteer. The court limited its review to the administrative record and found that Dorris could not perform the duties of her regular occupation, but nonetheless ruled in Unum's favor, because Dorris's arguments based on the "20% less" option were conclusory. The Seventh Circuit affirmed. The plaintiff bears the burden of proving that she is entitled to benefits. The court did not abuse its discretion in denying Dorris the opportunity to supplement the record after judgment nor were its factual findings in error. View "Dorris v. Unum Life Insurance Co. of America" on Justia Law

Signode assumed an obligation to pay health-care benefits to a group of retired steelworkers and their families. Signode then exercised its right to terminate the underlying benefits agreement and also stopped providing the promised benefits to the retired steelworkers and their families, despite contractual language providing that benefits would not be “terminated … notwithstanding the expiration” of the underlying agreement. The retirees and the union filed suit under the Labor-Management Relations Act, 29 U.S.C. 185, and the Employee Retirement Income Security Act of 1974, 29 U.S.C. 1132(a)(1)(B). The Seventh Circuit affirmed the district court’s entry of a permanent injunction, ordering Signode to reinstate the benefits. The agreement provided for vested benefits that would survive the agreement’s termination. While there is no longer a presumption in favor of lifetime vesting, the court applied ordinary contract law interpretation rules and concluded that the agreement unambiguously provided retirees with vested lifetime health-care benefits. Even if the agreement were ambiguous, industry usage and the behavior of the parties here provide enough evidence to support vesting such that resolution of any ambiguity in favor of the plaintiffs as a matter of law would still be correct. View "Stone v. Signode Industrial Group LLC" on Justia Law

The Union and the NECA Electrical Contractors Association entered into a collective bargaining agreement (CBA) providing health, welfare, and pension benefits for union workers. The Funds operate as trusts for these benefits. Employers, who are members of NECA, self-report the benefits they owe. Veterans Electric participated in NECA, assented to the CBA, and contributed to the Funds for its union employees. The Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1132(g), governs benefit plans between labor unions and multiemployer associations. The Funds attempted to audit Veterans’ payroll records. Veterans only provided records for union employees, which accounted for about half of the total reported wages. The Funds requested payroll information for non-union employees. Veterans refused, contending that the records were outside the scope of a proper audit under the CBA. The Funds filed suit. During discovery, Veterans provided the additional payroll information. The district court granted Veterans summary judgment, limiting the scope of the trustees’ audit authority. The Seventh Circuit reversed. Under the CBA, the trustees’ authority to audit payroll records includes “all employees regardless of membership or non-membership in the Union.” In light of the ERISA fiduciary duties imposed on union trustees and the authority under the Trust Agreements, the Funds had the right to conduct random audits on employer payroll records. View "Electrical Construction Industry Prefunding Credit Reimbursement Program v. Veterans Electric, LLC" on Justia Law