Top 5 ERISA Litigation Developments of 2019

As 2019 draws to a close, it is a good time to reflect on the biggest developments in ERISA litigation this past year. If this year is any indication, we expect 2020 to include landmark Supreme Court opinions and more.

5. Seventh Circuit Holds Withdrawal Liability Cannot Be “Decelerated.”

In Bauwens v Revcon Technology Group, Inc., the U.S. Court of Appeals for the Seventh Circuit held that a withdrawal liability claim was barred by the six-year statute of limitations applicable to claims under the Multiemployer Pension Plan Amendments Act (MPPAA). Bauwens presented unique issues for the court insofar as the defendant employer had repeatedly defaulted on its quarterly withdrawal liability payment obligations over the course of several years, the plaintiff fund had accelerated its withdrawal liability, and the parties entered into settlements to allow the employer to resume making payments. The last time the employer defaulted, the fund sued seeking the withdrawal liability owed based on the most recent settlement agreement. The court found that the fund’s claim was barred by the MPPAA’s six-year statute of limitations. Because the fund had first accelerated the employer’s withdrawal liability in 2008, the claim first accrued outside the statute of limitations. This “no good deed goes unpunished” decision will likely make trustees much less likely to agree to subsequent payment plans after finding an employer in default.

Bauwens v Revcon Technology Group, Inc., 935 F.3d 534 (7th Cir. 2019).

4.  Striking Down 35-Year-Old Precedent, Ninth Circuit Greenlights ERISA Individual Arbitration Provisions

In Dorman v. Charles Schwab Corp., a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit overturned its 1984 ruling in Amaro v. Continental Can Co. that ERISA lawsuits are not arbitrable. The court found that subsequent U.S. Supreme Court decisions mean Amaro “is no longer good law.” In Dorman, the plaintiff brought ERISA class action claims against the 401(k) plan, fiduciaries of the 401(k) plan, and company executives, alleging the defendants failed to properly steward the involved benefit plans. The court held that because there was an arbitration provision in the plan document, the plan itself had consented to arbitration. Further, the court enforced the arbitration agreement’s class action waiver, requiring the putative class plaintiff to resort to individual arbitration seeking remedies in connection with his or her individual account.

Dorman v. Charles Schwab Corp., 934 F.3d 1107 (9th Cir. 2019); Dorman v. Charles Schwab Corp., 780 F. App’x 510 (9th Cir. 2019).

3.  Ninth Circuit Finds That Hawaii Law Is Not Preempted by ERISA.

In Rudel v. Hawaii Management Alliance Ass’n, the Ninth Circuit found that anti-reimbursement state laws in Hawaii were not pre-empted by ERISA. When Rudel was injured in a serious accident, Hawai’i Management Alliance Association (HMAA), his medical insurer, paid hundreds of thousands of dollars for his medical treatment pursuant to an ERISA plan. Rudel later obtained a tort settlement of $1.5 million in general damages from a third party related to his injuries. Thereafter, HMAA sought reimbursement for the cost of Rudel’s medical treatment. Rudel refused to reimburse HMAA and sued, claiming that state law protected him from being required to compensate the ERISA plan. The Ninth Circuit ruled that while the state law was “related to” the ERISA plan at issue, there was no preemption due to the savings clause, which is a statutory exemption in ERISA in favor of state laws that regulate insurance, banking, and securities. Accordingly, the Ninth Circuit affirmed the lower court’s entry of a final judgment in Rudel’s favor.

Rudel v. Haw. Mgmt. Alliance Ass’n, 937 F.3d 1262 (9th Cir. 2019).

2.  U.S. Supreme Court To Reconsider Stock-Drop Pleading Standards.

On June 3, 2019 the Supreme Court granted IBM’s petition for writ of certiorari to examine the U.S. Court of Appeals for the Second Circuit’s December 10, 2018 decision in Jander v. Retirement Plans Committee of IBM. In that case, the court issued a rare procedural victory to “stock drop” plaintiffs by reversing and remanding a district court’s dismissal of a lawsuit against IBM. The court, applying the Supreme Court’s “more harm than good” standard (expressed in Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct. 2459 (2014)) held that the plaintiffs sufficiently pled a claim that IBM violated its duty of prudence by failing to timely disclose that certain IBM assets (and thus its stock) was overvalued. The court considered whether a prudent fiduciary would have acted before IBM’s stock declined and whether doing so could have done more harm than good. The court did not reach the merits of the question, holding only that Plaintiffs had adequately pled their claim. IBM, arguing the court improperly applied Dudenhoffer, had sought rehearing en banc, but the Second Circuit declined.

Jander v. Retirement Plans Committee of IBM, 910 F.3d 620 (2d Cir. 2018) cert granted 139 S. Ct. 2667 (2019).

1.  U.S. Supreme Court to Resolve Circuit Split on ERISA Statute of Limitations “Actual Knowledge” Requirement.

On June 10, 2019, the Supreme Court granted Intel Corporation Investment Policy Committee’s (“Intel’s”) petition for writ of certiorari to examine the U.S. Court of Appeals for the Ninth Circuit’s November 28, 2018 decision in Sulyma v. Intel Corp. Investment Policy Committee. In that case, the Ninth Circuit held that a participant does not have “actual knowledge” of an ERISA violation—which triggers the ERISA three-year statute of limitations—stemming from allegedly misleading financial documents until he or she either actually reads the documents that would alert him or her to the existence of wrongdoing or are told of the wrongdoing. In so ruling, the court reversed the District Court’s grant of summary judgment in Intel’s favor on the ground that the applicable limitations period had expired. The Ninth Circuit’s ruling departs from the majority of other circuits that have considered the question.

Sulyma v. Intel Corp. Investment Policy Committee, 909 F.3d 1069 (9th Cir. 2018) cert granted 139 S.Ct. 2692 (2019).

To hear more about these developments, please contact Reena R. Bajowala at reena.bajowala@icemiller.com, or another member of the Ice Miller Benefits Disputes and Litigation team.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.