Emily Seymour Costin, Emily C. Hootkins, Kirsten Scott, and Allyssa Villanueva

Transcription

1 RECENT DEVELOPMENTS IN EMPLOYEE BENEFITS LAW Emily Seymour Costin, Emily C. Hootkins, Kirsten Scott, and Allyssa Villanueva I. Introduction II. Survey of Case Law A. U.S. Supreme Court B. U.S. Courts of Appeals Hitchcock v. Cumberland University 403(b) DC Plan Orzechowski v. Boeing Co. Non-Union Long-Term Disability Plan Mull v. Motion Picture Industry Health Plan In re Mathias Thole v. U.S. Bank, National Association Secretary, U.S. Department of Labor v. Preston Coburn v. Evercore Trust Company III. Regulatory Developments IV. Conclusion Emily Seymour Costin is a partner in the Washington, D.C., office of Alston & Bird LLP. Ms. Costin is the Chair of the TIPS Employee Benefits Committee and the Chair-Elect of the ABA s Joint Committee on Employee Benefits. Emily C. Hootkins (emily.hootkins@alston.com) is a senior associate in the Atlanta office of Alston & Bird LLP. Ms. Hootkins is the Vice Chair of Publications of the TIPS Employee Benefits Committee. Kirsten Scott (kirsten@renakerhasselman.com) is a partner in the San Francisco office of Renaker Hasselman Scott LLP. Ms. Scott is the Vice Chair of Technology for the TIPS Employee Benefits Committee. Allyssa Villanueva (allyssa@feinbergjackson.com) is an attorney with Feinberg, Jackson, Worthman, & Wasow LLP in Oakland, CA. 315

2 316 Tort Trial & Insurance Practice Law Journal, Winter 2018 (53:2) i. introduction This article surveys recent developments in employee benefits law from fall 2016 through fall The first portion of the survey reviews the one and only U.S. Supreme Court case from last term regarding the Employee Retirement Income Security Act of 1974, as amended (ERISA) Advocate Health Care Network v. Stapleton.InAdvocate Health Care Network, the Supreme Court held that ERISA s church plan exemption applies to defined benefit pension plans that are maintained by church-affiliated non-profit organizations. The second portion of the survey reviews seven decisions issued by U.S. courts of appeals during the last year. Last year, the circuit courts provided important analysis regarding various topics, including administrative exhaustion, ERISA preemption, venue selection clauses, and the pleading requirements for breach-of-fiduciary-duty claims following the Supreme Court s decision in Fifth Third Bancorp v. Dudenhoeffer. The final portion of the survey reviews the recent regulatory proposal amending the claims procedure requirements applicable to ERISA-covered employee benefit plans that provide disability benefits. ii. survey of case law A. U.S. Supreme Court In Advocate Health Care Network v. Stapleton, 1 the U.S. Supreme Court unanimously held that ERISA s church plan exemption applies to defined benefit pension plans that are maintained by church-affiliated non-profit organizations, regardless of whether a church first established those plans. 2 Advocate Health Care Network reviewed three consolidated cases, all brought as part of a wave of litigation by current and former employees of non-profit hospital systems across the country. 3 The employees pension plans were treated as church plans, which are exempt from ERISA regulation altogether. 4 The employees argued, however, that the church plan exemption did not apply because their plans were established by their health system employers, not by churches. 5 Thus, the employees contended, their S. Ct (2017). 2. Id. at Justice Gorsuch took no part in the consideration or decision. Id. 3. Id. at Many district courts stayed similar cases until a decision was reached in Advocate. See, e.g., Kemp-Delisser v. Saint Francis Hosp. & Med. Ctr., No. 15-cv-1113 (VAB), 2016 WL (D. Conn. Nov. 3, 2016); Owens v. St. Anthony Med. Ctr., Inc., No. 14-cv-4068, 2015 WL (N.D. Ill. June 18, 2015). 4. ERISA, 29 U.S.C 1003(b)(2). 5. Advocate Health Care Network, 137 S. Ct. at 1657.

3 Employee Benefits Law 317 plans were subject to ERISA, which imposes obligations on employers to protect employee benefit plans and those who participate in the plans. 6 In the three cases reviewed by the Supreme Court, the district courts had agreed with the participants that a plan must be established by a church to qualify as a church plan. 7 The courts of appeals including the Third, Seventh, and Ninth Circuits had all affirmed, in favor of the participants. 8 These courts of appeals found that the plain language of the exemption require[d] that a pension plan be established by a church to qualify for the church-plan exemption. 9 The Supreme Court granted certiorari [i]n light of the importance of the issue. 10 In an opinion authored by Justice Kagan, the Supreme Court reversed the judgments of the courts of appeals and ruled for the defendant employers. The Court found that ERISA originally defined a church plan as a plan established and maintained...byachurch In 1980, however, Congress amended ERISA to expand the definition of church plan to include a plan maintained by an organization... the principal purpose or function of which is the administration of funding of a plan... for the employees of a church or a convention or association of churches, if such organization is controlled by or associated with a church The Court stated that the main job of a principalpurpose organization is to fund or manage a benefit plan for the employees of churches or... of church affiliates. 13 Thus, the Court held, that the statute tells readers that a different type of plan should receive the same treatment (i.e., an exemption) as the type described in the old definition. And those newly favored plans, once again, are simply those maintained by a principal-purpose organization irrespective of their origins. 14 The Supreme Court also reviewed the minimal legislative history 15 of the 1980 ERISA amendment. The Court considered the historical context in 1980 when the ERISA amendment was enacted. The Court agreed with 6. Id. at Kaplan v. Saint Peter s Healthcare Sys., No (MAS)(TJB), 2014 WL (D.N.J. Mar. 31, 2014); Rollins v. Dignity Health, 59 F. Supp. 3d 965 (N.D. Cal. 2014); Stapleton v. Advocate Health Care Network, 76 F. Supp. 3d 796 (N.D. Ill. 2014). 8. Stapleton v. Advocate Health Care Network, 817 F.3d 517 (7th Cir. 2016); Rollins v. Dignity Health, 830 F.3d 900 (9th Cir. 2016); Kaplan v. Saint Peter s Healthcare Sys., 810 F.3d 175 (3d Cir. 2015). 9. Advocate Health Care Network, 137 S. Ct. at Id. 11. ERISA, 29 U.S.C. 1002(33)(A). 12. ERISA, 29 U.S.C. 1002(33)(C)(i); see also Advocate Health Care Network, 137 S. Ct. at Advocate Health Care Network, 137 S. Ct. at Id. at Id. at 1661; see also id. at 1663 (Sotomayor, J., concurring) ( As the majority acknowledges, ante, at 1661, the available legislative history does not clearly endorse this result. The silence gives me pause:... ).

4 318 Tort Trial & Insurance Practice Law Journal, Winter 2018 (53:2) the non-profit health systems that Congress intended to eliminate the distinction between churches and church-affiliated organizations. 16 Despite the indeterminate legislative history, the Supreme Court found that Congress desired to add language to enable a plan maintained by a principalpurpose organization to substitute for a plan both established and maintained by a church. 17 Accordingly, the Court held that a church plan includes a plan maintained by a principal-purpose organization... regardless of who established it and reversed the judgments of the courts of appeals. 18 B. U.S. Courts of Appeals 1. Hitchcock v. Cumberland University 403(b) DC Plan 19 On March 14, 2017, the Sixth Circuit joined the Third, Fourth, Fifth, Ninth, Tenth, and D.C. Circuits in holding that ERISA plan participants and beneficiaries are not required to exhaust administrative claim procedures when they assert statutory violations of ERISA. In so holding, the Sixth Circuit disagreed with caselaw from the Seventh and Eleventh Circuits. The plaintiffs are former employees of Cumberland University and were participants in the Cumberland University 403(b) DC Plan. 20 The Plan is a defined contribution pension plan sponsored by the University. 21 In 2009, the University adopted a five percent matching contribution under the Plan. 22 In 2014, however, the University amended the Plan to replace the five percent match with a discretionary match. 23 The University made this amendment retroactive effective January 1, 2013, and also made announcements that the discretionary match would be zero percent for the and years. 24 Subsequently, the plaintiffs filed this lawsuit, alleging, inter alia, violations of ERISA s anti-cutback and breach-of-fiduciary-duty rules. 25 The defendants sought dismissal and the U.S. District Court for the Middle District of Tennessee dismissed the anti-cutback and breach-of-fiduciaryduty claims for failure to exhaust administrative claim procedures Id. at (citations omitted). 17. Id. at Id. at 1663; but see id. (Sotomayor, J., concurring) ( Today, by holding that ERISA s exemption... covers plans neither established nor maintained by a church, the Court holds that scores of employees who work for organizations that look and operate much like secular businesses potentially might be denied ERISA s protections. ). The Court did not decide whether the plans at issue in this case qualify as church plans F.3d 552 (6th Cir. 2017). 20. Id. at Id. 22. Id. 23. Id. at Id. 25. Id. 26. Id. at

5 Employee Benefits Law 319 On appeal, the Sixth Circuit agreed with the plaintiffs that the district court erred in requiring exhaustion of administrative claim procedures for the anti-cutback and breach-of-fiduciary-duty claims. 27 In reaching this conclusion, the Sixth Circuit noted that it had previously held that, in an ERISA case, when the plaintiff s suit is directed to the legality of a plan, not to a mere interpretation of it, exhaustion of the plan s administrative remedies would be futile. 28 Applying this principle to the present case, the Sixth Circuit noted that the plaintiffs challenged the legality of the amendment regarding the match contribution and that the legality of the amendment is a question best suited for the courts to decide. 29 Toward this end, the Sixth Circuit disagreed with the district court s conclusion that the statutory claims were duplicative of the plaintiffs benefits claim. 30 The Sixth Circuit could have ended its opinion with the conclusion that exhaustion of administrative claim procedures would be futile in this case. Instead, the court opted to address the circuit split on the issue of whether participants or beneficiaries of an ERISA plan must exhaust internal plan remedies before suing plan fiduciaries on the basis of an alleged violation of duties imposed by the statute. 31 The Sixth Circuit noted that it had not previously addressed this issue, but rather had resolved the issue of administrative exhaustion for certain statutory claims in prior cases on other grounds, such as that exhaustion would be futile. 32 With that background, the Sixth Circuit concluded there is no exhaustion requirement for ERISA claims alleging statutory, rather than planbased, violations The court cautioned, however, that this statutory claims exception to the exhaustion requirement does not apply to planbased claims artfully dressed in statutory clothing, such as where a plaintiff seeks to avoid the exhaustion requirement by recharacterizing a claim for benefits as a claim for breach of fiduciary duty. 34 Here, the plaintiffs anti-cutback and breach-of-fiduciary-duty claims were properly characterized as statutory claims because they were asserting rights granted to them by ERISA, not by the Plan s contractual terms. 35 Thus, the plaintiffs anticutback and breach-of-fiduciary-duty claims were not subject to an admin- 27. Id. at Id. at 562 (quoting Durand v. Hanover Ins. Grp., Inc., 560 F.3d 436, (6th Cir. 2009)). 29. Id. 30. Id. at Id. (citation omitted). 32. Id. at Id. at Id. at 565 (citation omitted). 35. Id.

6 320 Tort Trial & Insurance Practice Law Journal, Winter 2018 (53:2) istrative exhaustion requirement. 36 Accordingly, the Sixth Circuit reversed the district court s judgment and remanded the case for further proceedings consistent with its opinion Orzechowski v. Boeing Co. Non-Union Long-Term Disability Plan 38 On May 11, 2017, the Ninth Circuit held that California Insurance Code Section , which bans discretionary clauses in insurance plans, is not preempted by ERISA because it falls within ERISA s savings clause. The court further held that Section applies to the plaintiff s long-term disability (LTD) claim because the relevant insurance policy renewed after the statute s effective date. Where an ERISA plan grants discretion to an ERISA plan administrator to determine benefit eligibility, courts ordinarily review the administrator s decision for abuse of discretion. 39 California, however, has joined a number of states in voiding provisions conferring discretionary authority to ERISA plan administrators. 40 Section became effective on January 1, 2012, and is self-executing ; thus, if any discretionary provision is covered by the statute, the courts shall treat that provision as void and unenforceable. 41 At issue in this case is Aetna Life Insurance Company s July 2011 termination of the plaintiff s LTD benefits under the Boeing Co. Non-Union Long Term Disability Plan. 42 Aetna upheld its denial during the administrative appeal process and the plaintiff filed a lawsuit under ERISA Following a bench trial, the district court ruled in favor of defendants. 44 The Plan grants discretion to Aetna to review and determine benefit claims, and the district court applied an abuse-of-discretion standard of review. 45 The district court found that Section did not apply retroactively and that the Plan was last issued or renewed January 1, 2011, a year before the statute became effective. 46 Therefore, the district court held that the statute did not apply and abuse of discretion was the appropriate standard of review. 47 On appeal before the Ninth Circuit, the plaintiff argued that the district court erred by refusing to apply Section and thus applied 36. Id. 37. Id. at F.3d 686 (9th Cir. 2017). 39. Id. at Id. at Id. (quoting CAL. INS. CODE (g)). 42. Id. at Id. at Id. 45. Id. at 689, Id. at Id.

7 Employee Benefits Law 321 the wrong standard of review. 48 In response, the defendants argued that (1) ERISA preempts the California statute; and (2) even if it is not preempted, it does not apply retroactively. 49 ERISA preempts state laws that relate to an employee benefit plan. 50 ERISA, however, also contains a savings clause that saves from preemption state laws regulating insurance, banking, or securities. 51 The parties did not dispute that California Insurance Code Section comes within the broad terms of ERISA s preemption clause. 52 In order to be saved from preemption, the statute must satisfy the two-part test set forth by the Supreme Court in Kentucky Association of Health Plans, Inc. v. Miller. 53 First, the law must be specifically directed toward entities engaged in insurance[,] and second, it must substantially affect the risk pooling arrangement between the insurer and the insured. 54 The Ninth Circuit determined that Section meets both prongs of this test and, thus, is saved from ERISA preemption. 55 First, the court found that the statute is directed toward entities engaged in insurance. 56 The court rejected the defendants attempt to distinguish between a law directed at insurance companies and a law directed at ERISA plans, which it found are a form of insurance, even when issued by a corporation whose principal business is not insurance. 57 Second, the court found that Section substantially affects the risk-pooling arrangement between the insurer and the insured. 58 This prong of the test addresses whether the law is targeted at insurance practices, not merely at insurance companies[,] because bans on discretionary clauses alter the scope of permissible bargains between insurers and insureds. 59 Having determined that ERISA does not preempt Section , the Ninth Circuit then addressed whether it applies in this case. 60 The court determined that it does apply because the Plan s insurance policy had an anniversary date of and renewed on January 1, 2012, and the district court reviewed the denial of benefits after that date. 61 The Ninth Circuit re- 48. Id. at Id. 50. Id. (quoting 29 U.S.C. 1144(a)). 51. Id. (citing 29 U.S.C. 1144(b)(2)(A)). 52. Id U.S. 329 (2003). 54. Id. at Orzechowski, 856 F.3d at Id. at Id. (citing Standard Ins. Co. v. Morrison, 584 F.3d 837, 842 (9th Cir. 2009) and Miller, 538 U.S. at 342). 58. Id. at Id. (quoting Morrison, 584 F.3d at 844). 60. Id. at Id.

8 322 Tort Trial & Insurance Practice Law Journal, Winter 2018 (53:2) versed the district court s judgment and remanded the case for the court to review the case under a de novo standard of review instead of the abuse of discretion standard Mull v. Motion Picture Industry Health Plan 63 On August 1, 2017, the Ninth Circuit held that provisions found in the summary plan description (SPD) of an ERISA plan are enforceable where the SPD is one of the governing plan documents. The Motion Picture Industry Health Plan is a self-funded multiemployer health and welfare benefit plan established under the Motion Picture Industry Plan Agreement and Declaration of Trust (Trust Agreement). 64 The Plan s SPD provides that no benefits will be payable in a third-party liability claim unless the participant or beneficiary agrees to reimburse the Plan for benefits paid upon receipt of a third-party recovery. 65 The SPD also states that if reimbursement is requested but not received by the Plan, the amount of the third-party recovery will be deducted from future benefits payable to the participant and his or her dependents. 66 The Trust Agreement does not contain any such reimbursement/recoupment provision. 67 Norman Mull was a participant under the Plan and had several family member beneficiaries, including Lenai Mull, under his policy as well. 68 In 2010, Lenai was injured in a car accident and the Plan paid $147, in benefits for treatment of her injuries. 69 The following year, Lenai received a $100, recovery from a third party involved in the car accident. 70 The Plan sought reimbursement of the $100, from Lenai pursuant to the SPD provisions, but Lenai declined. 71 Thereafter, the Plan instituted the SPD s overpayment procedures by withholding subsequent benefit payments to Lenai and the other beneficiaries under her family s policy to recoup the $100, third-party recovery. 72 Norman, Lenai, and other family member beneficiaries sued the Plan and the Plan s Board of Directors for declaratory and injunctive relief and to recover the benefits that had been withheld. 73 The Board filed a counterclaim for equitable relief under ERISA 502(a)(3) against Nor- 62. Id. at F.3d 1207 (9th Cir. 2017). 64. Id. at Id. 66. Id. 67. Id. at Id. at Id. 70. Id. 71. Id. 72. Id. at Id. at 1209.

9 Employee Benefits Law 323 man and Lenai, seeking an equitable lien or constructive trust to recover the $100, received by Lenai from the third party. 74 Lenai later filed for Chapter 7 bankruptcy and the bankruptcy court discharged the counterclaim against her. 75 The district court later dismissed the counterclaim against Norman on grounds not challenged on appeal. 76 The district court granted summary judgment to the plaintiffs, finding that because the reimbursement/recoupment provisions were found only in the SPD and not in any documents that constituted the plan document, the provisions were not enforceable under ERISA. 77 On that basis, the district court enjoined the defendants from enforcing the SPD provisions and directed the defendants to reimburse the plaintiffs for benefits previously recouped. 78 The Ninth Circuit indicated that ERISA requires every employee benefit plan to include the following: (1) a procedure for establishing and carrying out a funding policy; (2) the procedure for the allocation of responsibilities for operation and administration of the plan; (3) a procedure for amending the plan and the identity of persons with the authority to do so; and (4) the basis on which payments are made to and from the plan. 79 The Ninth Circuit found that the Trust Agreement meets the first three of these requirements, but not the fourth. 80 Instead, the Trust Agreement indicates that the basis upon which payments under the Plan are made shall be specified in writing by resolution of the Board. 81 The Board carried this out by approving the SPD, which supplies, in great detail, the basis for payments. 82 Thus, the Ninth Circuit determined that the Plan is comprised of two governing documents the Trust Agreement and the SPD. 83 On that basis, the court held that the terms in both documents are enforceable, including the reimbursement/recoupment provisions found in the SPD. 84 The panel held that the Supreme Court s holding in CIGNA Corp. v. Amara 85 is not to the contrary. 86 In Amara, the Supreme Court held that summary documents, important as they are, provide communication with beneficiaries about the plan, but that their statements do not them- 74. Id. 75. Id. 76. Id. 77. Id. 78. Id. 79. Id. (citing 29 U.S.C. 1102(b)). 80. Id. 81. Id. 82. Id. 83. Id. at Id U.S. 421 (2011). 86. Mull v. Motion Picture Industry Health Plan, 865 F.3d 1207, 1210 (9th Cir. 2017).

10 324 Tort Trial & Insurance Practice Law Journal, Winter 2018 (53:2) selves constitute the terms of the plan Amara, however, does not preclude a finding that multiple documents constitute or govern a plan, including the SPD, such that the provisions in the SPD are enforceable on that basis. 88 The panel also noted that in Prichard v. Metropolitan Life Insurance Co., 89 the Ninth Circuit clarified that an SPD may constitute a formal plan document, consistent with Amara, so long as the SPD neither adds to nor contradicts the terms of existing Plan documents. 90 Here, the court held, the SPD is part of the Plan and there is no conflict between the SPD and the Trust Agreement. 91 Amara does not prohibit this type of arrangement. 92 The Ninth Circuit held that the district court erred in concluding that the SPD is not part of the Plan. 93 It vacated the district court s grant of summary judgment to the plaintiffs and remanded the case for further proceedings In re Mathias 95 On August 10, 2017, the Seventh Circuit joined the Sixth Circuit in holding that ERISA s venue provision does not invalidate a forum-selection clause contained in plan documents. The plaintiff is a retiree of Caterpillar, Inc. whose health insurance was terminated after he failed to repay more than $9, in past due premiums. 96 Following such termination, the plaintiff sued Caterpillar and the relevant health plans in federal court in the Eastern District of Pennsylvania. 97 The plan documents, however, required any such lawsuit to be filed in federal court in the Central District of Illinois. 98 Thus, the defendants moved to transfer the case under 28 U.S.C. 1404(a). 99 The plaintiff opposed the motion to transfer, arguing that the forum selection clause was invalid in light of ERISA s venue provision, 29 U.S.C. 1132(e)(2). 100 The Eastern District of Pennsylvania granted the motion to transfer venue and transferred the case to the Central District of Illinois. 101 The 87. Amara, 563 U.S. at Mull, 865 F.3d at F.3d 1166 (9th Cir. 2015). 90. Mull, 865 F.3d at 1210 (quoting Prichard, 783 F.3d at 1170). 91. Id. 92. Id. 93. Id. 94. Id. at F.3d 727 (7th Cir. 2017). 96. Id. at Id. at Id. 99. Id Id Id.

11 Employee Benefits Law 325 plaintiff again argued that the forum selection clause was invalid, seeking transfer back to Pennsylvania. 102 When the plaintiff s request was again denied at the district court level, he sought mandamus relief in the Seventh Circuit. 103 The Secretary of Labor filed an amicus curiae brief supporting the plaintiff s interpretation of 1132(e)(2). 104 In accepting the plaintiff s mandamus petition, the Seventh Circuit noted that it raised a question of first impression in this circuit: Does ERISA s venue provision, 29 U.S.C. 1132(e)(2), preclude enforcement of a forum-selection clause in an employee-benefits plan? 105 Only one circuit the Sixth Circuit had previously addressed this question, holding that an ERISA plan s forum-selection clause is enforceable even if it overrides the beneficiary s choice of a venue permitted by 1132(e)(2). 106 The Seventh Circuit began its analysis by noting that the Supreme Court has held that a valid forum-selection clause [should be] given controlling weight in all but the most exceptional cases. 107 The court further noted that ERISA plans are a special kind of contract and contractual forum-selection clauses are presumptively valid even in the absence of arm s-length bargaining. 108 Thus, the court concluded that the plan s forum-selection clause is controlling unless ERISA invalidates it. 109 The court then looked to ERISA s venue provision, which states the following: Where an action under this subchapter is brought in a district court of the United States, it may be brought in the district where the plan is administered, where the breach took place, or where a defendant resides or may be found, and process may be served in any other district where a defendant resides or may be found. 110 The Seventh Circuit concluded that [n]othing in this text expressly invalidates forum-selection clauses in employee-benefits plans. 111 Instead, ERISA s venue provision is phrased in entirely permissive language. 112 The Seventh Circuit also noted that forum-selection clauses are consistent with ERISA s policy goals because they promote uniformity in plan administration and reduce administrative costs Id Id Id Id. at Id. (citing Smith v. Aegon Cos. Pension Plan 769 F.3d 922, (6th Cir. 2014)) F.3d at 731 (quoting Atl. Marine Constr. Co. v. U.S. Dist. Court for W. Dist. of Tex., 134 S. Ct. 568, 581 (2013)) Id Id. at Id. (quoting 29 U.S.C. 1132(e)(2)) Id Id Id. at 733.

12 326 Tort Trial & Insurance Practice Law Journal, Winter 2018 (53:2) Applying the above to the facts of the case, the Seventh Circuit concluded that [t]he forum-selection clause in the Caterpillar plan chooses from among the venue options listed in 1132(e)(2), and nothing in the statute makes that choice invalid. Accordingly, the Seventh Circuit held that the plan s forum-selection clause was enforceable. 114 The plaintiff s petition for a writ of mandamus was therefore denied. 115 In a dissenting opinion, Circuit Judge Ripple opined that a contractual clause that restricts the right of an ERISA plan participant to an action in a forum far away from his home and his place of employment with the defendant contravenes the strong public policy embodied in ERISA itself. 116 Judge Ripple concluded that, in his view, the forum selection clause at issue is invalid and unenforceable because it is inconsistent with the forum selection rights protected by On September 28, 2017, the Seventh Circuit denied rehearing and rehearing en banc Thole v. U.S. Bank, National Association 119 On October 12, 2017, the Eighth Circuit held that (1) plan participants did not have statutory standing to sue for breach of fiduciary duty or for a prohibited transaction under ERISA because their pension plan was overfunded; and (2) the lawsuit was not a motivating factor in the defendants decision to make the contribution that resulted in the plan s overfunded status. Thus, the participants were not entitled to an award of attorney fees and costs. Retirees and employee participants of U.S. Bank s pension plan brought a class action in 2014 alleging breach of fiduciary duty and engaging in prohibited transactions under ERISA. 120 Plan participants alleged that the plan s sponsor, U.S. Bancorp, acted as the Compensation Committee and designated U.S. Bank s subsidiary, FAF Advisors, Inc., with full discretionary investment authority. 121 [B]y 2007, FAF had invested the entire Plan portfolio in equities direct stock holdings or through mutual funds that FAF managed ( Equities Strategy ). 122 The plaintiffs contended that this violated ERISA because of the conflicts of interest and benefits to the defendants. 123 The Equities Strategy investment allegedly resulted in significant 114. Id. at Id. at Id. at Id. at In re Mathias, No , 2017 U.S. App. LEXIS (7th Cir. Sept. 28, 2017) F.3d 617 (8th Cir. 2017) Id. at 621; see 29 U.S.C Thole, 873 F.3d at Id. at Id. at 624.

13 Employee Benefits Law 327 losses and the pension plan became underfunded from 2008 until the suit was filed in The participants alleged that U.S. Bank and others breached their ERISA fiduciary duties of: (1) prudence in failing to monitor the FAF investments and to terminate the Equities Strategy investment; (2) diversification of plan assets by investing the entire plan into the Equities Strategy; and (3) loyalty, because the defendants benefitted from the Equities Strategy investment to the detriment of the plan and its participants. 125 The district court dismissed all claims and held that: (1) plan participants in the overfunded plan lacked standing to sue either for relief to the plan under ERISA 502(a)(2) or for equitable relief under ERISA 502(a)(3); (2) the plan had become entirely invested in the Equities Strategy by 2008 so the claims filed in 2014 were barred by the six-year statute of limitation; and (3) there was no basis to award attorney fees and costs. 126 The Eighth Circuit affirmed, relying on its opinion in Harley v. Minnesota Mining & Manufacturing Co., 127 which held that a participant in a defined benefit plan cannot claim liability under 1109 for alleged breaches of fiduciary duties when the plan is overfunded. 128 The Eighth Circuit found Harley directly applicable to the plaintiffs claims under 502(a)(2) because it reasoned that the participants in an overfunded plan were not the type of persons Congress authorized to sue for monetary relief under ERISA. 129 The Eighth Circuit extended its analysis to adopt the Sixth Circuit s view that an actual injury is also required to bring claims for injunctive relief pursuant to ERISA 502(a)(3). 130 Thus, the Eighth Circuit affirmed the dismissal of all claims. 131 In reviewing the district court s denial of attorney fees and costs, the Eighth Circuit considered the participants argument that U.S. Bank s 124. Id Id Id. at (citng Adedipe v. U.S. Bank, N.A., 62 F. Supp. 3d 879 (D. Minn. 2014) (order on motion to dismiss, or in the alternative, motion for summary judgment); Adedipe v. U.S. Bank, N.A., No ( JNE/JJK), 2015 WL (D. Minn. Dec. 29, 2015) (order on motion to dismiss); Adedipe v. U.S. Bank, N.A., No ( JNE/JJK), 2016 WL (D. Minn. Mar. 18, 2016) (order on motion for attorney fees and costs) F.3d 901 (8th Cir. 2002) Thole, 873 F.3d at 627 (quoting McCullough v. AEGON USA Inc., 585 F.3d 1082, 1084 (8th Cir. 2009) (citing Harley, 284 F.3d at )) Id. at Id. at ; 29 U.S.C. 1132(a)(2), (3); see Soehnlen v. Fleet Owners Ins. Fund, 844 F.3d 576, (6th Cir. 2016); but see Thole, 873 F.3d at (Kelly, J., concurring in part and dissenting in part); see also Brief of the Dep t of Labor as Amicus Curiae Supporting Appellants Thole, 873 F.3d at 632. The opinion did not discuss the district court s dismissal of the Equities Strategy claims as time-barred.

14 328 Tort Trial & Insurance Practice Law Journal, Winter 2018 (53:2) excess contribution in 2014 was prompted by their lawsuit. 132 The defendants argued that they made a voluntary contribution to reduce the plan s insurance premium. 133 The Eighth Circuit agreed with the district court that the participants failed to produce evidence that their lawsuit was a material contributing factor in the defendants making the 2014 contribution resulting in the Plan s overfunded status The Eighth Circuit thus concluded that the district court did not abuse its discretion and affirmed the denial of attorney fees and costs Secretary, U.S. Department of Labor v. Preston 136 On October 12, 2017, the Eleventh Circuit held that a defendant is capable of expressly waiving the six-year statute of repose contained in ERISA 413(1). In 2004, Robert Preston, the owner and CEO of TPP Holdings, Inc. (TTP), established the TTP Employee Stock Ownership Plan (Plan), which provided retirement benefits for TTP employees. 137 The Secretary of the Department of Labor (DOL) brought this ERISA action alleging that Preston, who also served as the Plan s trustee, breached his fiduciary duties and engaged in prohibited self-dealing when, in 2006 and 2008, he knowingly caused the Plan to purchase his own company stock at an inflated price. 138 The DOL also alleged that Preston, TPP, and the Plan engaged in other misdeeds in 2008, such as failing to pay required distributions. 139 For several years prior to the DOL filing suit, the parties attempted to negotiate a settlement. 140 During that time, the parties entered into a series of tolling agreements in which the DOL agreed to delay filing suit in exchange for the defendants pledge that they would not assert in any manner the defense of statute of limitations, the doctrine of waiver, laches, or estoppel, or any other matter constituting an avoidance of the [DOL s] claims that is based on the time within which the [DOL] commenced such action. 141 The defendants acknowledged that they knowingly, willingly, and voluntarily entered into these agreements. 142 The parties failed to reach a settlement and the DOL filed suit in December 2014, one day before expiration of the agreed-upon tolling 132. Id. at Id Id. at Id F.3d 877 (11th Cir. 2017) Id. at Id Id Id Id Id.

15 Employee Benefits Law 329 period. 143 Despite the express language in the tolling agreements, the defendants moved to dismiss the complaint on the ground that all claims arising from violations that occurred more than six years prior to the complaint s filing were foreclosed by ERISA 413, the limitation-on-actions provision governing ERISA breach-of-fiduciary-duty and prohibitedtransaction claims. 144 The defendants asserted that the tolling agreements were invalid and unenforceable because 413 establishes a statute of repose that cannot be waived. 145 The district court adopted this argument and dismissed the case. 146 On interlocutory appeal, the Eleventh Circuit indicated that the principal criterion in deciding whether a limitations period can be waived is its jurisdictional character. 147 If 413 limits a court s subject matter jurisdiction, the time bar is not waivable; if instead it is a non-jurisdictional rule, waiver is permissible. 148 The Eleventh Circuit concluded that ERISA 413 s limitations period is not jurisdictional, citing multiple Supreme Court cases where the Court has found statutory limitation periods ordinarily are not jurisdictional and should be treated as jurisdictional only if Congress has clearly stated that it is. 149 Here, the court noted that the language in 413 does not refer at all to a court s jurisdiction. 150 Further, ERISA s provisions governing subject matter jurisdiction is in a separate part of the statute. 151 Thus, under Pugh, the limitations period in 413 is presumptively waivable. 152 The court then addressed the argument that 413 s limitations period nevertheless is a non-waivable statute of repose instead of an ordinary statute of limitations. 153 Whereas a statute of limitations establishes a time limit based on when the claim accrued, a statute of repose bars a suit brought after a specified time since the defendant acted, without regard to accrual of the claim. 154 The court concluded that, by its plain terms, 413 is a statute of repose because it is tied to the date of a fiduciary s last action and not 143. Id Id. at ERISA 413, 29 U.S.C. 1113, provides that an action may not be commenced after the earlier of: (1) six years after (A) the date of the last action which constituted a breach or violation; or (B) in the case of an omission, the latest date on which the fiduciary could have cured the breach or violation, or (2) three years after plaintiff had actual knowledge of the breach or violation Id. at Id Id. at 881 (citing In re Pugh, 158 F.3d 530 (11th Cir. 1998)) Id Id Id. at Id Id. at Id Id. (citing BLACK S LAW DICTIONARY (10th ed. 2014)).

16 330 Tort Trial & Insurance Practice Law Journal, Winter 2018 (53:2) based on accrual of a claim. 155 Nonetheless, the court found this does not mean the limitations period is inherently non-waivable, even by express agreement, finding this to be inconsistent with both law and logic. 156 The court remanded the case for proceedings consistent with its opinion Coburn v. Evercore Trust Company 158 In Coburn, the D.C. Circuit had its first occasion to examine the pleading requirements for a breach-of-fiduciary-duty claim involving employer stock following the Supreme Court s landmark decision in Fifth Third Bancorp v. Dudenhoeffer. 159 Coburn, a former J.C. Penney employee and investor in a J.C. Penney employee stock ownership plan (ESOP) managed by the defendant, Evercore Trust Company, claimed that Evercore breached its fiduciary duties of prudence and loyalty when it failed to take preventative action as the value of J.C. Penney common stock tumbled between 2012 and 2013, thereby causing significant losses. 160 Coburn argued that the pleading requirements outlined in Dudenhoeffer were not applicable to her allegations because she challenged Evercore s failure to appreciate the riskiness of J.C. Penney stock rather than Evercore s valuation of its price. 161 On February 17, 2016, the district court granted Evercore s motion to dismiss the complaint for failure to state a claim. 162 Primarily relying on Dudenhoeffer, the district court held that Coburn s allegations that Evercore should have recognized from publicly available information alone that continued investment in J.C. Penney common stock was imprudent were generally implausible absent special circumstances affecting the market. 163 Because Coburn failed to plead special circumstances (and, in fact, expressly disclaimed any need to plead them), the district court held that Coburn s complaint was insufficient. 164 The district court also rejected Coburn s alternative argument that, pursuant to Tibble v. Edison International, 165 Evercore violated its fiduciary duty to monitor investments and remove imprudent ones. 166 The U.S. Court of Appeals for the D.C. Circuit affirmed. Because a stock price on an efficient market reflects all publicly available information, 155. Id Id. at Id. at F.3d 965 (D.C. Cir. 2016) S. Ct (2014) Coburn, 844 F.3d at Id. at F. Supp. 3d 361 (D.C. 2016) Coburn, 844 F.3d at Id S. Ct (2015) Coburn, 844 F.3d at 968.

17 Employee Benefits Law 331 Dudenhoeffer requires additional allegations of special circumstances when a plaintiff brings a breach of the duty of prudence claim against a fiduciary based on that information. 167 In this case, Coburn failed to allege such special circumstances. 168 Recognizing this, Coburn acknowledged that her claim is not that Evercore over- or undervalued J.C. Penney stock, but instead that Evercore was imprudent for continuing to hold J.C. Penney common stock when it became increasingly and excessively risky. 169 The D.C. Circuit rejected Coburn s claim that risk is attenuated from price such that risk-based allegations are totally free from Dudenhoeffer s constraints. 170 The court held that arguing that a stock is too risky to hold at current market prices is part and parcel of the claim that that stock is overvalued. 171 iii. regulatory developments On October 12, 2017, the Department of Labor (DOL) published a proposed rule to delay for ninety (90) days through April 1, 2018 the applicability of the Final Rule amending the claims procedure requirements applicable to ERISA-covered employee benefit plans that provide disability benefits. 172 The Final Rule was published on December 19, 2016, and was scheduled to apply to claims filed on or after January 1, 2018, for disability benefits under ERISA plans. 173 The Final Rule imposes certain additional requirements related to claims for disability benefits, including, inter alia: denial notices must include a more detailed disclosure regarding the reasons the claim was denied, including disclosure of any internal rules, guidelines etc. that were used in denying the claim or a statement that none were used; appeals may not be denied based on new evidence or rationales, unless the claimant is given notice and a fair opportunity to respond; and rescissions of coverage must generally be treated as adverse benefit determinations. 174 The proposed rule notes that after publication of the Final Rule, various stakeholders and members of Congress asserted that it will drive up 167. Id. at Id. at Id Id. at Id. (citing Dudenhoeffer, 134 S. Ct. at 2471) Fed. Reg (Oct. 12, 2017) Id. at Id. at

18 332 Tort Trial & Insurance Practice Law Journal, Winter 2018 (53:2) disability benefit plan costs, cause an increase in litigation, and in so doing impair workers access to disability insurance benefits. 175 Accordingly, the DOL concluded that it was appropriate to give the public an opportunity to submit additional comments regarding the Final Rule and issued this proposed rule to allow time for such comments. 176 If the proposed rule is finalized, the Final Rule would apply only to claims for disability benefits that are filed on or after April 1, Comments on the proposed rule were due October 27, Comments on the Final Rule were due December 11, iv. conclusion Following the Supreme Court s decision in Tibble v Edison, 180 there was an uptick in ERISA litigation in 2016, particularly allegations regarding a breach of fiduciary duty to monitor investment options, excessive fees, and arrangements between plans and service providers. These new cases indicate a new line of attack on the fiduciary process regarding all aspects the administration of retirement plans. In addition, this rise in ERISA litigation was not just limited to corporate plan sponsors of large 401(k) plans, but the targets have changed and now include small plans and 403(b) plans (i.e., colleges, universities, and other tax-exempt organizations). Many of these cases have survived the dismissal phase and they should be interesting to watch in Next year should be a significant year for regulatory developments. In 2016, the Department of Labor Employee Benefits Security Administration published a final conflict of interest rule that defines who is a fiduciary of an employee benefit plan under ERISA as a result of giving investment advice to a plan or its participants or beneficiaries. 181 This rule was implemented under the Obama administration and set to take effect in In the first month of his administration, however, newly elected President Trump ordered the DOL to reexamine the rule and prepare an updated economic and legal analysis concerning its impact. 182 The full compliance deadline for the fiduciary rule has since been delayed and many speculate that the new administration will attempt to 175. Id. at Id Id. at Id. at Id S. Ct (2015) Fed. Reg (Apr. 8, 2016) See White House, Office of the Press Secretary, Presidential Memorandum on Fiduciary Duty Rule (Feb. 3, 2017), presidential-memorandum-fiduciary-duty-rule.

19 Employee Benefits Law 333 make significant modifications to the existing final rule. In addition, Congress is currently attempting to move forward with a significant tax reform overhaul measure, which among other things could include modifications to the existing regulations regarding 401(k) plans. Notably, there are no ERISA cases on the Supreme Court s docket for the term as of yet.

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