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ERISA Class Actions
ERISA Class Actions
Stock Drop Cases | Hidden or Excessive Fee Cases | Cash Balance Plan Cases | Wrongful Denial of a Pension Benefit or an Early Retirement Window Benefit | Cutback Claims | Notice Cases | ERISA 510 Claims | Representative Experience
Overview
The downturn in the economy has ushered in a substantial increase in ERISA litigation. Retirement plan-related ERISA litigation is exploding in the United States. There is approximately $10 trillion in pension plan assets nationwide, which has spawned a surge in class action lawsuits against pension plans and their fiduciaries. ERISA cases often involve tens, or even hundreds of millions of dollars. Many of these lawsuits are brought as class actions and are asserted by employees and retirees against plan fiduciaries, employers who maintain the plans, the officers of the companies, and the members of the boards of directors of the companies. The potential liability is often extremely material to the company and may include personal liability of the individuals who are “fiduciaries” of the plan. ERISA cases involve highly technical and complex issues that overlap multiple substantive areas of the law. Because of their substantive and procedural complexity and the high stakes often involved, these cases require counsel with significant knowledge and experience.
Vinson & Elkins’ ERISA Litigation practice offers a team of accomplished lawyers with a wealth of knowledge in all aspects of such litigation — including class action, securities, ERISA, and other related experience — which are vitally important in successfully defending ERISA litigation claims. In addition, partnering with our experienced group of securities litigation lawyers, we are able to simultaneously defend the companion securities fraud litigation that very often accompanies ERISA stock drop litigation.
Our ERISA lawyers understand the procedural rules peculiar to ERISA lawsuits, including ERISA preemption of state laws, exhaustion of administrative remedies, deferential standard of review, limitations on discovery, the restrictions on remedies such as punitive damages, and the limitations on jury trials. Such knowledge can help end suits early and successfully. Drawing on substantial skills and in-depth knowledge of ERISA’s substantive provisions, our law firm has been successful in making both threshold motions to dismiss and motions for summary judgment, thus avoiding or minimizing costly and disruptive discovery and trials. Equally as critical, our ERISA litigation group devotes considerable time and effort assisting our clients in avoiding ERISA litigation by improving their retirement plan documentation, administration, and claims review procedures.
Scope of Practice
Vinson & Elkins represents pension and welfare plans in ERISA litigation, along with the employer sponsors of those plans, the boards of directors of the plan sponsors, the plan sponsors’ officers, and the plan fiduciaries. The cases we defend are brought by all potential ERISA plaintiffs, including participant and beneficiary classes and individuals, third-party providers, the Internal Revenue Service, and the Department of Labor.
Stock Drop Cases
These cases began proliferating following the very public bankruptcies of several Fortune 500 companies in 2002 and thereafter, and typically involve claims that plan fiduciaries breached their ERISA fiduciary duties by retaining employer stock in the company’s 401(k) plan in a down economy or due to specific corporate events that negatively impact company stock price, and by failing to disclose to the plan participants corporate circumstances that, if known, would affect the participants’ decisions to invest in the company stock. These cases are very often accompanied by companion securities fraud cases. An employer is vulnerable to this type of class action lawsuit if the company’s 401(k) plan has employer stock as an investment option, and the stock has declined significantly in value.
Hidden or Excessive Fee Cases
These cases have become prevalent in the last couple of years and will likely increase with new fee disclosure rules under ERISA. All employers that maintain a 401(k) plan, the plan fiduciaries of 401(k) plans, and all recordkeepers that provide services to 401(k) plans are vulnerable to this type of class action lawsuit. They involve claims by participants that plan fiduciaries (1) failed to disclose to participants all of the administrative fees that are deducted from the participants’ accounts (either directly or indirectly) and (2) paid more than reasonable compensation to the recordkeeper thus violating ERISA’s fiduciary duty and prohibited transaction rules. These cases are often accompanied or followed by non-ERISA claims by plan fiduciaries that the recordkeepers violated securities laws by failing to disclose to the plan fiduciaries compensation sharing arrangements between the recordkeeper and the mutual funds in which the plan is invested.
Cash Balance Plan Cases
These cases highlight the extreme complexities of ERISA and pension plans and generally involve claims that cash balance plans run afoul of the age discrimination rules and/or the anti-cutback provisions of ERISA. All employers that maintain cash balance plans, especially those cash balance plans that were converted from traditional defined benefit plans, are vulnerable to this type of class action lawsuit.
Wrongful Denial of a Pension Benefit or an Early Retirement Window Benefit
Every employer with a retirement plan, especially those with defined benefit plans or those who have implemented early retirement window programs related to downsizing initiatives, is vulnerable to this type of class action lawsuit. These cases involve claims by employees and retirees that the pension plan owes them additional benefits because ERISA was violated (e.g., by a wrongful amendment to the plan, by failing to construe the terms of the plan properly, by failing to follow ERISA’s claims procedures, by failing to issue a 204(h) notice announcing the reduction of future benefit accruals when required, or by having a poorly drafted early retirement window program). These lawsuits have significantly increased in recent years due to the discovery by plaintiffs’ lawyers that many pension plans in the U.S. have some administration or amendment error connected with the plan or are often not administered in strict compliance with the procedural regulations governing administrative claims processes mandated by ERISA.
Cutback Claims
These cases generally involve challenges by classes of current and former employees against a plan sponsor of a defined benefit plan that an amendment to the defined benefit plan resulted in a cutback of participants’ accrued benefits and violated ERISA section 204(g) and/or the contractual terms of the plan.
Notice Cases
Notice cases generally involve claims by participants and beneficiaries that the plan failed to give (1) plan documents within 30 days of request by participants, (2) notice of failure to make payment of a required funding obligation under a defined benefit plan, (3) notice of the underfunded status of a defined benefit plan, (4) a black-out notice, such as in connection with a change of plan recordkeepers, (5) a notice of right to divest company stock, (6) a notice of transfer of defined benefit plan assets to health benefits accounts, (7) COBRA notices, and (8) other required notices. Under ERISA, penalties of up to $1,000 per day can be imposed for many of these failures and when multiplied across a large participant population, the stakes in such litigation can be quite high.
ERISA 510 Claims
These cases often follow an employer’s reduction in force and involve claims by participants that the terminations were effected in order to prevent the class of terminated participants from receiving or vesting in benefits to which they would otherwise have been entitled.
Representative ExperienceV&E obtained the dismissal with prejudice of an ERISA class action stock drop case filed against our client Blockbuster by participants in Blockbuster’s 401(k) plan; the claims were asserted against Blockbuster, the administrative and investment committees of the Blockbuster plan, and certain of Blockbuster’s officers and directors; plaintiffs alleged that the members of Blockbuster’s retirement and investment committees breached their ERISA fiduciary duties by (1) imprudently retaining Blockbuster stock in the plan and (2) failing to disclose adequate information concerning the stock and the impact of Blockbuster’s split-off from Viacom; the court granted Blockbuster’s motions to dismiss on all counts; V&E also obtained the dismissal of companion securities fraud class actions and a Delaware chancery court action We successfully defended our client Cirrus Logic, Inc., against claims over backdating of stock options; a federal court granted final approval to a highly favorable settlement of derivative lawsuits filed against our client; V&E lawyers successfully argued that there was no actionable conduct and that, even if there were, no damages could be assessed; when all was concluded, none of the individual defendants were required to pay anything, and the company was made nearly whole for its out-of-pocket expenses associated with the litigation V&E successfully defended AT&T in a case in which plaintiffs alleged they were entitled to additional benefits under AT&T’s ERISA pension plan because the plan administrator had interpreted the language of the plan in a manner contradicted by its own terms; the plaintiffs alleged various violations of ERISA, including failure to follow the terms of the plan and breaches of fiduciary duty, and sought declaratory and injunctive relief as well as additional benefits; V&E persuaded the district court to deny a motion for class certification and subsequently to grant the AT&T defendants’ motion for summary judgment, and the Fifth Circuit affirmed V&E represented a multi-national oilfield services company; we successfully defended the company’s profit-sharing plan against an alleged partial termination resulting from a major reduction in force; as a result, 11,000 continuing plan participants received contributions to the plan accounts that would otherwise have been distributed to employee participants terminated in the reduction in force; after prevailing in the United States Tax Court, we successfully defended the tax court judgment in the Fifth Circuit Court of Appeals V&E defended a major insurance company in litigation in Texas, North Carolina, and New York against claims that the design of the company’s voluntary early retirement program unlawfully discriminated against the class of managers who were excluded from the plan and that plaintiffs were terminated for the purpose of interfering with the attainment of rights under the various pension or other benefit plans maintained by the company; the case in North Carolina was dismissed on summary judgment by the district court and affirmed by the Fourth Circuit; the case in New York was dismissed by summary judgment and affirmed by the Second Circuit; the case in Texas was settled V&E defended a multi-national integrated energy company in a class action in which a claim of $600 million in damages was sought for an alleged failure to properly calculate payout to employees who participated in a subsidiary's ESOP when that subsidiary was sold; the issues involved plan interpretation, values of oil and gas pipeline properties, and the fiduciary duties of the sponsoring company, ESOP Committee, and trustee; after multiple-day mediation, the case was settled on favorable terms for far less than claimed; V&E sought and obtained approval of the settlement from the district court over objections from members of the class V&E defended a major U.S. steelmaker’s pension plan against allegations by a class of individuals alleging they were entitled to a special pension benefit based on age and service as a result of our client’s transfer of assets to a joint venture; judgment was entered by the district court in favor of defendants V&E successfully defended a global energy company in a putative class action alleging non-compliance with ERISA notice requirements and seeking more than $1 billion in statutory penalties on behalf of thousands of class members; the court stayed discovery at our request pending decision on our threshold motion for summary judgment, and subsequently entered summary judgment for our client V&E is representing an international airline and its retirement plan in a putative class action brought by retired pilots who allege that they were denied benefits due to a misinterpretation of their collective bargaining agreement and the company's pension plan
See more ERISA Litigation representative matters.
Prior results do not guarantee a similar outcome.
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