Are Forum Selection Clauses Valid Under ERISA?

Posted By Stephen D. Rosenberg In Benefit Litigation , ERISA Statutory Provisions
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So the Supreme Court, for the second time, has now taken a pass on ruling on whether ERISA plans can contain forum selection clauses. As this article notes, a number of courts have enforced forum selection clauses in ERISA-governed plans, essentially treating them the same in that context as they would be treated in an action involving a typical private contract, where parties are generally free to select a forum for their disputes.

The on-going dispute over the question of whether plan sponsors can properly include forum selection clauses in plans, and the Supreme Court’s most recent pass on the issue, always makes me think of a comment I recently heard from a federal court judge, who was speaking about her sense that ERISA litigators tend to see themselves – and the area in which they work – as unique and distinct (we are, by the way, and so is the area in which we work!). The judge said that she felt the message from the Supreme Court in its various decisions over the years on ERISA cases, including on what issues not to even consider, was that ERISA is not a world of “special snowflakes” (the judge’s words, not mine) and that most ERISA issues should be governed by the same procedural and substantive rules as would govern most other private, commercial cases, unless there was something in the statute itself dictating a different approach. In other words, I think, this judge would argue (and these are now my words and my speculation, not hers) that since ERISA does not expressly address the propriety of forum selection clauses, the generally applicable standards in the federal courts should govern the issue.

At the same time, though, the statute does contain an express venue provision, but one which admittedly does not expressly void private contracting over venue. It is widely accepted that the venue provision in the statute provides broad venue options to plan participants, and that Congress intended to remove procedural barriers to obtaining redress. Now, I have to say that this depiction has become settled dogma, and I have often wondered whether the statutory history actually supports this assessment as to why the statute contains such a broadly worded venue provision, but nonetheless, this is the interpretation of the statute’s venue provision that we currently operate under. If that premise is accepted, though, it becomes hard to argue with the alternative view that, in fact, when it comes to venue, ERISA is a “special snowflake,” and so too are those who sue under it. If the statute was specifically given a broad venue provision for the express purpose of more fully arming plan participants who sue to enforce their rights, than clearly the statute requires treating any issue involving venue as unique to ERISA and its context, and not just like any run of the mill federal court action.
 

The Church Plan Cases at the Supreme Court: A Billion Here, A Billion There and Soon You Are Talking Real Money

Posted By Stephen D. Rosenberg In Class Actions , ERISA Statutory Provisions , Employee Benefit Plans , Pensions
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Several years ago, when the first of the class actions were filed alleging that medical institutions were improperly claiming church plan status under ERISA, I was speaking on a panel at one of the American Conference Institute’s ERISA Litigation conferences, where I found myself eating lunch with two of the lead lawyers on those class action cases. I raised for them – and someone else would eventually ask the same question during their presentation on the church plan class actions – the question of damages. In particular, I wondered what they would ask for, and whether the defendants could afford it. I assumed that part of the relief would be to have the plans made compliant with the full panoply of ERISA’s procedural, notice, plan communication, claims processing, funding and other requirements. But that, I noted, was the easy part; it would only require the defendants to essentially hire really good ERISA lawyers and administrators and fix the plans. But what about the money? Could the defendants fund the massive shortfalls that the plaintiffs were claiming existed in the plans?

Well, of course they could, was the answer. And the size of some of the settlements of those actions to date indicate that truer words were never spoken. As Jacklyn Wille of Bloomberg BNA notes in this article, some of these lawsuits have been settled with the defendants agreeing to contribute from $75 million to as much as $350 million to the challenged pension plans. The defendants in these actions can, it appears, generally afford to fund the plans on the level required by ERISA. The numbers at issue across all of the targeted plans are breathtaking, running into the billions across all of the targeted entities and plans, making the stakes of the Supreme Court’s upcoming consideration of the scope of the exemption and whether these types of entities have properly invoked it among the highest – from a purely financial perspective – of any dispute I can recall coming before the Court recently. As Ms. Wille writes, “the lawsuits claim that more than 300,000 hospital workers face a pension shortfall of about $4 billion because hospitals have wrongly designated their pension plans as ‘church plans’ exempt from the Employee Retirement Income Security Act.” Expect to see no expense spared in the briefing at the high court.
 

The Year in Review: Looking Back at ERISA Litigation In 2016

Posted By Stephen D. Rosenberg In Benefit Litigation , Class Actions , ESOP , Fiduciaries
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2016 was the year that church plans went to the Supreme Court, excessive fee claims came to elite universities and the Department of Labor’s authority to alter its regulation of fiduciary conduct was challenged in multiple courts. Of course, stock drop litigation, excessive fee cases, and other assaults on the make up of 401(k) plans continued apace, even if they yielded the spotlight to flashier, more novel types of cases.

Church Plans Go To the Supreme Court

Over the past few years, at least 36 class action suits have been filed across the country against large medical institutions affiliated with religious entities attacking the status of their retirement plans under ERISA’s exemption for church plans. The lawsuits assert that these plans are not properly within that exemption and therefore must be brought compliant with ERISA. The relevant statutory language governing that exemption – which allows retirement plans to escape regulation under ERISA if they qualify as “church plans” – lacks clarity and leaves room to dispute when a plan qualifies for the exemption. Medical institutions affiliated, even if only remotely, with religious organizations have long designed their retirement plans without adhering to the strict terms of ERISA in reliance on a broad interpretation of the exemption’s scope taken by the Internal Revenue Service. Three federal courts of appeal have now narrowly construed the exemption in a manner contrary to the reading given it by regulatory agencies. The United States Supreme Court recently agreed to address this issue and decide the proper meaning to be given to ERISA’s church plan exemption.
 

Elite Universities Get the Excessive Fee Treatment

Perhaps the biggest media sensation in ERISA litigation in 2016 was the coordinated and nearly simultaneous filing of multiple lawsuits against many of the nation’s most prestigious universities. The suits, almost all of them filed by Schlichter Bogard & Denton LLP, which pioneered the concept of suing private industry 401(k) plans for excessive fees and undisclosed revenue sharing, accuse universities of paying excessive fees and having other allegedly costly deficiencies in their retirement plans. The lawsuits charge the plans with the typical panoply of complaints about retirement plans built around investment menus, including the use of overly expensive investment choices and excessive administrative costs. However, the suits also charge that the university plans not only include excessive fees and costs, but also an excessive number of investment options leading to poor returns for individual participants.  

The Department of Labor Fiduciary Rule Litigation

If the litigation campaign mounted against university retirement plans was not the biggest media splash in the world of ERISA litigation in 2016, then it was only because it was eventually overshadowed by the high profile lawsuits filed seeking to set aside the Department of Labor’s new regulations concerning the definition of fiduciary under ERISA. Not long after the Department issued its new regulations, six different lawsuits were filed in multiple federal courts seeking to have the regulations set aside, arguing that, among other claims, the Department’s regulations exceeded its authority or, if not, then the Department’s rule making was suspect. The courts have upheld the Department’s rule making in two of the cases, while the other actions remain pending.

“Stock Drop” Litigation After Dudenhoeffer

“Stock drop” cases continued along their merry way during 2016, even if the theory of liability, and related cases, fell from the lofty perch they had long held as a hot litigation topic. The term “stock drop” has long referred, in this context, to claims arising from the loss in value of a retirement plan holding that consists of the publicly traded stock of the plan sponsor. Clever lawyering had insulated plan fiduciaries from incurring liability as a result of large losses in the value of such holdings through the creation and enforcement of a legal rule known as the “Moench presumption,” which held that fiduciaries could not be held liable for declines in the value of company stock held in retirement plans absent extraordinary circumstances, such as an existential threat to the company’s very existence. Back n 2014, however, the United States Supreme Court rejected that test in Fifth Third Bancorp v. Dudenhoeffer, holding instead that fiduciaries are subject to liability if they were imprudent in managing or overseeing company stock holdings.

In 2016 , litigation continued apace over dramatic declines in company stock prices and their impact on the value of retirement accounts. However, despite the loss of the “Moench presumption,” overall, plan sponsors and fiduciaries generally fared well in defending against such claims. The highest profile court decision in 2016 in this area was likely Whitley v. BP, PLC, which was a stock drop claim arising from the explosion of the Deepwater Horizon offshore drilling rig, resulting in “a massive oil spill in the Gulf of Mexico and a subsequent decline in BP's stock price.” The Court held that there was no viable defensive action the fiduciaries could have taken to protect the value of the company stock holdings in the plan that would not have simply inflamed the collapse in the stock price, and that this precluded liability for breach of fiduciary duty due to the loss of value in the holdings of company stock.

The central issue in the Whitley action turned out to the be the key issue in stock drop cases during much of 2016, and clearly will be moving forward into 2017 as well: namely, the need for plan participants to prove, for their stock drop claims to proceed, that plan fiduciaries could have taken an action during, or before, the collapse in value of company stock that would have made the situation better, and not worse.
 

Continued Litigation Over 401(k) Plans

Last but not least, 2016 saw the continuation of extensive litigation over the investment options in 401(k) plans. Many of these claims, both those newly filed in 2016 and those that were filed earlier but that continued to be litigated, were excessive fee cases, alleging that plan fiduciaries included investment options in plans that were more expensive – thus generating excessive fees for vendors – than were necessary. One of the foundational cases alleging this theory, Tibble v. Edison International, continues along after 10 years of litigation, including multiple trips to the Ninth Circuit Court of Appeals and one to the United States Supreme Court. In 2016, the Ninth Circuit reinstated the claims of plan participants that the fiduciaries breached their fiduciary duties by failing to monitor, and then remediate, excessively high fees charged by investment options in the company’s 401(k) plan.

One of the key trends in litigation in 2016 was the expansion of such lawsuits to include more novel and arguably sophisticated theories beyond simply alleging that fees were paid that were higher than necessary. One high profile example consists of the many claims filed charging that financial and similar companies included their own in-house products in the retirement plans of their own companies for the purpose of generating outsize fees for the plan sponsor, in breach of the fiduciary duty to manage the investments for the benefit of the participants. The year 2016 saw an expanding panoply of theories for attacking investment options and other aspects of the administration of 401(k) plans, and more of the same can be expected going forward.
 

I Predict the Future in Planadvisor

Posted By Stephen D. Rosenberg In 401(k) Plans , Benefit Litigation , Class Actions
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I, and a cast of other ERISA Nostradamus[es], claim to foretell the future of ERISA litigation – by gazing back at the past year – in this new article in Planadvisor, titled “Expect More Varied ERISA Litigation in 2017.” I am quoted in the article on the trend line of stock drop litigation, but also point out more generally that “the year 2016 saw an expanding panoply of theories for attacking investment options and other aspects of the administration of 401(k) plans, and more of the same can be expected going forward.” The article is worth a read, especially if, like me, you need to fill the quiet hours of the last day before the holiday week.

Sanders v. The Phoenix Insurance Company Is a Comprehensive Insurance Coverage Decision, But Have Bad Facts Again Made Bad Law?

Posted By Stephen D. Rosenberg In Coverage Litigation , Coverage for Professional Services , Defense Costs , Duty to Defend , Duty to Indemnify , Homeowners Insurance
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So this is interesting, from a couple of perspectives. The First Circuit Court of Appeals has issued a fairly comprehensive opinion addressing a number of issues in insurance coverage law in Massachusetts. The facts are a little salacious, and read more like a John Grisham plot than real life, but unfortunately, odd facts often underlie key decisions in insurance law. I say unfortunately because it means that many decisions concerning insurance coverage are often so unique to their unusual facts that they can easily be distinguished away by litigants in other cases, leaving parties with less guidance for future conduct than one would expect to glean from the case law. This case is a perfect example: I will bet this fact pattern will never, ever repeat itself in an insurance coverage dispute.

Nonetheless, this case has some discussions that apply broadly enough that the ruling can easily be expanded to other cases. For instance, the Court answers the question of whether Chapter 93A demand letters – which Massachusetts law requires a party to send to a business before suing it for unfair trade practices – can trigger a duty to defend. The Court held that it cannot, and distinguished away a key, longstanding Massachusetts decision that many lawyers have used for years to argue to the contrary. Still, I have to say that even on this point, I am not totally convinced that the issue is settled after this decision; I think there will be room to argue to the contrary in other cases that involve other fact patterns and, more importantly, somewhat different policy language. Personally, I am skeptical that, although the decision suggests that it should be or is the rule, no Chapter 93A demand letter, no matter what relief it seeks or the details of the claim, can ever trigger coverage under any policy language.

I would also highlight the Court’s analysis of the issue of whether an assignment of rights to the claimant from the insured gave rise to a viable claim for recovery against the insurer. The Court found that policy language governing when the insurer agreed to be sued precluded such a claim. It would be beyond the scope of a relatively short blog post to explain why that ruling has some wobbly legs underneath it, but suffice it to say, as I do in this article in Massachusetts Lawyers Weekly on the case, that, after this ruling, lawyers who are considering assigning insurance rights as part of a settlement need to carefully consider whether there is any value to doing so in Massachusetts.

The decision is Sanders v. The Phoenix Insurance Company, which you can find here.
 

DOL 1, Critics of the New Fiduciary Regulations 0: Comments on NAFA v. Perez

Posted By Stephen D. Rosenberg In Fiduciaries
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Well now, I wrote a few substantial posts on the multiple lawsuits challenging the Department of Labor’s new regulations governing fiduciary status at the time they were filed, a couple of which you can find here and here. One of my key points was that it is a mistake to get lost in the meta story made in the complaints in those actions, which are effectively – using the term in its broadest form – political documents making the case that the regulatory changes are just plain bad. In a way, the complaints in those actions read almost like old fashioned political pamphlets with regard to the big picture criticisms made in them, while having technical legal arguments buried beneath. That is not a criticism, not to me anyway. Hitting all of those notes in the same complaint is a tough job, and it was done well. But as I suggested in this post, if you looked past the polemics and focused on the administrative law challenges to the promulgation of the rules that are the actual technical heart of the complaints filed against the Department, it was right to be skeptical of the complaints and the claims against the Department seeking to set aside the new regulations. The scope of a challenge to this type of administrative and regulatory action is highly specific and its grounds narrow; skepticism about the various plaintiffs’ abilities to prove their claims was warranted, given the massive effort by the Department in promulgating the regulations and the history of what occurred when they did so.

That skepticism is borne out in the first substantive ruling by one of the courts with a challenge to the Department’s new regulations pending before it. The United States District Court for the District of Columbia has roundly rejected the plaintiff’s arguments in that case, firmly upholding the Department’s actions. The decision is 92 pages long and I doubt that many people spent their weekend reading it, and while I did, I don’t want to spend my whole morning summarizing it. And why should I? Nevin Adams at NAPA has done a great job of that already, right here in this story.

One of the things I like about his summary is that he really drives home the extent to which the court found that the Department acted within its regulatory authority and power. That, as I noted above, is the real central point in all of the lawsuits filed over the new fiduciary regulation, as opposed to the question of whether the financial and insurance industries should be put in the position of having to comply with the accompanying changes to industry practice, which is more properly a question for the political – and not the judicial – process.
 

Upcoming Webinar on Retirement Plan Risk Management: An Overview

Posted By Stephen D. Rosenberg In ERISA Seminars and other Resources , Employee Benefit Plans , Retirement Benefits
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I had fun speaking on ERISA litigation remedies with Eric Serron of Steptoe and Joe Barton of Cohen Milstein this past Thursday at the American Conference Institute’s 13th National Forum on ERISA Litigation. Since Eric’s exclusively a defense lawyer and Joe’s exclusively a plaintiff’s lawyer, Michael Prame of Groom Law Group, when introducing the panel, pointed out that it was up to me to keep them at bay, since I represent both plaintiffs and defendants in ERISA litigation. I felt a little like the moderator of the McLaughlin Group by the time our hour was up (well, really 55 minutes, but I am the son of two psychologists, so I consider that an “hour”), but I thought the structure really drove home how diametrically opposed the views of the defense bar and the plaintiff bar are on many ERISA issues.

On Wednesday, November 2, I will switch gears though, and present a much more collaborative webinar with Susan Mangiero – who knows more about the financial side of retirement plans than most of us have forgotten – on the current risk and operational environment faced by pension plans. The webinar is offered by PRMIA, and the title tells you what its about: “Retirement Plan Risk Management: An Overview.” As the program’s overview explains:

According to estimates, global retirement assets are huge at $500 trillion. Improper decision-making about plan design, investment and risk mitigation could have an adverse impact on millions of individuals to include employees, retirees, taxpayers and shareholders. Service providers such as asset managers, banks and insurance companies are likewise impacted by bad governance and unchecked risk-taking. Everyone has a stake in the financial health of the worldwide retirement system and whether uncertainty is being adequately identified, measured, managed and monitored, especially now. New regulations, a flurry of fiduciary breach lawsuits, low interest rates, the complexity of modeling longevity, increased risk-taking, need for liquidity, cost of capital and worker mobility are just a few of the challenges that keep retirement plan executives, participants and their advisors up at night.

I think that’s a pretty fair view from 30,000 feet of the world of retirement plans, and I am looking forward to discussing it, along with Susan, at the webinar.

You can find registration material for the webinar here.
 

When Are Defense Counsel's Fees Relevant to an Attorney Fee Claim by a Plaintiff under ERISA?

Posted By Stephen D. Rosenberg In Attorney Fee Awards
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Wow, this is fascinating. The “this” in question is an interesting little twist in litigation over an attorney fee award to plaintiff’s counsel in the long running ERISA litigation, Frommert v. Conkright. Attorney fee awards in ERISA litigation are a fascinating sub-issue in and of itself, for a number of reasons. First, it is one of the few areas of American law in which the American rule – all parties pay their own legal fees – is overridden in favor of a modified system of loser pays. While there are various statutes that allow such an award, few, if any, actually give rise to such awards on the frequency that they are granted in ERISA cases. Second, ERISA provides a great deal of flexibility and discretion to courts in making such awards, and the manner in which courts handle them suggests why tort reform advocates of a loser pays system across the board are likely barking up the wrong tree: 40 years of experience with a modified form of loser pays in ERISA litigation suggests that all sorts of exemptions, exclusions and rules of thumbs arise in such systems that are intended to enforce equity, even in the face of a loser pays regime. For instance, even though a court could theoretically grant attorneys fees to a prevailing plan sponsor that defends a case, when is the last time you saw that happen? And if you have, can you count on the fingers of one hand the number of times you have seen it happen?

Moreover, litigation over attorneys fee awards is often resolved without anyone wanting to look too closely under the hood of fee requests, for fear of what people might find. This article on fee litigation in Frommert is the perfect example. The defendant challenged the rates requested by the prevailing attorneys, claiming that a much lower rate would be reasonable. This is a common argument, and, when made by a losing party in motion practice over fees in an ERISA case, most often just leads to the judge declaring and then applying some particular rate that seems fair to the judge. In my experience, it is usually some discount off of what prevailing counsel wanted to have applied, but nothing like the haircut counsel for the losing party sought. In Frommert though, the Court has apparently responded to that argument by the defendant by ordering disclosure of the rates charged by the defendant’s counsel, on the thesis that it represents the best proxy for determining what a reasonable rate for plaintiff’s counsel should be in the case. I can guarantee you, by the way, that it is much higher than the relatively low rate that defense counsel argued, on the fee request, would be the reasonable rate to use in calculating a fee award (and I am sure the judge knows this as well).

I am sure the defendant has no desire to disclose this information. There is a more important point here, however, which is the lesson that you always have to be careful what you argue for in motion practice over fee awards in ERISA case, because otherwise you risk the court or the opposing party opening doors that you might have preferred stayed closed.
 

A Tale of Two Cases, or Why Bad Facts Make Bad (Stock Drop) Law

Posted By Stephen D. Rosenberg In 401(k) Plans , Fiduciaries
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I will be sharing a dais with Joe Barton later this month at the 13th National Forum on ERISA Litigation, where we are both part of a panel that is discussing equitable remedies under ERISA. Joe won an interesting case before the Second Circuit recently, Severstal Wheeling Retirement Committee v WPN Corporation, in which the Court held that the fiduciaries had breached their duties by failing to properly diversify the plan holdings. While the decision is interesting in a number of ways, what caught my eye about the Court’s opinion was the focus on very specific and concrete facts demonstrating a close link between the fiduciaries’ specific acts and losses to the plan. The Court drilled down into the conduct at issue, and found a very specific action or series of actions that breached the defendants’ fiduciary duties. This is worth noting because most successful fiduciary litigation – and by that I mean successful in the courtroom, not just at the settlement table – has this type of narrow, concrete linkage in common; think back to the first big breakthrough excessive fee case, Tibble, and the trial court’s focus on one specific fee aspect of the case.

In contrast, fiduciary breach cases that are based on a more generalized complaint about fiduciary conduct tend to fizzle out, and you see this nowhere more clearly than in the stock drop cases. Writing the other day about the Fifth Circuit’s decision rejecting a stock drop claim based on the impact on BP’s stock price of an oil rig explosion, I pointed out that stock drop cases are turning against the plaintiffs’ bar, and suggested that the BP decision was a good example of why that was the case: because the factual linkage between the underlying event giving rise to the stock drop and the fiduciary actions of the plan’s fiduciaries was too attenuated to support a compelling claim. In other words, at the heart of much of the failure of the stock drop claims is the old maxim that bad facts make for bad law. Many of the stock drop claims, and the BP case is the perfect exemplar, are simply based on facts that don’t easily lend themselves to concluding that a plan’s fiduciaries acted improperly. As the Second Circuit’s decision in Severstal Wheeling Retirement Committee v WPN Corporation reflects, although obviously not in the context of a stock drop claim, a close link between plan losses and fiduciary acts is a necessary prerequisite to a compelling claim.

Will stock drop claims eventually come back into fashion, perhaps after the next stock market downturn? Will they ever be successful? I think the answer to both is likely yes, but as to the latter, only if and when they start being tied much more closely to specific and concrete acts of fiduciaries and are no longer based on broad claims that essentially treat fiduciaries as somehow able to protect plan participants against the risk of declines from any and all corporate actions. That last dog simply won’t hunt, to borrow an old saying from my youth spent on the line where Baltimore’s suburbs ended and its remaining farmlands began.
 

Whitley v. BP, Stock Drops, and the Outer Limits of Fiduciary Responsibility

Posted By Stephen D. Rosenberg In 401(k) Plans , Class Actions , ESOP , Fiduciaries
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There is an old political saying that where you stand depends on where you sit, which, roughly translated, means that people tend to assert positions that are beneficial to their own organizations and employers, rather than based upon a consideration of broader issues. The author of the maxim, Rufus Miles, thinks the idea goes all the way back to Plato.

I often think of this maxim, known as Miles’ law, when ERISA litigators comment on prominent court decisions affecting ERISA claims, particularly breach of fiduciary duty actions. Lawyers from firms who primarily or exclusively represent major financial companies or plan sponsors always speak well of defense oriented decisions, and those who represent participants, particularly class action lawyers, always speak poorly of such decisions. The reverse, of course, tends to occur when a court issues a decision that seems to expand liability under ERISA or to favor participants on even a superficial or procedural level.

For me, probably because I represent the full range of actors in the ERISA universe, from participants to plan sponsors to third party administrators to fiduciaries and back again, I tend to be pretty agnostic about prominent decisions issued by courts on key ERISA issues. Some are good, some are bad, some are just plan poorly reasoned and worthy of criticism no matter which side of the “v” you favor.

One I am not particularly critical of is the clear trend line against participants in the so-called stock drop suits, involving claims of breach of fiduciary duty based upon collapse in the stock price of company stock held in employer plans, at least in cases where plan participants always had the option of diversifying out of those holdings but instead voluntarily kept too much of their retirement holdings in company stock. As I have written before, how many economic cycles does one have to live through to know that keeping a large portion of your retirement assets or other wealth, voluntarily, in the stock of your publicly traded employer might just not be the best idea?

But leaving that caveat aside, it is necessary to maintain some strong bars to such claims, because otherwise they simply become a back door avenue for plaintiffs’ firms to prosecute securities litigation, only in this instance, under ERISA, which – for all its reputation as a defense-oriented statute – is a more flexible basis for pursuing such claims than are the securities laws at this point. Stock drop claims more properly belong under the securities laws and its doctrines, and should be evaluated under them. Now don’t get me wrong: I am not saying there cannot be a fiduciary breach for purposes of ERISA related to employer stock that warrants a claim under ERISA under all circumstances, but only that stock collapse, without more, is really simply securities litigation in ERISA clothing.

I have always believed that the Supreme Court’s decision in Dudenhoeffer was a fine piece of line drawing in this regard, allowing such claims in a narrow class of circumstances but limiting them to a degree sufficient to maintain a firm distinction between securities law and ERISA’s fiduciary standards. I believe the post-Dudenhoeffer decisions out of the district courts and federal courts of appeal have demonstrated that this is an accurate view of that decision, including the most recent high profile decision on this issue, the Fifth Circuit’s decision this week in Whitley v. BP, PLC. Whitley was a stock drop claim arising from one of the more notorious environmental disasters in recent years, with the participants claiming that the loss in the value of their company stock holdings that resulted from it was attributable to fiduciary violations by the plan’s fiduciaries. As the Fifth Circuit explained:

On April 20, 2010, the BP-leased Deepwater Horizon offshore drilling rig exploded, causing a massive oil spill in the Gulf of Mexico and a subsequent decline in BP's stock price. The BP Stock Fund lost significant value, and the affected investors filed suit on June 24, 2010, alleging that the plan fiduciaries: (1) breached their duties of prudence and loyalty by allowing the Plans to acquire and hold overvalued BP stock; (2) breached their duty to provide adequate investment information to plan participants; and (3) breached their duty to monitor those responsible for managing the BP Stock Fund.

After much procedural maneuvering by the plaintiffs to try to plead a viable breach of fiduciary duty theory involving this fact pattern, the Fifth Circuit eventually dismissed the action, finding that the plaintiffs could not satisfy the standards for stock drop claims after Dudenhoeffer. Procedurally and doctrinally, it reads to me as a correct ruling. But there is more to it than that. If you step back and think about this case as a whole – and not just based on where you sit in terms of who should bear the losses from a stock drop, the employees or instead the employer – the decision makes even more sense. There is an awful long distance – both literally and metaphorically - between an offshore drilling rig and the plan fiduciaries sitting in an office somewhere deciding to offer company stock in a retirement plan. To borrow a concept from tort law, there is an almost inconceivable number of breaks in the chain of causation between the decision making of the fiduciaries and a loss stemming from this event. Although I fully understand how one can connect the dots, it is really pushing the outer limits of fiduciary responsibility to do so.