Baseball, Hot Dogs and Class Action Lawyers

Posted By Stephen D. Rosenberg In Class Actions , Percentage Players Die Broke Too: Notes on Litigation and Trial Tactics
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One of my favorite kid friendly, safe for work jokes:

Q: Moose walks into a bar. What’s he say?
A: Ouch.

If you like that one, how about this one:

Q:Woman buys an expensive seat at the ballpark. What’s she say?
A: Get me a class action lawyer!

And if you like that one, you will like my pal Randy Maniloff’s (even if he did blow me off for dinner the last time I was in Philadelphia) Op-Ed piece in the Wall Street Journal this past weekend on the Oakland A’s ticket holder and her lawyer who have filed a class action suit against Major League Baseball alleging that protective netting should be installed the length of the baseline seating in ball parks. Now, I am not one to make fun of lawsuits by referencing the old saw about the woman who was burnt by McDonald’s coffee and received a large jury verdict afterwards, which tort reform people always try to use to support their claims that we need to crack down on plaintiffs and their lawyers; as I have discussed before, if you look behind the self-serving rhetoric about that case, you find that it doesn’t actually demonstrate a misuse of the court system. But Randy makes very good points about the frivolity of this particular class action suit, ranging from the fact that the plaintiff has elected expensive seats over cheaper seats where there is no possible risk of injury from foul balls, rendering her complaints self-serving (to say the least), to the fact that the case probably cannot survive the types of filtering events (such as motions to dismiss, class certification standards, etc.) that serve to weed out non-meritorious class actions.

But what is most interesting about Randy’s Op-Ed is that he notes the real, fundamental problem with the proposed class action, which is that the law has long applied a sort of caveat emptor approach to the risks faced by baseball fans of being hit by foul balls and broken bats: as Randy discusses, the law pretty much says such fans are not entitled to sue over such harms, on the thesis that they assume the risk by going to the ballpark. This has its own interesting subtext, having to do with the extent to which baseball is woven into the national fabric and the extent to which the development of the common law reflects that fact. But that is a story for another day, and one best explored by a more skeptical writer than me.

The more telling and immediate issue is a point that underlies Randy’s piece, which is that the law maintains such principles disfavoring claims of injuries by fans. One has to ask, though, whether today such a legal approach should continue, as team owners take every step open to them to increase profits, including – such as at Fenway Park – adding seats that are ever closer to the field (and which thus increase the risk of injury, by placing paying customers ever closer to the action, even though – unlike the twenty something world-class athletes they are now only a few feet away from on the field - they certainly lack the reactions to avoid batted balls and the like). At what point does the quest for profits by increasing the risks to customers require revisiting any rules that make it difficult for an injured baseball fan to sue if seriously hurt by a batted ball? If – taking this example from cases I have tried – a company makes a product that is more dangerous than necessary so that it can make more money from its sale, the law doesn’t bar an injured customer from asking for recompense. Should baseball team owners who have increased their customers’ risks in the pursuit of ever higher revenue be immune from answering for it in court in the same way? I don’t profess to have studied the question enough to know the answer, but I have certainly studied it enough to ask the question.

Do You "Work For" Uber?

Posted By Stephen D. Rosenberg In 401(k) Plans , Class Actions , Employee Benefit Plans , Long Term Disability Benefits , Pensions
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You know, the Uber decision out of the California Labor Commission is fascinating, even if it isn’t directly on point with the subject of this blog. It immediately brought me back to the first appeal brief I ever wrote, as a young associate, which concerned, at its heart, the question of whether the plaintiff was an employee or instead an independent contractor. In Massachusetts, at least at that time, there was significant authority laid out in published cases as to the test for determining whether someone was an independent contractor, but essentially no such statements in the published decisions defining what makes someone an employee. I wrote the brief from the perspective of whether the plaintiff in that case qualified as an independent contractor under the standards laid out in the case law, demonstrated that the plaintiff did not satisfy those standards and thus was not an independent contractor, and that the plaintiff was therefore, by definition, an employee. What stands out to me, though, and creates my lens for viewing the Uber decision, is that the partner I turned the brief into read it once and then immediately said to me that I had shown the plaintiff was not an independent contractor, but that he did not see why that made the plaintiff an employee. I can remember explaining to him that under Massachusetts law, and really anywhere in the country, someone has to be one or the other, either an employee or an independent contractor, and that the case law analyzed the issue in that way: if the relevant legal test does not demonstrate independent contractor status, than the person in question is by definition an employee.

It has never struck me that Uber drivers and similar “workers,” for lack of a better word, fit comfortably within those traditional understandings, that one is either an independent contractor, as we have traditionally understood the phrase, or an employee. They are clearly entitled to more protections and benefits than the society at large and employment law in general extend to independent contractors, as they don’t really fit the traditional understanding of that term, no matter the clever machinations of Silicon Valley lawyers, but it is not clear that they qualify as employees under any traditional sense of the word either. There may, perhaps, have to be evolutionary movement in the case law that will allow the legal structure to incorporate these types of sharing economy worker bees into the system somewhere in a middle ground, and there may have to likewise be a similar movement in statutory provisions that control access to and administration of 401(k) plans, disability benefits and the like for these purposes. But as this article points out – featuring Boston lawyer Shannon Liss-Riordan (Bostonians always want to be the first ones to fire the first shot for liberty, in any context, see, e.g., the Battle for Bunker Hill, which was actually fought on Breed’s Hill, but why ruin a good story) – the first steps in this process will be class action and other litigation, and I just wonder whether that is too blunt an instrument for this process. Would we, and the workers of the sharing economy, be better served if state legislatures and Congress tackled the problem of their job classification and their rights under employment law in the type of thoughtful way that created ERISA forty years ago (if you think I am kidding with that last characterization, I am not; take a look at Professor Jim Wooten’s work on the Congressional development of ERISA, part of which you can find here)?

It's a Top Hat Plan? Prove It

Posted By Stephen D. Rosenberg In Top Hat Plans
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This is a great article in PlanAdvisor on the recent decision in Tolbert v. RBC. Tolbert is a truly fascinating, and wonderfully instructive, district court decision on one of my favorite topics, and actually favorite things to do (I know it’s a strange interest, so sue me) – which is the litigation of top hat cases. What’s instructive about the decision is that it lays out, quite clearly for anyone to understand, what are the elements of a top hat plan and what must be proven in litigation to establish that a plan is actually a top hat plan. What’s fascinating about the decision, in turn, is that it finds that at least three aspects of that test need factual development at trial: whether the plan was primarily for the purpose of providing retirement income/deferred compensation; whether that was provided only to a select group of highly compensated individuals; and whether the participants who would benefit from the top hat plan had the workplace power to substantially influence the top hat plan’s terms. Of great interest is the Court’s discussion of that last factor, and its recognition that the courts have not firmly established one way or the other whether it actually is a factor in determining whether a particular deferred compensation arrangement is, in fact, a top hat plan. Other than that last element, there is nothing in particular unique about the Court’s determination of the factors that need to be considered to decide if a particular deferred compensation arrangement qualifies as a top hat plan, but even with regard to those elements, the decision is fascinating, and here’s why: the decision finds that the existence of the relevant elements of a top hat plan were not established on summary judgment and must instead be determined at trial. I have litigated top hat plan cases before, and counseled parties on them outside of litigation, and the fascinating thing about them is that employers often think of them as straight forward and as not really open to dispute over whether the deferred compensation being offered is a top hat plan for purposes of ERISA. In reality though, it is not always that clear once a dispute arises whether the requirements of a top hat plan were met, because the elements noted above can require serious factual investigation to determine whether they can be proven in court. To some extent, the problem is that there is a clash between the “if it looks like a duck and walks like a duck, then it’s a duck” approach to top hat plans and the rigorous standards of proof often applied by courts. When employers offer deferred compensation plans to a small group of top of the scale employees to try to tie them more firmly to the company, they know they are offering deferred compensation to a select group of top tier employees, and thus feel quite certain that the plan involved is a top hat plan. To them, it looks like a top hat plan, walks like a top hat plan and quacks like a top hat plan, so it is a top hat plan. That, though, is not enough, as Tolbert shows, for a court applying rigorous standards of proof: instead, the elements are going to have to be proven by testimony, data comparing the recipients to the employee pool as a whole, and the like.

Susan Mangiero on Tibble and the Complexity of Monitoring Plan Investments

Posted By Stephen D. Rosenberg In Fiduciaries
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So, as I and dozens of other observers have pointed out (although I am confident I am the only one who quoted Shakespeare on the subject), the Supreme Court’s recent decision in Tibble drove home the importance of monitoring plan investments, as well as the fact that, dependent on the circumstances, the failure to do so, and where necessary to take corresponding action based on the monitoring, can constitute a fiduciary breach. Okay, okay, say all the ERISA lawyers: time to tell our clients to set up a monitoring schedule and to meet regularly to do so.

Well, as forensic economist, expert witness and blogger extraordinaire Susan Mangiero points out, not so fast. From a financial perspective, monitoring plan investments can be a complex enterprise, highly dependent on details of the investments themselves and their relationship to market stimuli. In this article for BNA, Susan explains in detail exactly what this means, illustrating the level of complexity that the type of monitoring that Tibble requires actually involves, and pointing out that plan fiduciaries are now going to have to carefully consider when to bring in – and pay for – still more outside expertise for these exact purposes.

Déjà Vu All Over Again: Patenting Retirement Plan Features

Posted By Stephen D. Rosenberg In 401(k) Plans , Intellectual Property Litigation , Patent Infringement
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You know, you live long enough and you see everything come back around again. Ties get skinny, then they get wide. Standardized testing is seen as the key to everything, then as evil incarnate, then as the key to everything again. Baseball is learning to again look at the quality of the player on the field, after ignoring it in the belief that numbers on a computer screen can tell you everything. And so on, and so on, and so on.

I could not help but think of this when I read this story this morning in the Wall Street Journal on whether certain 401(k) features infringe on patents held by others, an article in which my colleague, Marcia Wagner, played a featured role. Why couldn’t I help but think of this? Because in 2007, the folks at BNA were, as they often are, well ahead of the curve (in this instance by almost a decade), writing about the question of whether tax strategies should be patented. Why do I remember that so clearly? Because they interviewed me for the article and I was quoted in depth on the subject. I wrote about it here, and later returned to the subject a few months later when I wrote a post on whether patenting ERISA strategies had reached its end game.

Yogi Berra once famously said that its like déjà vu all over again. Its amazing how often that rings true if you practice law long enough.

The Intersection of the ACA, ERISA Litigation and Insurance Coverage

Posted By Stephen D. Rosenberg In Health Insurance
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For those of you who have a professional or personal interest in the ACA, litigation arising from it and insurance coverage for litigation it is likely to spawn, I am speaking on a webinar this afternoon that covers those subjects. If you are interested in listening in (and/or amusing yourself by asking complex questions that will stump the panelists, which is how I amuse myself when I am in the audience),  the webinar, hosted by Strafford, is “Liability Insurance for ERISA Plan Sponsors: Maximizing Coverage Under Employee Benefits and Fiduciary Liability Policies - Securing Coverage for Civil Damages and Tax Assessments Arising From the ACA and Other Claims," and its at 1 pm this afternoon.  You can register here.

Sorry for the short notice, but I have been tied up with depositions and with trying to finish yesterday's somewhat complex post on the intersection between Tibble and Shakespeare.

What Would William Shakespeare Say About Tibble v. Edison?

Posted By Stephen D. Rosenberg In 401(k) Plans , Fiduciaries
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Years ago I moved from reading fiction for fun to mostly reading non-fiction, not long after reading The Corrections and spending the whole time hearing, in style, tone and manner, echoes in the back of my head of writers as recent as Martin Amis, as old as Norman Mailer, and as somewhere in-between as Don DeLillo. Even more though, I had begun to be struck by the fact that, with a few exceptions, most of what anyone had to say had long since been better said by William Shakespeare.

I thought of this as I reread the Supreme Court’s opinion in Tibble. After all of the years of litigation, the high profile appeals, the articles and panels discussing the case, the decision, from a practical perspective, can be best summed up by Shakespeare: its simply sound and fury, signifying nothing, at least not from either a practical or an academic perspective when it comes to either the law of ERISA or its practical application.

The Court was confronted with, in essence, this issue: when does ERISA’s statute of limitations begin running in the context of investment decisions made many years ago, where the investments continued to be held in a plan. ERISA’s statute of limitations for breaches of fiduciary duty is an odd little duck, in many ways unique to itself: its six year limit runs from the last act in a breach, and its three year limit runs from the plaintiff’s actual knowledge of a breach (I know, this is a summary). You can see the problem though, from the practical perspective of either a litigator or a plan fiduciary, or even as part of the completely academic exercise of developing a jurisprudence for this statute of limitations. It is essentially dependent on defining the date of fiduciary breach, establishing what constitutes knowledge of that breach and on defining the last act of the breach. The Supreme Court’s opinion in Tibble in no manner expanded upon our understanding of those issues or of how to apply that statute of limitations in that context. It instead, at least implicitly, continued to uphold the unremarkable, and effectively undisputed, proposition that the statute’s running cannot occur before the breach, but without telling us anything, really, about how to determine the relevant date of breach.

Instead, the Court declared what was, again, an essentially unremarkable proposition, which is that fiduciary duties don’t simply end with the selection by fiduciaries of plan investments, but instead continue throughout the life of the plan with regard to such investments. But as the Court’s unanimity and its broad citations of standard trust rules reflect, did anyone ever really think otherwise? As the Court noted in its opinion, even the parties had agreed on that point by the time the briefing and argument before the Supreme Court was concluded.

The Court then, from there, failed to take anyone the one step further and fill in what that continuing duty with regard to plan investments looks like, and wisely so. This is an issue best filled in on a detailed factual record, not in the abstract by an appellate panel. What type of continued monitoring is needed, what type of events should trigger a revision of investment choices by a fiduciary, what level of review is needed once those events occur, are all complex questions that can vary from case to case, particularly given the wide range of plan types that exist and the fact that different types of plans may be affected in different ways by different events. For instance, certainly employer stock of a publicly traded corporation is affected in different ways by the collapse of a Wall Street bank than are index funds in a 401(k) plan. Likewise, negative events in a particular and narrow industry might require revisiting the employee ownership held in the ESOP of a private company in that industry, but would be unlikely to raise any concerns with regard to a diversified pension plan.

So when all is said and done, what do years of litigation, a Ninth Circuit opinion and a Supreme Court opinion in Tibble leave us knowing? That there is a continuing duty to monitor plan investments, the breach of which can give rise to fiduciary liability, and that ERISA’s statute of limitations runs from the date of whatever breach is identified and proven. I am not sure any experienced ERISA litigator or academic didn’t already know that already, before the Supreme Court issued its opinion in Tibble.

Initial Thoughts on the Supreme Court's Opinion in Tibble v. Edison

Posted By Stephen D. Rosenberg In 401(k) Plans , Class Actions , ERISA Statutory Provisions
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So what does it mean if you are an ERISA litigator who writes a blog and you are too busy litigating to write a post on Tibble v. Edison (even though you have published a widely read article on the case) right after the Supreme Court issues its opinion on the case? I don’t know, but it does remind me of this old joke:

Q: What do you call one lawyer in town? A: Unemployed.
Q: What do you call two lawyers in town? A: Overworked.

For now, until I have time to sit down and write a comprehensive post on the decision, I will content myself with passing along articles of interest on the decision, along with some general comments of my own. A good place to start is with the article in today’s Wall Street Journal, and with this piece in the Washington Post. This piece in Forbes caught my eye as it grabs hold of the most important aspect of the decision, which is that the Court found that fiduciaries have an on-going duty to monitor and review investments, but without outlining the parameters of that duty. Frankly, I wouldn’t have expected the Court to do so, as that is a very fact specific question and the exact parameters of that duty – once you accept that it exists – can vary from one set of circumstances to another. Thus, the Supreme Court has found that such a duty exists and that a fiduciary is not off the hook forever simply because the original investment decisions were prudent when first made, but left it for future litigation to establish what that duty looks like in different circumstances. This will continue to put ERISA litigators, quite happily, within the second category of lawyers in that old joke.

Will Church Plan Litigation Lead to an Attack on Governmental Plan Exemptions?

Posted By Stephen D. Rosenberg In ERISA Statutory Provisions
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Dismayed at the attention her father was receiving from her teenage friends over dinner in a Chinese restaurant, Sally Draper remarked to the table that her father’s joke about stray cats and slow restaurant service was one he had been making for years. I thought of this when I saw Mike Reilly’s interesting post last week on the test for determining whether a plan is a governmental plan or not, because I have been leading off stories about governmental plan and other exemptions from ERISA for many years with the story of a client who, in 1975, was assigned this “new law” to oversee for his employer, with the “new law,” of course, being ERISA. My client liked to say how, back then, with no case law to guide them, they would handle the exemption by means of an “if it looks like a duck and quacks like a duck, then it’s a duck” analysis. In other words, if they thought a plan looked like a governmental plan, and it was related to a governmental enterprise, then they would treat it as a governmental plan.

Of course, over the years, legal rulings have given some framework to the analysis of governmental plans, and my client accordingly moved on from the “ if it looks like a duck” school of analysis for handling plans related to government or quasi-government enterprises. The problem, though, is that determining whether to treat or not treat a particular plan as a governmental plan is not always cut and dried, because of the variety of circumstances in which a plan related to governmental functions can come into existence, in this era of quasi-governmental agencies, private contracting out of government functions, and the overlapping role of private, public and union entities in some areas of government services. Mike Reilly’s post was on governmental plan exemptions in just this type of a context, where the role of collective bargaining, a teacher’s union, and a school district overlap in a manner that impacts determining whether the plan in question is a governmental plan.

As you can see both from Mike’s post and, even more, from the District Court decision itself that he discusses, there can be a lot of moving parts – or more accurately perhaps, hands in the pot – with regard to the provision of plans in such circumstances, and all of those moving parts have to be accounted for and analyzed in deciding whether or not there is a governmental plan.

The somewhat amorphous nature of the analysis reminds me, to some extent, of the church plan exemption and the current litigation over it. That exemption likewise was subject to a somewhat rickety legal structure, based to some extent on the intersection of private letter rulings with assumptions made by courts and plan administrators as to what it takes to qualify as a church plan. Church plan status, of course, is currently under attack by the plaintiffs’ bar, and the eventual outcome is up in the air. However, it is worth noting that panelists on the church plan litigation at the recent ACI ERISA Litigation Conference in Chicago raised the question of whether governmental plans will be the next target if the plaintiffs’ bar succeeds in overturning various plans’ claims to the church plan exemption. One thing I can tell you is that if that happens, we are going to see an awful lot of briefs and court opinions that explain the difference between the two exemptions by making a pun about the separation of church and state.

Should Company Officers Run Retirement and Other Benefit Plans?

Posted By Stephen D. Rosenberg In 401(k) Plans , Class Actions , Employee Benefit Plans , Fiduciaries , Pensions
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This is great – I loved the idea of this Bloomberg BNA webinar the minute it popped up in my in-box, just from the title: “Just Say No: Why Directors Should Avoid Duties That Will Subject Them to ERISA.” I have written extensively on the idea of accidental fiduciaries, and the manner in which corporate officers find themselves dragged, unwittingly, into ERISA class actions because they played some role in the administration of a benefit plan, rendering them, at least arguably, deemed or functional fiduciaries for purposes of ERISA. Sometimes, they actually have played enough of an operational role to truly be proper defendants in an action; in others, they have only enough connection – such as having appointed the members of a committee that runs the plan – to be forced to litigate the question of whether they actually qualify as fiduciaries; and in other cases, their roles lie somewhere in between.

But there is also the question of the extent to which directors should deliberately place themselves in harms way by being the overlord of the company’s benefit plans, rather than leaving that in the hand of a lower level employee. I have represented officers who have taken on that role, and I have also sued officers who have taken on that role, and I have to say that, consistently, having a director actually be a plan fiduciary, intentionally, seldom appears, in the hindsight of litigation, to have been the best idea. Moreover, it has often appeared to be the case that a company officer or director took on the role because of its seeming importance but without any real analysis as to whether or not it made sense to take on that role. In many instances, there was almost a default, knee jerk reflex that something that important should be on a senior officer’s radar screen, but at the same time, that same officer did not really have the time or expertise to focus on it, leaving the officer exposed to potential liability if a problem arose with the plan and, further, leaving the plan open to more suits based on poor oversight than would have been the case if the oversight had been assigned to a lower level executive for whom the assignment was more of a central focus and possibly even one that could raise his or her profile.

In the end, litigation teaches that it isn’t so much the question of whether directors should ever be a plan fiduciary – accidentally or deliberately – that is important, but rather the act of thinking logically in advance about who best in a company should have what roles with regard to a plan. Doing the latter not only protects against unanticipated litigation exposures, but also decreases the likelihood of litigation by increasing the probability that the plan will be in the hands of the executives best placed to run it well.