Boston ERISA Law Blog

The Fiduciary Status of Investment Advisors

I often explain to people that as a litigator, I am typically presented with a knotty, tied up problem, consisting of all the decisions and plan choices that have been made in the past that eventually resulted in litigation, and that I then have to unravel the knot into its constituent pieces, which can then be used to defend the decisions that led to the knotty problem (if I am defending the case) or to attack the decisions that created the knot (if I am instead representing a plaintiff, whether a plan participant or a plan sponsor or other fiduciary). This is a much different perspective on plans and their design and development than that of those who assemble plans, who look at things in a more prospective manner, from the vantage point of the one developing the world from scratch. In essence, their view is the mirror image of mine, as they look at all the independent strands of a plan and assemble them into what, eventually, will become the knot that I get charged with unraveling in litigation.

That more prospective view comes through in Adam Pozek’s excellent post yesterday on the difference between different types of fiduciary advisors to plans, and how to select them, as well as in the excellent source article on section 3(38) and section 3(21) advisors he references. Adam presents a typical scenario of a plan sponsor trying to work through the issues of how to use such advisors, when to use each kind, and the factors to be considered in making such a decision. To someone like me who normally only sees those types of transactions in the rear view mirror, as they are recounted for purposes of litigation (such as in a deposition), it is very interesting to read a presentation of the decision making and the transaction back at the start of the whole process.

You Say Potato, I Say Potato: Two Different Understandings of What Discretionary Review Means

This is interesting. I have written before on this blog, on numerous occasions, about courts sometimes engaging in a more searching level of discretionary review that, in essence, is not discretionary review at all, at least in the manner it has long been traditionally understood. The common belief, and applied in that way by many and probably most courts over the years, is that discretionary - sometimes called arbitrary and capricious - review means that an administrator’s decision in a long term disability case must be upheld if there is significant medical evidence in the administrative record to support the administrator’s determination, and that the process of weighing the different pieces of evidence in the medical record - much of which may be conflicting - belongs to the administrator; the court, applying this type of review, is normally understood to not engage in its own independent weighing of that evidence. Actually looking into and weighing that conflicting evidence to decide whether the administrator was correct was traditionally understood to be part of de novo review, not discretionary review.

However, as I have commented in the past, court decisions in this area reflect a subtle shift away from granting that much discretion to the administrator and towards analyzing the credibility and weight of the evidence supporting the administrator’s decision, even as part of discretionary review. Essentially, while applying discretionary review, some courts have begun to look more closely at the evidence to decide whether to uphold the administrator’s decision, finding that the decision is arbitrary if the court disagrees with the administrator over the value of or weight to be given to certain aspects of the administrative record. It’s a gradual and subtle shift in jurisprudence, but one that exists and that can change the outcome of a long term disability case, by affecting exactly how the court reviews the record and the administrator’s decision. The developing jurisprudence over structural conflicts of interest has provided still greater impetus to, and opportunities for, this shift.

Roy Harmon at his always excellent Health Plan Law blog had a perfect example of this in a post yesterday, concerning a Ninth Circuit ruling in which the appeals court looked behind the medical evidence to weigh it in deciding a long term disability case, finding that the evidence, looked at closely, did not support the administrator’s determination. In contrast, though, you can see in that same case how the district court applied a more traditional understanding of discretionary review, which does not involve independently analyzing the evidence in that manner, to find that the administrator’s decision was not arbitrary and capricious since it was supported by substantial evidence in the administrative record. The end result is that you can compare in this case the effect on the same facts of these two different approaches to applying discretionary review, with the more traditional view of it - applied by the district court - resulting in a win for the administrator - and the more searching and activist approach - applied by the Ninth Circuit - resulting in a win by the participant.

On the Ticking Time Bomb of Public Pension Plans

Wow. When I saw this article about the questionable investment assumptions and increasingly risky investment choices being pursued by public pension plans, the first thing that jumped into my head was the old Yogi Berra line that “in baseball, you don't know nothing." It seems to hold true for at least some of those running the public pension plans profiled in the article. The article details how public pension plans, in order to deal with (I would say paper over) an ever increasing gap between their assets and their obligations, are increasing their exposure to ever more risky investments at the same time that the best run private pension funds are reducing theirs. My second thought, in reading the techniques, assumptions and reasoning of the public pension funds being profiled - in particular the reliance of some of them on assumed future returns in excess of anything the funds have actually been garnering - is that if these were instead the fiduciaries of private pension plans, they would be staring at breach of fiduciary duty lawsuits right now.

For a long while, many have been sounding the alarm that many public pension plans cannot possibly meet the benefit obligations that state and municipal governments have committed them to satisfy, and this article doesn’t suggest otherwise. As many have argued, this can only mean, eventually, a taxpayer bailout of one form or another, whether it is in the form of large increases in tax revenue contributed to the plans or in the form of taxes to pay out the promised benefits to the beneficiaries down the road. Playing connect the dots a little bit, I couldn’t help but think of the Washington Post Company’s Robert Samuelson’s depiction of the youngest generation in the current workforce as being the “chump” generation, who will end up paying for all of these promised benefits down the road, reducing their long term quality of life to pay off the underfunded promises made to generations that preceded them.

A Nicely Supported Overview of Global Warming Litigation and its Impact on Insurers

Well now, I think this is exactly what I said in this post here, as well as elsewhere on this blog in the past. Global warming litigation is heating up (pretty funny pun, huh?), litigation costs from the defense of those cases pose a significant threat to the insurance industry, and insurance coverage litigation to sort out coverage for those costs is bound to follow on the heels of such global warming cases. This story that popped up in my in-box today does, however, provide the most systematic overview of these points that I have seen to date. It’s a particularly provocative read right now, as I look out my window here in Boston at temperatures in the mid-forties and sunshine, even though its still just the beginning of March.

In re Lehman

I have been wanting to post about the decision early last month in In re Lehman Brothers ERISA Litigation, in which the Southern District of New York dismissed ERISA stock drop claims against a number of officers and a named fiduciary, but, as it turns out, I have been too busy using the decision for my own purposes in my own practice to find time to post about it. Well, all that changes today, driven in part by this client advisory memorandum from Shearman & Sterling on the decision, which provides an excellent overview of the decision. The interesting thing to me about the memo, and its interaction with the decision itself, is the memo’s focus on the named fiduciary being exonerated on the basis of the famous - or infamous, depending on which side of the bar you sit on - Moench presumption. There is much to be said about the Moench presumption, and when it is appropriate to apply it or not apply it, including both the question of whether this single Third Circuit decision should have been allowed to morph into the de facto standard applied across the board in many circuits and district courts to an often somewhat disparate series of factual scenarios, and the issue of whether its sweeping acceptance should be understood as reflecting a judicial predisposition against allowing ERISA to be turned into an easier to plead version of securities class action litigation. I am not going to talk about all of that today, and neither did the Shearman & Sterling memo. What I am going to talk about is a particular point in the Lehman Brothers decision that is less the focus of the Shearman & Sterling memo, but, in many ways, of more significance to the day in, day out practice of handling disputes over ERISA plans, which is the status of company officers and directors. If there has been one consistent bone of contention between defense lawyers and lawyers who represent participants - whether individually or as a class - it has been the question of whether lumping in the directors and officers of the company sponsoring a plan as defendants, based solely on that capacity (or, more often, that capacity with just a little window dressing added on top) is appropriate. Lehman Brothers answers that in an authoritative voice, pointing out that such directors and officers do not become fiduciaries solely by means of that status, and further cannot be sued as fiduciaries based on the additional allegation that they had some authority to select those who made plan decisions unless they are being sued for mistakes stemming directly from taking action in that regard. Too often, lawsuits treat the directors and officers as additional deep pockets who should be named as defendants, but as Lehman Brothers points out, such individuals do not belong in the case unless they actually exercised operative control over an aspect of the plan that allegedly went awry and are being sued for that exact aspect of the plan’s operations.

A Parable About the Cable Man

For reasons too obscure and uninteresting to mention, I have had almost nothing to do with the cable tv industry since, well, it was invented. What’s a DVR, anyway, and why would I want one? But yesterday, I had to obtain digital cable from my local cable company, and called them, braced to be gouged. Instead, I was offered a special deal for a year, much less than I was expecting to pay, with stuff I would never pay for thrown in. A few hours later, of course, the reason occurred to me. The cable monopoly I recall from my youth is not what I was dealing with, and I was instead talking to a cable company that had competition from dishes - Dish.com, I guess? - and the local telephone/internet/cable company, so instead of gouging me, they had to offer me a deal they figured would keep me as a customer. Classic economic, legal and antitrust theory holds that there are really just two ways to police pricing - competition or, in its absence, regulation. Competition, of course, is why I got my sweet deal on cable yesterday.

So what does this have to do with the topics of this blog? Seems like plenty, in that it is the absence of above board open competition that is at the root of much of the problems discussed in these pages concerning ERISA governed plans. I have discussed in many posts that the problem with health insurance coverage through employers has much less to do with the question of whether employers want to provide it than it has to do with the ever escalating cost of health insurance and the fact that providing health insurance is a punishing cost. Employers, in my view, are unfairly demonized as trying to avoid providing health insurance, but it is the cost that is driving their increasing balkiness about being, as I have described it in other posts, unofficially deputized as the providers of health insurance in this country. From where I sit, one of the fundamental problems with acts mandating health insurance provision or payments by employers is that they don’t account for this, either by reducing health insurance costs or by recognizing the business costs imposed by these types of statutes. Does anybody really think that the restaurants targeted by the San Francisco statute are swimming in profits? This article here, profiled on the Workplace Prof blog, describes this exact concern about costs as the driving force behind employer, and particularly small employer, health insurance decisions.

And perhaps one solution to the problem of the cost of providing health insurance - perhaps the most important one - is that what is good for the cable industry should also be sauce for the gander, i.e., much greater competition among, and significantly less market control by, health insurers, as pointed out in this op-ed piece here by Robert Reich (when even the archetype liberals are arguing that market competition is the answer to all evils, you know the world has turned upside down).

And the same thought continues across to 401(k) plans, and the ongoing issue of fees and costs in investment options, and how they are disclosed. What if, instead of arguing after the fact about whether the fees in a particular plan were too high, prudent fiduciary practices were deemed to require a competitive process for selecting investment options, in a manner forcing putative vendors to put their lowest cost options forward to win the business? Isn’t that what all the complaining about large asset plans that don’t use their size to win better pricing is about, after all? Instead of just complaining in the abstract that plan sponsors should have acted that way, or engaging in after the fact litigation to try to police how much should have been charged in fees, wouldn’t it make more sense to just require a fully competitive process among vendors for selecting investment options, conducted by fiduciaries - or their delegates - who have the knowledge base to understand the pricing structure of the proposed options?

In that version of the world, it would be a fiduciary obligation to impose a fully competitive, open call for investment options, and to select the best - including on fees, costs, disclosure and performance - from among them, with it being a fiduciary breach for failing to pursue this process (rather than it being a fiduciary breach for ending up with fees that are too high). The focus would return in this way to fiduciary practice, both in terms of judging conduct as meeting or failing to meet the standards of a fiduciary and in terms of whether to impose liability, rather than on an after the fact, necessarily subjective evaluation of the amount of fees, costs, or disclosure in a particular plan that resulted from the fiduciary’s decisions.

Open competition would certainly drive down the fees and costs in plans, while simultaneously giving fiduciaries a clear standard - namely their obligation to decide on the basis of such competition - against which to work. I can’t help but think that, like the cable customer, plan participants will end up with better and cheaper products to pick from, while plans - and their insurers - will spend substantially less on litigation costs.

Pozek on 403(b) Plans

I always wondered what benefits whiz Adam Pozek did on Sundays, and now I know - he writes excellent blog posts on 403(b) plans, like this one right here! My own experience with such plans has concerned disputes over them, but Adam provides an interesting overview of the regulatory structure of the 403(b) plan as a whole.

On Plan Fees, Wal-Mart and the Costs of Bad Publicity

Ouch. Here’s a story bashing Wal-Mart for having very high plan fees in its 401(k) plan, and wanting to know why in the world it doesn’t negotiate lower fees when it has some ten billion dollars in assets to use as leverage. I am sure the plaintiffs’ class action bar has the same question. A quick cross reference to BrightScope, by the way, bears out the allegation.

Here’s the original Forbes story on the issue.

In this day and age, whether to avoid bad publicity or to avoid the costs of litigation, there is no reason for plan sponsors not to put in the effort to seek below market, rather than market - or worse - fees, particularly when they have substantial plan assets to use as a cudgel. Even if a court might eventually find that the higher than necessary fees do not add up to a fiduciary breach, why incur the costs of defending against a major lawsuit alleging that plan fees were too high? It has to be cheaper, in terms of both dollars and corporate resources, to invest the time and effort to obtain lower fees on a plan’s investment options. It’s the same old same old, that I talked about here most recently - an obsession on compliance is the best way of avoiding litigation costs and potential legal exposure. From the point of view of a plan sponsor, it may not legally be necessary to drive down plan fees - the law on excessive fee issues is still developing - but an effort to do so can only be beneficial in the long run, by avoiding potential legal costs on the one hand and improving employee morale on the other.

How Will Climate Change Affect LTD Carriers?

Who knows? The only link between the two subjects that I know of right now is that this blog post is going to touch on both issues.

There are a couple of stories I thought I would pass along today that may be worth reading. In the first, here, I am quoted on climate change litigation and the potential costs to the insurance industry. Personally, I am hard pressed, as a litigator who spends a lot of time dealing with issues related to the admissibility of expert testimony under the current federal court structure, to imagine plaintiffs who are pressing a climate change case ever being able to prove causation, or, for that matter, even being able to submit expert testimony to prove causation. Take one particular hypothetical case, a claim that in essence pollution increased the ocean level and is responsible for some particular piece of coastal property damage. How would you ever prove causation in a federal court between the pollution and the rise in the water level, given the strict standards for admitting expert testimony under current federal law? Or for that matter, even if you could prove that element, how would you ever prove one particular defendant’s factory - or even those of an entire particular industry - was the cause, as opposed to hundreds of millions of automobiles or a million factories in China, just to give two examples? I don’t see the current state of the scientific research being sufficient for a court to allow experts to testify to the elements of causation needed to recover on these types of claims. That said, though, I also don’t think much of the theories used to recover the GNP of a mid-size country from the tobacco industry, but all that took was a couple of courts to give credence to such theories, and you know how that ended up after that. All it would take is one judge somewhere to allow plaintiffs to go forward on these types of claims, and industry - and quickly their insurers - will end up, at a minimum, footing the bill for very large defense costs in response to such cases.

The second story, here, I pass along just because it is fascinating, to anyone who handles long term disability cases or likes statistics, or both. Who knew doctors claimed long term disability at a disproportionate rate?

Ten Ways to Stay Out of Trouble

I talk a lot on these electronic pages about compliance. Its really, from my perspective as a litigator, an ERISA lawyer’s take on the old sports saw that the best defense is a good offense. I often say that, in this economy and this investment market, any problems in the operations of a plan will become grist for a lawsuit, including seemingly minor things that participants - and class action lawyers - would have simply ignored in years past while the markets were only going up, even if they suppressed returns slightly. That’s not the case when the markets take a precipitous fall, and when many participants are finding themselves out of work or forced into retirement with substantially reduced account balances. And so compliance becomes doubly important, as the best defense to the risk posed by litigation. It may or may not prevent getting sued, but strong compliance makes for a strong defense, and for a substantial reduction in the risk of getting hit for a large judgment or settlement.

This is a long lead in to this article here, on ten principles the author identified from a major ERISA conference for protecting plan sponsors and fiduciaries from liability and litigation exposures. They are very much of a piece with the idea of pro-actively protecting oneself by means of compliance. For instance, one of them has to do with watching the fees in investment options, something I have noted frequently in posts addressing how plan sponsors should position themselves going forward in the face of the glut of excessive fee claims.

One point in the article on which I do break ranks a bit from the author is in the tenth point, which discusses the importance of hiring an ERISA lawyer with litigation skills when sued, rather than just a litigator with strong litigation skills. I don’t disagree with the point about needing to hire a lawyer with significant ERISA knowledge, and not just a good litigator who hopes to learn about the subject. That latter option is not a good bet. Most areas of the law can be mastered just fine by a high quality litigator asked to handle a case, but not this one. The courts themselves are in so much disagreement from one circuit to the next - and often from one district court judge to the next in the same circuit - over various issues, and ERISA issues often raise so many subtle points, that it is just not an area that can be well litigated by someone without substantive knowledge, honed over years, of ERISA.

That said, though, it isn’t enough to just hire a good litigator who knows his or her way around ERISA. What you need is a trial lawyer, with a demonstrated record of trying and winning cases before both judges and juries, who is substantively steeped in the law of ERISA. You need it if the case ever gets tried, obviously. But more importantly, you need a trial lawyer leading your team to get the best result period, whether that is by settlement or a resolution on the papers at some point along the way. You can only fight fire with fire in a courtroom, and if the other side is fronted by experienced trial lawyers, you will be at a disadvantage every step of the way - from discovery to settlement discussions to motion practice - if you aren’t as well, in litigating against them. Conversely, if the other side’s team isn’t fronted by an experienced trial lawyer, having your team led by one will put them at a disadvantage, and will substantially increase the odds of getting a result that favors your side.

So therein lies the rub. An ERISA trial lawyer is what you need. But in this day and age, in which so few lawyers try cases anymore - or are trained to do it since most cases they will see settle or head off to arbitration - that’s not the easiest thing to find, although I do know at least one.

Disability Insurers, False Claims and Social Security Benefits

Here’s a story worth reading, about a case worth paying attention to, namely the pending First Circuit appeal - argued yesterday - concerning whether a long term disability insurer - namely Unum - engages in false claims when it instructs beneficiaries to also apply for Social Security disability benefits. Simply put, group long term disability plans routinely require participants applying for LTD benefits to also seek social security benefits, if they qualify, and the plans are structured so that the LTD benefits are off set by the amount of social security benefits received. The structure both reduces plan costs - thereby satisfying the overall goal behind ERISA itself of encouraging plan adoption - and ensures that plan participants receive - when they are entitled to them - benefits under a social security system they have been paying into for years. There is nothing wrong with this system, although in its implementation there will be circumstances in which the implementation and enforcement of the offset can have a negative short term impact on a plan participant, due to the reduction in LTD benefits from what was paid prior to the award of social security benefits. But it is a workable coordination of the two benefit systems, one that has been in place for many years. Whatever the merits of this particular case, its certainly one that presents a need to avoid tossing the baby out with the bath water, and derailing this long standing benefit plan structure.

Climate Change Litigation and Insurance Coverage

I have posted in the past about how everything eventually makes its way through the insurance industry, in terms of any types of new lawsuits or liability theories, and as this article makes clear, litigation over climate change will be no different. The suits are coming, and while their viability is yet to be determined, they will pose challenges for the insurance industry, because the development of theories of liability in this area will eventually lead to demands for insurance carriers to cover the defense costs or liabilities arising from those theories, just as occurred with asbestos and pollution, and almost certainly with the same types of pitched battles over the existence of coverage as occurred in those areas. This will raise a whole host of issues for carriers that will mimic the types of issues that played out with regard to the large scale - and often unanticipated - exposure posed by environmental litigation and asbestos, only on a broader and probably even more complicated level. Just think, for instance, about how difficult it will be to develop exclusions against climate change lawsuits, if that is the direction insurers elect to go, that are broad enough to encompass the as yet unknown range of legal theories, while still being concise enough in their wording to avoid being declared ambiguous.

On Attorneys Fees and Hecker

Honestly, I have spent a week scratching my head, off and on, over the Supreme Court granting cert to consider the standards governing when attorneys fees can be awarded in an ERISA case, particularly when they denied cert shortly thereafter in Hecker, which presented the opportunity to address the much more substantive issue of the scope of fiduciary responsibility for the amount - and corresponding degree of disclosure - of 401(k) fees. In my mind, there is already a conflict among the circuits over that issue, with the Seventh Circuit finding outright that there was no viable theory against fiduciaries of large plans with market standard fees, and the Eighth finding this same theory worthy of factual inquiry. However, as I thought more on it, the denial of cert for Hecker makes some jurisprudential sense. Hecker itself was decided on a motion to dismiss, leaving essentially no factual record for evaluating these types of claims (critics will say, of course, that this didn’t stop the Seventh Circuit from deciding the theory had no merit) and forcing any Supreme Court ruling to turn solely on the allegations in the pleadings. This is a complicated issue, one I have said before would have been more properly evaluated by the Seventh Circuit after factual development, and I suppose it is likewise fair to say that a Supreme Court review of the issues posed by Hecker by means of reviewing Hecker itself would have suffered from the same flaw; Supreme Court review of the fee issues raised by the Hecker line of cases is probably better suited to a case that has played out sufficiently to allow all of the factual and legal fault lines to develop prior to Supreme Court review.

But the attorneys fee case itself still doesn’t make a whole lot of sense to me, as a practicing litigator who spends plenty of time with cases pending in the federal courts that are governed by that fee statute. The reality is that such attorney fee awards are either subsumed within settlements, or the courts award them under current standards only, typically, where there is significant merit to a party’s position and the party obtains significant relief; the district court judges, in my experience, do a good job of utilizing the current standards and understanding of the fee shifting provision of the statute to bring about that result, such as in this case here. And at the end of the day, no matter certain peculiarities that exist in the wording of the statute, this is really the only standard for awarding or not awarding fees that makes practical sense in the real world. After all, do we really want attorneys fees awarded for less than obtaining at least a significant portion of the relief sought by a plan participant?

I understand that the Fourth Circuit, in the case under review, applied a somewhat more stringent test than what I am discussing here, but, from a courtroom level view, courts get this issue right often enough that it doesn’t seem to warrant Supreme Court intervention. But the Court seems to have a thing for ERISA cases these days, for whatever reason.

Here's What the Court Will Do In Conkright v. Frommert

Alright, here we go on Conkright v. Frommert, which will be argued at the Supreme Court on Wednesday. SCOTUS has the full run down of the case and what is at issue right here, and long time ERISA blogger Paul Secunda has an amici brief before the Court on the core issue, which can be found here. At its heart, the case presents one fundamental question, though cloaked - like many ERISA cases - in a wide ranging and complicated documentary, factual, and judicial history. That, by the way, is what makes ERISA cases fun for litigators like me - nothing is ever simple, even the issues that one would think should be. This is a natural outcropping from a number of aspects of this area of the law, running from a complicated statute that leaves much to further development by the courts, to the inherent limitations posed by both the English language and the (inevitably finite) skill of the scrivener in drafting complicated benefit plans, to the frequent disagreement among circuits (and even among district court judges within the same circuit in some instances) on a variety of issues under the statute. Here though, the key issue is one of deference, and whether a court must continue to apply deferential review to a plan administrator’s interpretation of a plan when the court has already rejected the administrator’s earlier interpretation as being arbitrary and capricious. A non-lawyer - and most lawyers too - would say the case is simply about whether the plan administrator only gets one bite at the apple, or perhaps is about whether its one strike and you are out.

This case continues a recent trend of the Court taking on ERISA cases that pose very finite issues, ones that aren’t likely to recur frequently but that pose the opportunity to present some sense of what are the outer guidelines of ERISA litigation - how broad is deference, does it apply when there is a conflict, what kind of conflict matters, how much room does the administrator get to work with plan language, and what is the proper balance between the plan administrator and the district courts (and eventually the circuit courts) in deciding factual and plan language issues in ERISA cases. Much of this goes back to Firestone, and the universe governing ERISA cases that it spawned; if I had my guess, I think the Court would like to have that one back, and start all over again with a cleaner, more easily applied legal structure. But they can’t go back, and I don’t think anyone believes they will go so far as to overturn that ruling and start anew with a new framework. So what we will have instead is cases like this one being decided in a manner intended to reign in the outer limits of the universe spawned by Firestone (ouch, that extended “Firestone as the Big Bang” metaphor is beginning to make my head hurt), which means I call this one for the participants, with a finding that the plan administrator gets deference only the first time around.

And yes, I know I am dramatically simplifying how the parties frame the questions here - but what I have said above will be the essence of the outcome.

Is There A Disjunct Between Excessive Fee Cases and the Real World?

Here’s a very interesting article from the Financial Times on the Deere/Wal-Mart line of 401(k) suits, in which class actions are being brought on behalf of plan participants alleging that fees in the plans at issue were too high and insufficiently disclosed. I have discussed in other blog posts the essentially diametrically opposed results in Hecker and in Wal-Mart, with one circuit essentially finding no merit to the underlying legal theory, and the other deeming it viable and worthy of further fact finding to determine whether fiduciary breaches had in fact occurred. Me, personally, I think the theory, independent of actual facts of any given case, is viable and has merit. I don’t think, though, that the fiduciary obligations require the particular plans to have the lowest possible fees, but rather require reasonable fees under all the circumstances, along with a realistic and reasonably aggressive process to obtain lower fees than smaller companies or the consumer off the street would have ended up with, this later point being something which the opinion in Hecker did not require.

Factually, though, I thought it would be fun to combine two of my favorite hobby horses - the Hecker theory of fiduciary liability and BrightScope ratings - in light of the Financial Times article, and see what we learn. Interestingly, it is in Wal-Mart that the Eighth Circuit let this line of attack on 401(k) fees proceed, but we learn from the BrightScope ratings on Wal-Mart’s 401(k) plan that it has low fees in comparison to other companies. John Deere’s plan, at issue in the Hecker case, isn’t rated yet on the BrightScope site. Two other large companies identified in the Financial Times article as being the target of such suits, Lockheed Martin and Boeing, are both rated as likewise having low total fees. The same can be said of Caterpillar, which just settled such a suit. ABB Inc., which the article identifies as proceeding to trial as we write on just such a claim, doesn’t score as well as those other companies in this regard, but is rated as having low fees.

Now, long time readers know that I am quick to quote (especially when the other side on one of my cases has a statistician for an expert witness) the old line that there are three kinds of lies - lies, damn lies and statistics - and certainly there are subtle points to be made about the comparison between what the plaintiffs are claiming against those various companies and what the BrightScope ratings on fees tell us. This, though, isn’t the place to fully vet those points. What is clear, though, is that easily accessible data - for us, anyway, but surely not for the folks at BrightScope when they went through the work of getting it - suggests there is a pretty good disjunct on a macro level between the theories being crafted by participants’ lawyers in this particular area and the factual reality of the operation of many of the plans that are being targeted.