This week’s Five Favorites is very ERISA heavy. Sometimes that’s just the way the world spins, as there is a lot going on with retirement plans and ERISA litigation, even at the Supreme Court. A lot of it touches on some of my favorite topics, such as the role of the jury trial in ERISA litigation, or on the most important topics in ERISA at this point, such as allowing private equity investments into 401(k) plans. So here goes this week’s entry in this series of posts, and I hope you enjoy it:

  1. I believe it is United States District Court Judge Young, in Massachusetts, who I have heard routinely say, in setting firm trial dates, that nothing concentrates the mind like an execution date – implying that nothing focuses lawyers and clients on settlement like the impending risk of a trial. Very few ERISA cases, particularly large exposure ERISA class actions, are actually tried, for various reasons, and there are even fewer jury trials in this context. However, jury trials have become a thing in ERISA class action litigation over the past couple of years, after a major one went resoundingly in favor of the defense. Since then, though, the risks for plan sponsors, plan fiduciaries and their insurers inherent in trying these types of cases to a jury have become manifest, with some bad results for defendants, at numbers that would make those concerned in the tort world with the rise of nuclear verdicts stop and count their blessings that a nuclear verdict is typically just ten million or more, and not the numbers coming in from the rare ERISA jury trial. Well, given this backdrop, it’s not surprising that the certainty of an ERISA class action jury trial concentrated the minds of the lawyers and clients in this Massachusetts ERISA class action against Liberty Mutual on settlement, which was reached this week, avoiding a jury trial over 401(k) performance issues.
  2. Look, I am not unsympathetic to the idea that the worst aspects of ERISA class action litigation need to be reined in. I am also not unsympathetic to the idea that the private attorney general model for regulating ERISA plans is a necessary adjunct to Department of Labor regulatory and investigatory tools for protecting plan participants. The issue to me isn’t the meritorious case or the serious effort by serious firms to target abuses and losses to plan participants through class action litigation. The issue is the drive by class action case that results in the quick $2 million settlement with the half million fee to the lawyers, in which the case is filed by firms just looking for a quick payday, in which the average plan participant sees little actual financial benefit from the settlement and the defendant or its insurer settles early just to avoid discovery costs. In my days as a patent litigator, we used to refer to these as strike suits, filed just to trigger a settlement rather than to actually vindicate a patent holder’s substantive rights. But as I have written elsewhere, the tools to control this already exist in the hands of courts and, if they are willing to press them aggressively, defense lawyers. They lie in the assertion of greater court control of discovery, use of tools to phase litigation to decide outcome determinative legal issues long before discovery or defense costs get out of hand, and the like. They even reside in the hands of corporate clients in challenging their lawyers over whether the traditional model of class action defense – motion to dismiss followed by massively expensive discovery followed by a summary judgment motion followed by large settlement payout when, predictably enough in many cases, the summary judgment motion doesn’t resolve the case -is really the right approach to a given case, or whether instead there is a better way to approach a particular ERISA class action case. And given that, combined with the law of unintended consequences, I am highly skeptical of these types of legislative efforts in response to particular court rulings or developments in ERISA class action litigation, which really just seem to be reactive rather than a thoughtful attempt at tackling a complex problem.
  3. Apropos of my point in the preceding item, the recent history of forfeiture class action litigation in ERISA reflects the extent to which the system already pushes back successfully against novel approaches to ERISA liability that seem more intended to create a market for class action lawyers to work in than to fix an actual problem with ERISA plans. This article on the recent defeat of another such case is a good illustration. I wrote a recent post on the three key underlying elements that need to exist to get a court to look favorably on new legal theories, and those elements are proving to be absent in the forfeiture cases.
  4. The Supreme Court is taking up another ERISA class action case, this one involving the use of private equity investments in 401(k) plans, although that is not technically the central issue of the appeal. I wrote about it here the other day. This is a thought provoking piece on the idea that the real issue in this case isn’t what the Supreme Court accepted cert about, but instead underlying issues that the eventual ruling may well bless.
  5. The Supreme Court’s decision to hear the latest action will dominate the ERISA news as well as current thinking on key issues in ERISA class action litigation during the months ahead. Its mere pendency will also impact the progression of and arguments in a variety of already pending actions. It’s also worth nothing that, again apropos of the topics discussed above, it is in many ways another action about pleading standards and what types of barriers to meritless ERISA class action cases already exist, without some sort of legislative effort to put particular rules in place. This is an excellent article to understand the history, status and nature of the case as it goes up to the Supreme Court. At a minimum, it has everything in it you need to carry on a conversation about it at the (now mythical or perhaps always apocryphal) water cooler.