Rising home insurance costs in beachfront areas is a trendy topic, and the Boston Globe weighed in on it yesterday, in this article discussing consumers on Cape Cod joining together to question the industry’s rate setting. The article’s lead (or lede, as I have learned from former newspaper reporter turned lawyer and blogger David Rossmiller) frames the topic of the article, pointing out that “a growing army of homeowners have watched as home insurers have left Cape Cod and remaining companies insist they must raise rates because of hurricane fears.” For those of you who are more interested in the substance of the criticisms across the country of rate setting and market departures by homeowners insurers in response to hurricane projections than in the joining together on the Cape of consumers to challenge it, David Rossmiller at the Insurance Coverage Blog has been covering this issue in great detail, with a focus on Florida and the Hurricane Katrina affected regions. That’s the place to go for more on this issue.

Well, my trial’s still ongoing, and I find myself short of time to really comment in any detail on the latest details in the always percolating and never quiet world of ERISA and insurance law. However, I do still find time to continue my own reading on the subject, and so I am able to pass along for your review items that I find particularly interesting. Head and shoulders above anything else on that list right now is this excellent analysis by Workplace Prof blog of the Supreme Court hearing in Beck v. Pace International Union, which concerns the issue of fiduciary obligations with regard to the distribution of a terminated plan’s assets. The analysis is timely, interesting, and probably, in a nutshell, all you need to know about this case until the time the Court actually issues an opinion on the case.

Today’s post is sort of a place holder, in a way. My associate Eric Brodie, who is my crack science guy, and I are starting a patent infringement trial this morning in federal court that is expected to last two or three weeks. As a result, I don’t know how much I will be posting for the next couple weeks, although I will try to post here and there, when I have a chance, and will certainly make a point to at least put up short posts drawing attention to new decisions that are handed down while I am on trial or to particularly interesting blog posts or articles published during that time; the posts will undoubtedly lack much discussion by me about those decisions and publications, although, if they merit it, I will return to them to provide comments in a couple of weeks, when I have more time.

Blog vendor Kevin O’Keefe at LexBlog likes to suggest that lawyers blog during the downtime in trials, and comment on what is going on at court, in the interest of showing – in his words – that you not only talk the talk, but also walk the walk. I don’t know whether I will do that during this trial, partly because I am not all that comfortable with blogging about an ongoing court proceeding in which I am involved; I am not sure I feel that it fits my obligations to either the client or to the court, but, if there is something interesting to comment on involving something other than the case I am actually trying, I might put something up from court, maybe over the midmorning break. We’ll have to see on that.

I have a bit of a lawyer geek’s fascination with the electronic discovery amendments to the federal rules of civil procedure; they exist at an interesting intersection of evidence, discovery, and business management issues, each of which alone is interesting to me but that in combination, as they are with regard to these amendments, become a fascinating, almost gordian, knot of issues. In earlier posts, I have talked about a couple of issues raised by them. The first is the need for the courts to develop rules governing electronic discovery that are more rigorous than traditional standards for paper discovery, and that take into account the far greater cost that broad electronic discovery can impose. The second concerned the importance for companies to act proactively, and establish strong computer information systems that keep information well organized and easily accessible in the normal course of business, allowing cost effective data collection, review and production when things turn extraordinary, namely into litigation.

I thought, on both of these points, I would pass along this article that I liked, which really drives home the point that the best solution to the potentially backbreaking cost problem of electronic discovery is proper electronic document management on a day in day out basis in the operation of the business itself, rather than just tackling that issue latter on, after a suit is filed and electronic discovery is sought.

Maryland has given up the fight over its Wal-Mart bill, which essentially targeted Wal-Mart and tried to force it to increase the health care benefits provided to its employees; as many of you will recall, the Fourth Circuit and the district court both found the act to be preempted by ERISA. Most commentators, including this one, agree that it is preempted, under current law. Maryland officials will not try to take the issue to the Supreme Court, feeling that they are unlikely to be successful.  I suggested as much a while back, in this post.

An interesting counterpoint, for those of you with access to the National Law Journal and/or its subscription only website, is an opinion piece by law school professor Ed Zelinsky, whose work I have commented on in the past here in this blog, that Congress should address the problems of availability and affordability of health insurance by revoking federal preemption of the issue and allowing states to pass their own initiatives to try to solve the problem. I guess I have a few thoughts and concerns on that issue, the first of which is that, for every example, such as Massachusetts’ effort to provide universal health insurance for the currently uninsured, of a broad based effort to address a fundamental problem, there is a countervailing example, such as the Maryland act, of a statute that is narrowly crafted at only one small piece of the problem, often one, such as Wal-Mart, that can be easily vilified. In addition, state by state regulation in other areas is certainly not devoid of a “race to the bottom” mentality, where states seek competitive advantage over others in attracting employers by imposing lesser burdens on companies than do other states. I would hate to see that happen in health care and health insurance, which is an area already bedeviled by enough problems; a universal, national health care solution, rather than the removal of preemption with a resulting state by state system, avoids this problem.

I have a confession to make: I like houses. I remember an old Arlo and Janis cartoon, in which they respond to a bad day by pulling out the plans for their dream home, which they know they will never build, and add another elaborate room to it: that’s me. And so I greatly enjoy this blog about a couple’s attempts to build their dream home. Now normally, this would not be grist for this blog, for obvious reasons, but for one thing – in a post yesterday, they mirrored reality for me, touching on issues in a case I greatly enjoyed litigating recently, which was a dispute over the right to use plans drawn up by an architect who was subsequently terminated from the project. Given my interest in architecture and copyright law, this case was an absolute ball from where I sit. And in this blog post, the authors are astounded when they learn that the contract forwarded to them by their architect was, first, one sided in that it protected the architect but not the party retaining the architect, and, two, made the plans the property of the architect, even though the authors were paying for them. Their shock falls right in line with what I have always thought of as the three take aways from that recent case I handled. First, that the standard architecture contract, drafted by the architects’ trade group, is completely one sided, was drafted that way intentionally, and should never simply be signed off on, without changes, by anyone retaining an architect to design property for them. Two, that the most egregious part of that standard contract is that it gives all rights in the design of the building to the party designing it, the architect, rather than the person who should hold it, the one paying for that design. And three, that the consumers of the services, unless represented by counsel, don’t know any of this, would be shocked if they did, normally just sign on the bottom line to get the project started, and never learn this unless and until something goes wrong with the project. That standard contract should never be signed off on as is, without changes made to some of these more one sided terms. And at the end of the day, for purposes of this post, it is simply fun to find these truths documented by this couple’s experience, discussed in their blog.

Here is a very neat and interesting paper contrasting defined benefit plans – i.e. pensions – with defined contribution plans – i.e. 401(k) plans – and addressing, in particular: (1) the decline in the former in the workplace and replacement by the latter; and (2) the problems engendered by that change. In essence, the authors argue that the defined contribution plans, as they currently are regulated and operated, simply are not satisfactory replacements for the vanishing pension system, and cannot be counted on to provide an appropriate stream of retirement income for most retired workers. The authors provide suggested changes for both types of plans that, they hope, will make pensions more palatable to employers and 401(k) plans more beneficial to employees.

I have spent a couple days musing on the paper, which was first brought to my attention in this post last week on Workplace Prof, and have a few thoughts to offer, mostly about how the facts and arguments in this paper fit in with the litigation climate involving, in particular, 401(k) plans. What jumps out at me is the central theme of the paper, that pensions are overly regulated and employee contribution plans like 401(k) plans insufficiently regulated, with the result that the latter plans are unlikely to meet the needs of the prototypical employee. And this leads to two thoughts about excessive fee, breach of fiduciary duty and other types of lawsuits against companies sponsoring 401(k) plans and the advisors they retain. First, are the suits driven, at core, by the defined contribution plans’ absence of overarching regulation and government protection, placing the onus for policing them on employees and their lawyers, who can be seen to have been forced into serving almost in a “private attorney general” role with regard to such plans? And would this be the case if, like pensions, they were more heavily regulated and backstopped by the government, much like pensions are by the Pension Benefit Guaranty Corporation? And second, echoing a theme I have commented on in the past, to what extent is the litigation driven by the exact problem emphasized in the article, namely that workers cannot confidently assume an appropriate retirement income by relying on 401(k) plans and therefore may rightfully be afraid for their long term economic security? If they didn’t have that fear, and instead were confident in their retirement income, much as – sometimes wrongly – they generally are in pensions, would they be so quick to authorize lawyers to sue in their names?

I have talked before about my tendency to veer from my appointed rounds when something more interesting appears on the horizon than that which I had planned to work or post on, and today is another one of those days. I came in full of grand hopes to discuss insurance coverage for intellectual property risks and discovery issues in insurance bad faith cases, using two upcoming seminars on those topics as a foundation from which to riff. Those can wait for another day, and I will return to them, either over the weekend or next week, but something more interesting appeared on the horizon this morning that I wanted to post on, and that is likely to be of interest to those of you who read this blog out of a professional interest in ERISA and how it applies to 401(k) plans and pensions, namely, the launching of Pension Governance LLC, a subscriber website providing independent advice and information for pension investment fiduciaries. Among other features, the website, http://www.pensiongovernance.com/home.php, provides analysis, research and commentary on issues affecting defined contribution and defined benefit plans; interviews with industry leaders; annotated online articles from a variety of news sources; access to research team members; original content from expert practitioners; and educational webinars.

Readers of this blog who have been curious enough to peruse either the “About Stephen Rosenberg” part of this blog or the what’s new section of my firm’s website already know that I am a member of the website’s editorial board; I have already submitted one article for the site, and am looking forward to contributing still more to it.

While I am excited about the launch of the website, that’s not the only reason I write about it today. The more urgent reason for writing about it today, and to introduce Pension Governance to you right on the heels of its launch, is that the site is currently offering a free two week trial subscription, and I think the information that it makes available will be of interest to many who read this blog.

Here is a terrific and in-depth review of the underlying facts and issues in the pending Supreme Court case of Beck v. Pace International Union, which is scheduled to be argued later this month, and which involves the extent, if any, to which fiduciary obligations apply to a decision to terminate a pension plan by purchasing an annuity rather than by merging the plan into other existing plans. Thanks to Workplace Prof for the heads up about this on-line publication out of the Cornell Law School, a source that I don’t regularly follow (but of course, that is what I rely on the Prof to do, to follow academic sites like that in my stead).

On a side note, one of the things that I simply really enjoy about ERISA is that whenever the Supreme Court weighs in on an ERISA issue, we can look forward to years of – usually conflicting – district court and circuit court decisions trying to apply the Supreme Court’s ruling, giving us great material for litigating cases and for blog discussions.

This case, out of the United States District Court for the District of Massachusetts, provides a nice little rule of thumb for amending, merging or otherwise altering retirement benefit plans – namely, that it makes it hard to get sued and lose if you make the changes in a way that avoids altering the actual benefit amounts of any given participant. In this case, an employee complained about changes to the company’s retirement plan made as part of a corporate acquisition and about a later change intended to protect other participants’ participation in the plan. The court found that the changes did not violate ERISA’s merger or anti-cutback provisions, as the evidence showed the changes had no adverse impact on the plaintiff’s benefits. In an interesting discussion of the merger and anti-cutback provisions, the court explained that:  

Pursuant to ERISA § 208 and I.R.C. § 414(1), when benefit plans are merged, each plan participant must receive benefits immediately after the merger that are equal to the benefits he would have received had his plan terminated immediately prior to the merger. . . .At its core, this merger rule is a simple one, intended to prevent companies from eliminating an employee’s previously accrued benefits when merging one benefit plan with another. . . . Much like the merger rule, the purpose of the anti-cutback provisions of § 204(g)(1) of ERISA is to prevent an employer from "pulling the rug out from under employees" by amending its benefit plan to eliminate or reduce a previously accrued early retirement subsidy. Specifically, the anti-cutback rule provides, with certain exceptions not relevant here, that "[t]he accrued benefit of a participant under a plan may not be decreased by an amendment of the plan." 29 U.S.C. § 1054(g)(1). . . .The Act requires that the merger or amendment of retirement plans does not result in a plan that has the effect of reducing an employee’s previously accrued benefits.

The court ruled across the board in favor of the defendant, not just on the merger and anti-cutback counts but on all counts pled by the participant, with the decision driven in large part by the fact that the evidence demonstrated that the changes to the plan did not detrimentally alter the benefits available under the plan to the complaining participant.

The case is Gillis v. SPX Corp. Individual Retirement Plan.