The merits issue in this case is whether participants were promised and are entitled under the employer’s plan to certain lifetime medical and life insurance benefits upon retirement. The district court dismissed the case as untimely, agreeing with the majority of courts that hold that the “fraud or concealment” exception to the ERISA section 413’s six-year statute of limitations requires an affirmative act of “fraudulent concealment” separate from the underlying misrepresentation constituting the alleged breach of fiduciary duty. It also decided the claims were untimely because they accrued at the time of the misrepresentation of lifetime benefits, more than six years before suit was brought. The court issued its initial decision on February 14, 2013, and it issued a decision denying reconsideration on July 16, 2013. A notice of appeal was timely filed on September 17, 2013. On December 18, 2013, the Secretary filed an amicus brief arguing that the district court erred in concluding that the “fraud or concealment” standard for statute of limitations purposes only applies when a fiduciary takes steps in additional affirmative steps to conceal the fiduciary misrepresentation. Plan Benefits Security Division
Fuller v. Sun Trust Banks (11th Cir.)
This case involves both the three-year and six-year statutes of limitations under section 413 of ERISA. Appellant’s brief was filed on February 12, 2013, and the Secretary filed an amicus brief in support of the plaintiff-appellant on March 12, 2013. The brief argued, with respect to the three-year actual knowledge standard, that the district court wrongly applied a constructive knowledge standard by relying on certain documents attached to the motion to dismiss that plaintiff never saw, and that she would not have had actual knowledge of all the elements of the alleged fiduciary breach even if she had reviewed those documents. The brief did not address the six-year statute of limitations issues. Oral argument, in which the Secretary participated, was held on November 7, 2013. Plan Benefits Security Division
Hi-Lex Controls, Inc. v. Blue Cross and Blue Shield of Michigan (6th Cir.)
In this private action, the court found that Blue Cross violated its fiduciary duties by charging health care plans sponsors hidden administrative fees and ordered Blue Cross to reimburse the sponsor $5.1 million. The court held that the claims were not time-barred under ERISA’s three or six-year statute of limitations because ERISA’s “fraud or concealment” exception to the normal statutory period applied. In so holding, the district court relied on a Second Circuit decision construing the exception more leniently than the construction applied by other circuits. On December 10, 2013, the Secretary filed an amicus brief agreeing with the court’s analysis of the statute of limitations issue, and also taking the position that the court was correct in deciding that Blue Cross acted as a fiduciary and committed a fiduciary breach in collecting the hidden fees from the plan assets it controlled. Plan Benefits Security Division
In re Revstone Casting Fairfield (N.D. Tex.)
On February 25, 2013, the Secretary obtained an inspection warrant that allowed the Department and an appraiser entry on to property owned by the Revstone Casting Fairfield Plan, in order for the appraiser to prepare a valuation of the property. See also Perez v. Hofmeister, Section K. Financial Institution and Service Provider Cases. Dallas and Chicago Offices
Solis v. Rice (N.D. Ohio)
On January 23, 2013, the court entered an amendment to a consent order and judgment, entered on November 25, 2003, involving the Ohio Industries, Inc. Group Medical, Dental and Weekly Disability Income Plan and the Ohio Locomotive Crane Co., Inc. Savings Investment Plan. The amendment, which appoints a new independent fiduciary to replace the one who withdrew, provides for the new fiduciary to accept $29,562.83 in funds ($25,314.46 for the Group Medical, Dental and Weekly Disability Income Plan and $4,248.37 for the Savings Investment Plan) distributed from Ohio Industries’ bankruptcy case. In addition, the independent fiduciary is to secure unclaimed funds in the name of the plans from the State of Ohio and distribute these assets, along with the bankruptcy funds, to the plans’ participants. Cleveland Office
Smith v. Aegon (6th Cir.)
This is an appeal from a district court decision dismissing an ERISA pension benefits case brought in Kentucky based on a forum selection clause that was incorporated into the plan more than seven years after the participant retired, which clause required him to file suit in Ohio rather than Kentucky. The plaintiff filed his opening brief on July 22, 2013. On August 12, 2013, the Secretary filed an amicus brief arguing that ERISA invalidates the forum selection clause. Plan Benefits Security Division
In re Ormet Corporation (Bankr. Del.)
On November 15, 2013, the Secretary filed two objections in the Ormet Corporation Chapter 11 bankruptcy proceeding. Ormet was an Ohio corporation with four affiliated companies. It had approximately 14 employee benefit plans, some of which were subject to ERISA. The Secretary’s first objection involved the debtors’ motion for the approval of the sale of all of its assets relating to one of its facilities, including the transfer of employee benefit plans. The Secretary objected to the motion because the debtors’ filings failed to include sufficient information for the Secretary to determine whether the sale would violate any provisions of ERISA, including its COBRA provisions, or to determine whether the buyer would incur any successor liability. The Secretary also objected based on the debtors’ attempt to disclaim all ERISA liability with respect to the buyer and non-debtor third parties. In addition, the Secretary also objected to the debtors’ second emergency motion, which sought relief from its current obligations to several ERISA-covered plans and attempted to disclaim all COBRA obligations and some of its plan payment obligations. Chicago Office
In re Robert Plan Corp. (Bankr. E.D.N.Y.)
This case involves an ongoing dispute with a Chapter 7 trustee over a bankruptcy court’s jurisdiction to approve payments to the trustee and his retained professionals for work performed in terminating the debtor’s 401(k) plan. On October 26, 2010, the bankruptcy court held that it had core jurisdiction to rule on the fee requests, but avoided ruling on whether it had jurisdiction to determine the amount of the fees to be paid using plan assets. On March 1, 2011, the bankruptcy court issued a first interim fee award to the trustee and his professionals in amounts greater than the Secretary believed appropriate, but consistent with the October 2010 Order, and refused the trustee’s request to rule on what amounts were payable by the plan. On December 11, 2011, the Secretary filed an objection to the second interim fee request by the trustee and his law firm and a final fee application by the auditor and pension consultant assisting the trustee. On August 20, 2012, the bankruptcy court overruled the Secretary’s objections and granted the fee applications. Departing from the terms of the 2010 Order, which had stated that “[a]ny order awarding fees would contain no determination of whether Plan funds could be used to satisfy the award,” the bankruptcy court expressly provided in the August 2012 decision that the trustee could use plan funds to pay the professionals, thereby effectively asserting jurisdiction over the ERISA plan and its assets. The interim fee award to the trustee of $132,378.24 resulted in an effective hourly rate of approximately $2,000 per hour. As a portion of the relief granted in the 2012 decision was interlocutory, on September 4, 2012, the Secretary filed a motion for leave to appeal to the district court. On September 14, 2012, the trustee filed an opposition to the Secretary’s motion. On September 27, 2012, the Secretary filed a motion for leave to file a reply brief, to which the trustee filed an opposition on October 4, 2012. On April 9, 2013, rather than rule on the Secretary’s request to file a reply brief, the district court granted the Secretary’s request to appeal solely that portion of the August 2012 decision that asserted the bankruptcy court’s jurisdiction to order the payment of fees from plan assets; it determined that the issues regarding the amount of the compensation of the trustee and his law firm would be appealable at a later date when final orders of compensation were issued in the bankruptcy case. The Secretary filed its appeal brief on April 30, 2013, and the trustee filed an opposition on May 15, 2013. The district court has not yet issued an opinion. Plan Benefits Security Division
In re Saetveit (Bankr. D. Colo.)
The Secretary filed a joint stipulation as to non-dischargeability of debt in December 2013 in the bankruptcy case of William Roger Saetveit, a fiduciary responsible, along with others, for committing a series of ERISA violations in the course of investing plan assets and allowing plan participants to direct their plan account assets into a hedge fund that later was revealed to be a Ponzi scheme. Saetveit, the fiduciary debtor, was grossly negligent with regard to his responsibilities as a plan fiduciary and thus committed defalcation. Denver Office
Schoenfeld v. Perez (9th Cir.)
This is an appeal from a case brought by the Secretary in which the Secretary successfully argued that fiduciaries breached their duties to an ESOP by allowing the corporate sponsor to withdraw funds from the ESOP to pay corporate expenses and that the debt is non-dischargeable under the bankruptcy code because of defalcation. The appellants filed their brief on August 20, 2013, and the Secretary filed a response brief on extension on October 25, 2013. San Francisco Office and Plan Benefits Security Division
In re Thelen LLP (Bankr. S.D.N.Y.)
Thelen LLP, a major national law firm and Chapter 7 debtor, was the sponsor and plan administrator for three ERISA-covered plans: a 401(k) plan, a defined benefit plan, and a cash balance plan. Pursuant to section 704(a)(11) of the Bankruptcy Code, Thelen’s Chapter 7 trustee became obligated to fulfill the plan administrator role. On or about July 13, 2010, the trustee filed a motion seeking payment from the plans for legal services provided by Fox Rothschild LLP (“Fox”), the trustee’s law firm. The trustee filed motions on January 13, 2011, and October 13, 2011, seeking: (i) authorization to terminate the plans; (ii) authorization for the plans to pay for services provided by professionals retained by the trustee; (iii) the retention of an independent fiduciary to terminate the plans and pay retained professionals from plan assets; and (iv) to quash an administrative subpoena issued by the Secretary to the trustee. On March 17, 2011, and February 10, 2012, the Secretary objected to the jurisdiction of the bankruptcy court to approve the payment of the fees and expenses of Fox and the other professionals, the appointment of the independent fiduciary, and the quashing of the subpoena. On October 20, 2011, the PBGC filed an objection to the appointment of an independent fiduciary and the failure of the trustee to sign a trusteeship agreement for the transfer of the defined benefit plan to the PBGC for termination. On May 17, 2012 a consensual order was entered by the district court providing for, among other things: (i) a withdrawal of the reference of the motions from the bankruptcy court to the district court; (ii) the appointment of an independent fiduciary for the cash balance and the 401(k) plans to terminate those plans and to pay the plan professionals (including Fox); (iii) fixing Fox’s fees at $125,000, less than half of what Fox would have claimed; (iv) the assignment of the defined benefit plan to the PBGC; and (v) the Secretary’s release of her prohibited transaction claims and certain other claims against the trustee and Fox. The independent fiduciary is now in the process of terminating the cash balance and 401(k) plans; termination of the 401(k) plan is near completion. Plan Benefits Security Division
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