Recent Court of Appeals decisions grapple with individuals in a Plan context

A recent Sixth Circuit decision has opened the courtroom doors to individual participants harmed by a Plan Fiduciary’s breach of fiduciary duty by eliminating a previous requirement that individual plan participants sue on behalf of the entire plan, rather than only for their individual losses. In Tullis v. UMB Bank, the Sixth Circuit granted standing to two physicians who were defrauded of almost $1.8 million by their plan’s investment advisor when the fiduciary continued to employ an advisor who made improper trades and failed to make trades, even after the SEC suspended the investment company’s ability to operate.

In allowing the individual suits to go forward, the Sixth Circuit has removed a Plan’s first line of defense in protecting itself against ERISA violation claims. Click here to read the full article.

In contrast, a First Circuit decision demonstrated that a “top hat” excess compensation plan is still exempt under ERISA, even when the individual executives are not given an opportunity to negotiate the terms of their pension packages, and do not have individual bargaining power. In Alexander v. Brigham and Women’s Physicians Organization, Inc., the First Circuit broke with other federal circuits in approving a Plan’s seizure of more than $400,000 from a Massachusetts surgeon’s deferred compensation account after terminating him. Click here to read the full article.

Journalist Rachel McMurdie addresses the relationship between good pension governance and litigation events. In “Investing in Good Governance: Subprime-Related Losses Stir Up the Conversation,” the January 2008 issue of The Institutional Real Estate Newsletter credits Pension Governance, LLC founder, Dr. Susan Mangiero, as saying “People must pay closer attention to the proper identification, measurement and management of investment risks. That includes making inquiries about how their fund managers deal with risk, how they value thinly traded securities and the extent to which they employ leverage.” ERISA attorney Steve Rosenberg with The McCormick Firm” predicts more lawsuits. “The problem we’re seeing consistently is that [pension funds] don’t do sufficient investigation.” He adds “They don’t bring in sufficient expertise and they get blind-sided.” Reference is made to www.PensionLitigationData.com, notably the large number of cases being added each quarter. Click here to read the article.

PensionLitigationData.com debuts with over 1,500 retirement plan legal actions, each classified by nearly 100 fields, including court circuit, type of allegation, plaintiff, defendant and date. A joint venture of Pension Governance, LLC and The Michel-Shaked Group, this continuously updated and searchable database reflects the dramatic rise in pension lawsuits. Market volatility, complex investment strategies, new accounting rules, federal regulations and heightened scrutiny of financial decision-making are a few of the many reasons that explain the addition of hundreds more cases each quarter. This unique web-enabled tool helps attorneys, trustees, board members and policy-makers to better understand the nature of individual pension lawsuits and related litigation trends, thereby encouraging better practices.

To read the rest of the announcement, click here.

In a new article published by PensionLitigationDatabase.com, analysts describe an increase in litigation relating to multiemployer plan withdrawals. Under current rules, an employer seeking to exit must continue payments to the plan to help fund its obligation to pay vested benefits. Cases making their way through the legal system allege employer failure to comply in paying a proportionate share of what is owed. Click here to read about this important topic.

On January 28, 2008, Dr. Susan Mangiero, AIFA, AVA, CFA, FRM will talk about pension fiduciary litigation trends. Click here to review the agenda for IMN’s “2nd Annual Ohio Forum on Public Retirement: The Conference for the Public Retirement Systems of Ohio.”

On January 31, 2008, Dr. Susan M. Mangiero, AIFA, AVA, CFA, FRM will speak about pension litigation trends to attendees of the Canadian Institute’s conference entitled “Pension Law, Litigation and Governance: Practical Guidelines for Minimizing the Risk of Liability.” For further details, click here.