ARTICLE
4 February 2016

What Amgen And Tackett Tell Us About ERISA Litigation Trend Lines

SS
Seyfarth Shaw LLP

Contributor

With more than 900 lawyers across 18 offices, Seyfarth Shaw LLP provides advisory, litigation, and transactional legal services to clients worldwide. Our high-caliber legal representation and advanced delivery capabilities allow us to take on our clients’ unique challenges and opportunities-no matter the scale or complexity. Whether navigating complex litigation, negotiating transformational deals, or advising on cross-border projects, our attorneys achieve exceptional legal outcomes. Our drive for excellence leads us to seek out better ways to work with our clients and each other. We have been first-to-market on many legal service delivery innovations-and we continue to break new ground with our clients every day. This long history of excellence and innovation has created a culture with a sense of purpose and belonging for all. In turn, our culture drives our commitment to the growth of our clients, the diversity of our people, and the resilience of our workforce.
Two recent Supreme Court decisions, and a recent Sixth Circuit analysis on remand from the Supreme Court, offer a roadmap of sorts on ERISA litigation.
United States Employment and HR

Two recent Supreme Court decisions, and a recent Sixth Circuit analysis on remand from the Supreme Court, offer a roadmap of sorts on ERISA litigation. In both decisions, the Supreme Court did away with presumptions, and at the same time made it more difficult for plaintiffs to sue.

In Amgen, Inc. v. Harris, 2016 WL 280886 (Jan. 25, 2016), the Supreme Court affirmed its 2014 decision in Fifth Third Bancorp v. Dudenhoeffer, 134 S.Ct. 2459 (2014) that a claim for a breach of fiduciary duty of prudence against ERISA fiduciaries who manage publically-traded employee stock investments in 401(k) plans need not overcome a presumption of prudence. But the Court reversed a Ninth Circuit decision that imposed too low a burden on plaintiffs when arguing that the ERISA fiduciaries should have "done something" to halt a decline in stock values. The Court affirmed this critical Dudenhoeffer pleading standard for plaintiffs: The complaint must "plausibly allege" that "a prudent fiduciary in the same position could not have concluded that [ ] alternative action would do more harm than good." (Emphasis added; internal quotation marks omitted.) There are two points to note with this affirmation of the Dudenhoeffer phrasing of the plaintiff's burden: (1) "plausibility" has become at catch-word for specificity, and (2) alleging a negative with specificity is very hard to do.

In Tackett v. M&G Polymers USA, Inc., 2016 WL 240414 (6th Cir. Jan. 21, 2016), the Court of Appeals for the Sixth Circuit remanded a case to the District Court in light of the Supreme Court's decision in M&G Polymers USA, LLC v. Tackett, 135 S.Ct. 926 (2015) that did away with a presumption of vesting of collectively bargained retiree welfare benefits. The Sixth Circuit instructed the District Court to evaluate the vesting issue under "ordinary principles of contract law." The Sixth Circuit then listed many of these ordinary principles. Of note is the principle that "traditional rules of contractual interpretation require a clear manifestation of intent before conferring a benefit." Combining this principle with plausibility means that plaintiffs must allege with specificity a plan sponsor intention to vest. A collective bargaining agreement's durational language or incorporation of a plan document with a reservation of rights will make it hard for a plaintiff to allege with specificity the existence of vested benefits, even if the other governing language is vague.

So, what do these decisions suggest about the future of ERISA litigation? Expect a tougher road for plaintiffs to state claims upon which relief may be granted. Also expect stock drop and retiree welfare benefits litigation to shine a spotlight on an ERISA plan's privately-held stock investments, the ERISA duty of loyalty (which was not the focus of the Amgen decision), and plans and collective bargaining agreements that, from a plan sponsor perspective, are badly drafted.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More