ERISA Litigation Update

Welcome to Goodwin's ERISA Litigation Update. Litigation involving ERISA-governed benefits plans has exploded in recent years. Lawyers in our award-winning ERISA Litigation practice have extensive experience litigating these cases across the country, as well as representing clients in Department of Labor investigations. The ERISA Litigation Update will gather notable developments in this space, including important court decisions and appeals as well as regulatory guidance, and provide information regarding those developments on a quarterly basis.

For more information about Goodwin's ERISA Litigation practice or to read our publications, please visit our practice page.

1 Second Circuit Affirms Dismissal of Breach of Fiduciary Duty Claims for Lack of Article III Standing

Key Takeaway: On a matter of first impression, the Second Circuit affirmed dismissal of breach of fiduciary duty claims because the named plaintiffs failed to sufficiently plead that they suffered injury-in-fact.

On August 18, 2025, in Collins v. Northeast Grocery, Inc., No. 24-2339, the Second Circuit Court of Appeals largely affirmed dismissal of a complaint brought by participants in the Northeast Grocery 401(k) plan. The plaintiffs challenged (i) recordkeeping and advisory fees and (ii) the selection and retention of certain plan investment options, including funds they claimed underperformed or used higher-cost share classes when lower-cost share classes were available. The District Court for the Northern District of New York had dismissed the complaint without leave to amend, in part because the plaintiffs had not invested in any of the investment funds they challenged and, thus, failed to plead injury-in-fact.

On appeal, the Second Circuit addressed for the first time whether plaintiffs have Article III standing to challenge the selection or monitoring of 401(k) plan funds that they did not invest in. The Second Circuit squarely rejected the plaintiffs' standing theory that allegations of plan-wide mismanagement are sufficient to demonstrate injury-in-fact. The Second Circuit held that such allegations were conclusory and speculative; rather, a plaintiff must demonstrate that they were affected in a personal and individual way. For this reason, the court held that the plaintiffs lacked constitutional standing and failed to satisfy the class standing test as to their claims concerning funds that they did not invest in. In a separate summary order, the Second Circuit affirmed dismissal of the remaining breach of fiduciary duty claims for failure to plead a meaningful benchmark. However, the court reversed and remanded one prohibited transaction claim in light of the Supreme Court's ruling in Cunningham v. Cornell University.

2 Ninth Circuit Clarifies Law Regarding Whether Plan Language Can Require Arbitration

Key Takeaway: The Ninth Circuit affirms in part and reverses in part a district court's decision denying motion to compel arbitration.

On August 4, 2025, in Platt v. Sodexo, S.A., No. 23-55737, the Ninth Circuit Court of Appeals affirmed in part and reversed in part the District Court for the Central District of California's decision denying the defendants' motion to compel arbitration in a case concerning challenges to monthly tobacco surcharges on health insurance plan premiums. In so doing, the Ninth Circuit drew a distinction between moving to compel arbitration of claims brought by an individual plan participant (under ERISA Sections 502(a)(1)(B) & (a)(3)) and moving to compel arbitration of claims brought by a participant on behalf of the plan (under Section 502(a)(2)).

With respect to the claims brought by the plaintiff as an individual plan participant, the Ninth Circuit held that the plan's arbitration clause was unenforceable as to this plaintiff because it was added to the plan after the plaintiff joined the plan. The court held that, to be bound by the arbitration clause, the plaintiff must consent to it, which the plaintiff did not do. The court noted that, although explicit consent is unnecessary, the plaintiff lacked sufficient notice of the addition of the arbitration clause or that he would be subject to it by virtue of his continued participation in the plan.

With respect to the claims brought on behalf of the plan, the court concluded that the consent of an individual plan participant to arbitrate is not needed; the participant's unilateral consent to the plan is sufficient consent to the arbitration clause. However, the plan's arbitration clause also included a class action waiver, which the Ninth Circuit found impermissibly restricts the right of plan participants under ERISA to bring a class action. The court remanded to the district court to determine whether the class action waiver was severable (i.e., whether the arbitration clause permitted the class action waiver to be removed in the event that a court determines that the waiver impermissibly restricts the rights of plan participants). If so, the arbitration clause could still be enforceable. The Ninth Circuit also remanded the case to the district court for it to determine whether the arbitration clause is unconscionable.

3 Defendant Prevails at Trial on Recordkeeping and Share Class Claims

Key Takeaway: The court found that the defendant had prudently monitored a 401(k) plan's recordkeeping costs and the share classes of its investments.

On August 12, 2025, in McDonald v. Laboratory Corporation of America Holdings, No. 22-680, the U.S. District Court for the Middle District of North Carolina entered a full defense judgment for defendant Laboratory Corporation of America Holdings (LabCorp) in litigation regarding its 401(k) plan. LabCorp's motion to dismiss had narrowed the claims, leaving only two surviving claims: the defendant had breached its duty of prudence by failing to monitor the plan's recordkeeping costs by failing to investigate the availability of lower-cost share classes for its investment options. On Daubert motions, the court had excluded opinions from one of the plaintiffs' experts regarding what would constitute a reasonable recordkeeping fee for the LabCorp plan but otherwise declined to exclude the experts' opinions. A bench trial was held from May 5, 2025, through May 8, 2025.

The court entered a judgment for LabCorp on all claims. The court first found that, while it had not excluded most opinions from plaintiff's experts, it found those experts opinions to be unpersuasive because the experts either testified solely based on their own experience and not industry standards or started with their ultimate conclusion and then found evidence to support it. Next, the court found that LabCorp had prudently monitored the plan's recordkeeping costs, including through the use of an independent consultant and multiple requests for information or fee benchmarking analyses. Finally, the court also ruled in favor of LabCorp on the share class claim, finding that there was no evidence that LabCorp either met the minimum asset requirement for lower-cost investments or that this requirement would be waived for the plan.

4 Recent Developments in Forfeiture Cases

Key Takeaway: District courts have continued to weigh in on forfeiture claims and have dismissed many such claims. Several forfeiture cases are now before appellate courts and, in one, the Department of Labor has submitted an amicus brief in support of the defendants.

Key developments in forfeiture cases over the past quarter include:

Courts Continue to Grant Motions to Dismiss Claims Challenging Allocation of Forfeitures

District courts have continued the growing trend toward the dismissal of claims that challenge employers' allocation of forfeitures to reduce employer contributions. In several of these decisions, courts have dismissed forfeiture claims under Rule 12(b)(6) based on the reasoning in Hutchins v. HP — that the plaintiff's theory is overbroad because it allows for no set of circumstances or context in which a prudent and loyal fiduciary could apply forfeited amounts toward employer contributions. In other decisions, courts have dismissed forfeiture claims under Rule 12(b)(1) for lack of Article III standing. In those cases, the courts held that the plaintiffs could not have suffered an injury-in-fact because the plans did not authorize the defendants to use forfeited amounts in the way the plaintiffs claimed they should have been used.

A Small Number of Courts Have Denied Motions to Dismiss Forfeiture Claims

By contrast, a handful of district courts have bucked the trend toward dismissal and allowed forfeiture claims to proceed to discovery. For example, in Buescher v. North American Lighting, Inc., the U.S. District Court for the Central District of Illinois denied a motion to dismiss where the complaint specifically alleged that there were circumstances in which the decision to offset employer contributions could align with the interests of participants. The court held that the defendants were required to base their decision regarding how to use forfeited amounts on an adequate investigation.

Department of Labor Weighs In on Forfeiture Litigation in Favor of Employers

On July 9, 2025, the Department of Labor (DOL) filed an amicus brief in support of the defendants in the Hutchins v. HP appeal currently pending before the Ninth Circuit Court of Appeals. The DOL explained its view that the fundamental issue with the plaintiff's theory of liability was that the plaintiff ignored the constraints on the fiduciary's decision-making evident from the face of the complaint and the plan terms. For example, there was a possibility that there would be a funding shortfall if the plan sponsor refused to increase its contributions to make up for amounts that would be covered by forfeitures. This is the first public position the DOL has taken on the recent wave of forfeiture litigation.

Appeals of Forfeiture Decisions Granting Motions to Dismiss Continue

In addition to the Hutchins v. HP appeal in the Ninth Circuit Court of Appeals, several plaintiffs have appealed district court decisions granting motions to dismiss in the Ninth, Eighth, and Third Circuit Courts of Appeal. The forfeiture cases currently on appeal include:

• Hutchins v. HP Inc., No. 25-826 (9th Cir. Feb. 7, 2025)
• Sievert v. Knight-Swift Transportation Holdings, Inc., No. 25-3409 (9th Cir. May 28, 2025)
• Wright v. JPMorgan Chase & Co., No. 25-4235 (9th Cir. July 9, 2025)
• Matula v. Wells Fargo & Co., No. 25-2441 (8th Cir. July 17, 2025)
• McWashington v. Nordstrom, Inc., No. 25-04613 (9th Cir. July 18, 2025)
• Cain v. Siemens Corp., No. 25-2564 (3d Cir. Aug. 19, 2025)
• Barragan v. Honeywell International, Inc., No. 25-2609 (3d Cir. Aug. 22, 2025)

The HP case is fully briefed; the briefing for the other appeals is expected to be completed by later 2025 or early 2026.

5 Recent Events

Speaking Engagement: RILA Retail Law Conference 2025 (October 9, 2025)

Jaime Santos and Jamie Fleckner participated in the "Health Plan Apocalypse? What Retirement Plan Litigation Can Tell Us About the Coming Wave of Health Plan Class Actions" panel at the RILA Retail Law Conference, discussing lawsuits challenging employer-sponsored health plan costs.

Speaking Engagement: Stable Value Investment Association Fall Forum 2025 (October 7, 2025)

Jamie Fleckner spoke at the Stable Value Investment Association's Fall Forum 2025 on a panel called "Legal and Legislative Developments to Watch."

Speaking Engagement: The Retail Private Markets Revolution: A Guide for Private Fund Managers (September 30, 2025)

Jamie Fleckner moderated "The Trump Executive Order on Private Markets Access in Retirement Plans: What Comes Next and What Does It Mean?" roundtable discussion with Goodwin partners Patrick Menasco and Jeremy Senderowicz, along with Chris Lyon, the global head of defined contribution at Goldman Sachs.

Speaking Engagement: Fiducient Advisors 2025 Investor Conference (September 17, 2025) (September 17, 2025)

Jamie Fleckner spoke on a panel at the Fiducient Advisors 2025 Investor Conference discussing the trend of hiring outsourced chief investment officers in the retirement space.

6 Recent Insights

Expert Analysis: "What's At Stake In High Court Review Of Funds' Right To Sue" (Law360, August 8, 2025)

Mike Isenman, Jennifer Luz, and Jamie Fleckner co-authored an article regarding a Supreme Court case, FS Credit Opportunities Corp. v. Saba Capital Master Fund, Ltd., about whether investment funds and their investors can sue each other in federal court over alleged violations of investment company law.

Client Alert: "Trump Administration's Executive Order to Facilitate Availability of Alternative Assets in Defined Contribution Plans: What Does It Mean?" (Goodwin, August 8, 2025)

Jeremy Senderowicz, Bibek Pandey, Patrick Menasco, Brynn Peltz, John Cleary, and Hasan Cetin co-authored a client alert regarding the Trump administration's issuing of a long-awaited executive order (EO) on alternative assets. The EO encourages sponsors of 401(k) and other participant-directed defined contribution plans that are governed by ERISA to consider offering access to alternative investments, such as private equity, private credit, real estate, funds investing in digital assets, commodities, project financing, and lifetime income investments.

7 Awards and Recognitions

Goodwin's ERISA Litigation practice was recognized by The Best Lawyers in America 2026. Congratulations to Jamie Fleckner, John Cleary, Natascha George, James Mattus, Patrick Menasco, and Jaime Santos on being recognized as Best Lawyers and Morgan Frisoli, Chris Jones, Isabel Marin, James Oh, Kelsey Pelagalli, Rahat Tariq, and Grace Wirth on being recognized as Ones to Watch.