18th Annual Workplace Class Action Report - 2022 Edition

352 Annual Workplace Class Action Litigation Report: 2022 Edition Haley, et al. v. Teachers Insurance & Annuity Association , 2021 U.S. Dist. LEXIS 188585 (S.D.N.Y. Sept. 30, 2021). Plaintiff, a loan plan participant, filed a class action alleging that Defendant breached its fiduciary duty in violation of the ERISA. The parties filed cross-motions for summary judgment, and the Court granted in part and denied in part Defendant’s motion and denied Plaintiff’s motion. Plaintiff’s motion focused exclusively on whether Defendant’s loan plans were covered under the exemption in § 408(b)(1) of the ERISA. The Court ruled that Plaintiff failed to “provide evidence on each element of her claim.” Id . at *4. Accordingly, the Court denied Plaintiff’s motion. Defendant argued that its loans satisfied the ERISA’s requirement such that summary judgment was warranted. Plaintiff argued that Defendant’s collateralized loan program violated the ERISA because: (i) the program’s "exclusive purpose" was not to benefit participants because Defendant required collateral to be deposited in its General Account; (ii) Defendant, not the plans, received the reasonable rate of interest on the loan and the plan only received returns on the investment of the collateral; and (iii) the collateral was not "pledged to the plan" but instead to Defendant, since loan proceeds were funded from its General Account. Id . at *6. The Court ruled that Plaintiff’s primary contention was that the exclusive purpose of the loan program was not to benefit the plan participants, and Defendant’s response that requiring collateral to secure a loan was lawful did not directly address the argument. Thus, the Court denied Defendant’s motion as to the first claim. The Court, however, granted the motion as to the interest claim because nothing in the ERISA required that the interest provided to plan participants be from interest on the loans, and plan participants received 3% interest. The Court determined that Defendant sufficiently established that its compensation spread was reasonable as a matter of law. Accordingly, the Court granted Defendant’s motion as to the compensation spread claim. In addition, the Court concluded that Defendant failed to establish as a matter of law that the crediting rate paid to the plan constituted "adequate consideration." Id . at *15. The Court thus denied the motion for summary judgment on this claim. Finally, the Court ruled that disgorgement of profits from Defendant’s loan program would be an appropriate equitable remedy under § 502(a)(3) of the ERISA and thus denied the motion as to the equitable relief. For these reasons, the Court granted in part and denied in part Defendant’s motion and denied Plaintiff’s motion. Nolan, et al. v. Detroit Edison Co., 2021 U.S. App. LEXIS 8432 (6th Cir. March 23, 2021). Plaintiff, a participant in Defendant’s defined benefit plan (“the new Plan”), brought a putative class action alleging that Defendant made misleading promises and failed to explain the Plan’s risks in violation of several provisions of the ERISA. Defendant had a cash balance pension plan for all new employees and invited its existing employees to transfer from their traditional defined benefit plan to the new Plan. Plaintiff accepted and when she retired in 2017, Defendant informed her that her monthly pension benefit would be what she had accrued as of 2002 under the old traditional pension plan. This was despite her participation in the new Plan cash balance plan for over 15 years after she had transferred from the traditional defined benefit plan to the new Plan. Plaintiff’s complaint alleged: (i) a claim for benefits under § 502(a)(1)(B) of the ERISA for a breach of Plan terms (Count I); (ii) a violation of § 102 of the ERISA (Count II); and (iii) a violation of § 204(h) of the ERISA (Count III). Specifically, Count I alleged that Plaintiff was entitled to a benefit based on the “A+B Promise.” Id . at *7. Defendants provided participants with a Decision Guide that served as a Summary of Material Modifications. According to Plaintiff, the Guide promised that if employees agreed to transfer to the cash balance plan, they would receive their "frozen and protected" traditional plan benefit earned as of the date of the transfer and contribution credits and interest credits earned under the cash balance plan. Id . In the alternative, Plaintiff alleged in Counts II and III that the Guide inaccurately described the Plan by failing to inform her of the potential downsides of the cash balance formula, including the likelihood that her benefits would be subject to the wear- away phenomenon. Id. Defendants moved to dismiss the Complaint on the grounds that Plaintiff’s claims were time-barred and that Counts II and III failed to state a claim. The District Court granted Defendants’ motion in its entirety and entered judgment for Defendants. On Plaintiff’s appeal, the Sixth Circuit reversed in part and affirmed in part. The Sixth Circuit held that Plaintiff’s ERISA breach of plan terms claim was not time-barred under the applicable six-year limitations period because Plaintiff did not receive a clear benefits repudiation when she transferred to the Plan, and instead received the repudiation when she retired and received a pension calculation statement. Additionally the Sixth Circuit held that Plaintiff’s claim of a violation of the ERISA’s disclosure requirements was also not time-barred because the Guide was unclear and the employee alleged that the first time she had enough information to bring a challenge was upon her retirement. However, the Sixth Circuit held that Plaintiffs procedural claim in Count III that the Guide was provided at least 45 days too late was untimely and was properly dismissed, but her claim that Defendant failed to comply with the substantive