Elon Musk’s X Faces ERISA Violation Allegations

Elon Musk's X (formerly Twitter) faces allegations of ERISA violations.

The Case: Courtney McMillan v. X Corp.

The Court: U.S. District Court, Northern California

The Case No.: 3:23-cv-03461

The Plaintiff: Courtney McMillan v. X Corp.

The plaintiff in the case, Courtney McMillan, alleges X violated the Employee Retirement Income Security Act (ERISA). In the California ERISA lawsuit filed July 12th, the former Twitter (now X) employee claims the company owes former employees more than $500 million.

The Defendant: Courtney McMillan v. X Corp.

The defendant in the case, X (formerly known as Twitter), allegedly agreed to distribute severance pay as determined by the employees' initial offer letters. The company also allegedly later confirmed that employees' severance pay would be equitable or better than the pre-merger terms put in place by old Twitter management. According to the severance plan, laid-off workers were entitled to:

• A minimum of two months of base salary plus pro-rated performance bonuses (as if the triggers for all such bonuses were met) plus

• The cash value of any restricted stock units that would have been vested within three months of separation plus

• A cash contribution for health care coverage continuation

However, according to the lawsuit, the company offered two months base salary (in compliance with the notice requirements of the Federal Worker Adjustment and Retraining Notification (WARN) Act plus one month of severance pay.

The Case: Courtney McMillan v. X Corp.

Like retirement and group health plans, corporate severance plans can be subject to ERISA. According to the U.S. Department of Labor, severance benefits are not a pension plan if the payments are not contingent on retirement, the payments do not exceed double the employee's annual compensation, and the payments are completed within two years of the employee's layoff or termination. Companies that violate ERISA can face steep consequences.

If you have questions about how to file a California ERISA lawsuit, please get in touch with Blumenthal Nordrehaug Bhowmik DeBlouw LLP. Experienced ERISA attorneys are ready to assist you in various law firm offices in San Diego, San Francisco, Sacramento, Los Angeles, Riverside, and Chicago.

Another Chance for LinkedIn ERISA Suit Plaintiffs

After finding deficiencies in plaintiffs’ claims of impudence and disloyalty in connection to specific investments and plan fees, Judge Edward J. Davila offers LinkedIn ERISA suit plaintiffs time to correct the issues.

The Case: Douglas G. Bailey, Jason J. Hayes, and Marianne Robinson v. LinkedIn

The Court: U.S. District Court for the Northern District of California

The Case No.: 5:20-cv-05704-EJD

The Plaintiff: Douglas G. Bailey, Jason J. Hayes, and Marianne Robinson

One current and two former participants of the LinkedIn Corp. 401(k) Profit Sharing Plan and Trust filed an ERISA lawsuit claiming that LinkedIn, its 401(k) committee for breaches of ERISA (Employee Retirement Income Security Act) fiduciary duties, and its board of directors breached their fiduciary duties. According to the plaintiffs’ claims, the LinkedIn plan maintained over $164 million in assets over the course of the class period (and over $817 million in 2018), which qualifies the plan as a large plan in the DC plan marketplace with substantial bargaining power regarding the fees charged against participants’ investments. The plaintiffs allege that the fiduciaries did not leverage their bargaining power to attempt to reduce plan expenses or carefully consider each investment option offered in the plan to ensure it was a good option.

The Defendant: LinkedIn

The Defendant in the case, LinkedIn, argued that the plaintiffs did not claim to have actually invested in any of the challenged funds, and therefore did not establish that they suffered a concrete injury (according to the standard set by the U.S. Supreme Court in Thole v. U.S. Bank N.A.) However, the judge did indicate that claims based on excessive management fees would not require plaintiffs to plead their individual investment in specific funds if management fees are charged to all plan participants regardless of their chosen investments in the plan.

Summary of the Case: Douglas G. Bailey, Jason J. Hayes, and Marianne Robinson v. LinkedIn

The Defendants’ motions to dismiss the lawsuit alleging fiduciaries of the LinkedIn Corp. 401(k) Profit Sharing Plan and Trust violated the Employee Retirement Income Security Act (ERISA) by allowing the plan to pay excessive fees have been granted in part and denied in part. Judge Edward J. Davila gave the plaintiffs time to file another complaint addressing “deficiencies” he found in the original complaint. While the judge indicated that exorbitant plan fee claims of this nature could be based on an injury to a plan’s assets unrelated to specific funds if the plan participants were all assessed a portion of the injury, the plaintiffs need to amend their claim to expressly state such in the complaint.

If you have questions about California employment law or if you need to file an ERISA lawsuit, please get in touch with Blumenthal Nordrehaug Bhowmik DeBlouw LLP. Experienced employment law attorneys can assist you in various law firm offices located in San Diego, San Francisco, Sacramento, Los Angeles, Riverside, and Chicago.

Olin Corp. ERISA Lawsuit Claims Resemble Prior Suits

The ERISA lawsuit filed against Olin Corp. includes claims similar to those included in prior lawsuits.

The Case: Malika Riley and Takeeya S. Reliford v. Olin Corp., the Board of Directors of Olin Corp., the Olin Corp. Investment Committee, etc.

The Court: U.S. District Court for the Eastern District of Missouri

The Case No.: 4:21-cv-01328-SRC

The Plaintiff: Malika Riley and Takeeya S. Reliford

The plaintiffs in the case, Malika Riley and Takeeya S. Reliford, allege that the fiduciary defendants failed to appropriately monitor and control the plan’s recordkeeping fees and failed to adequately review the investment portfolio with the necessary care to make sure investment options were prudent (regarding both cost and performance of each investment). The plaintiffs allege that the plan fiduciaries maintained specific (allegedly underperforming) funds in the plan despite the availability of options with lower costs and better returns.

The Defendant: Olin Corporation

Olin Corporation, Defendant in the case, is a manufacturer producing ammunition, chlorine, and sodium hydroxide based in Clayton, Missouri. The corporation traces its roots to two different companies, both founded in 1892: Franklin W. Olin's Equitable Powder Company and the Mathieson Alkali Works. According to the allegations in the complaint, the corporation’s mismanagement of the plan was to the detriment of plan participants and their beneficiaries and thus constitutes a breach of fiduciary duty of prudence. Plaintiffs in the case allege that Olin Corporation plan fiduciaries’ actions were unreasonable and cost the plan and Olin Corporation plan participants millions of dollars. Defendant faces claims for breach of fiduciary duties of prudence and failure to monitor fiduciaries. Numerous other mid to large-sized businesses across the nation face (or have recently faced) similar claims that met with varying degrees of success over the past several years.

Summary of the Case: Malika Riley and Takeeya S. Reliford v. Olin Corporation

The complaint was filed in the U.S. District Court for the Eastern District of Missouri and included substantially similar allegations to various other lawsuits filed against American employers alleging fiduciary breaches connected to the management and operation of the company’s defined contribution (DC) retirement plans. Plaintiffs allege that Olin Corporation’s use of revenue sharing to pay for recordkeeping saddled the plan and its participants with excessive fees for both recordkeeping and administration. Some authorities have recognized “reasonable” annual rates for similarly sized retirement plans to average around $35 per participant (with costs for these services generally dropping daily). According to the complaint, there were times during the class period when the plan fiduciaries agreed to recordkeeping fees over $100 per participant. As the plan stayed with the same service provider over the entire course of the class period, the plaintiffs also allege that there is little to indicate that the plan fiduciaries attempted to do their duty with any request for proposals (RFP), which should be conducted regularly. The complaint questions whether the fiduciaries’ actions constituted adequately monitoring the plan’s investments. While changes have been made in recent years pulling funds out of mutual funds and turning to collective investment trusts (CITs), plaintiffs argue the changes were made too late to avoid significant participant losses.

If you have questions about California employment law or if you need to file an ERISA suit, please get in touch with Blumenthal Nordrehaug Bhowmik DeBlouw LLP. Experienced employment law attorneys are ready to assist you in various law firm offices located in San Diego, San Francisco, Sacramento, Los Angeles, Riverside, and Chicago.

Veterinary Hospital Faces Allegations in Recent ERISA Lawsuit

Plaintiffs filed an ERISA (Employee Retirement Income Security Act) lawsuit naming a veterinary hospital network (VCA, Inc.) and a number of retirement plan administrators and compensation committees in the company’s leadership as defendants.

The Case: Brain Smith, Jacqueline Mooney, Angela Bakanas, and Matthew Colon v. VCA Inc., and the plan committee for the VCA, INC. Salary Savings Plan, etc.

The Court: U.S. District Court for the Central District of California

The Case No.: 2:21-cv-09140-CAS-AGR

The Plaintiff: Smith, Mooney, & Colon

The plaintiffs in the case claim that the fiduciaries of VCA’s retirement savings plan failed to adequately monitor the retirement plan service fees and as a result, authorized the plan to pay unreasonable and excessive fees relative to the services received.

The Defendant: VCA Inc. and plan committee for their Salary Savings Plan

The retirement plan at issue is VCA, Inc.’s Salary Savings Plan. According to the suit, the specified retirement plan has close to 12,000 participants. Participants hold over $563 million in net assets as of the end of 2019. The plaintiffs claim that the plan fiduciaries failed to leverage the plan’s significant bargaining power to benefit the plan participants and their designated beneficiaries.

Summary of the Case: Brain Smith, Jacqueline Mooney, Angela Bakanas, and Matthew Colon v. VCA Inc., and the planning committee for the VCA, INC. Salary Savings Plan, etc.

According to the lawsuit, the plan paid as much as $105 per participant each year for retirement plan recordkeeping and administration services. The plaintiffs argue that a reasonable retirement plan service fee for a plan of this magnitude averages closer to $38 per plan participant annually. Similar claims have been filed against other midsize to large employers across the United States throughout the last several years. Similar claims have met with varying degrees of success - each depending on the details and facts of the particular case. In a general sense, the success of an ERISA suit is tied to the plaintiffs’ ability to demonstrate that the payment of excessive fees or inclusion of underperforming investments was likely due to fiduciary breaches. Simply stating that the service fees paid by a plan are higher than average or showing that investments underperformed other investment options that were overlooked is not enough to establish an ERISA claim in court.

If you have questions about California employment law or if you need help establishing an ERISA claim, please get in touch with Blumenthal Nordrehaug Bhowmik DeBlouw LLP. Experienced employment law attorneys are ready to assist you in various law firm offices located in San Diego, San Francisco, Sacramento, Los Angeles, Riverside, and Chicago.

Recent Decision Broadens the Relief Offered by ERISA for Breaches of Fiduciary Duties

On September 13th, 2021, the United States Court of Appeals for the Ninth Circuit issued an important ruling under ERISA for Daniel Warmenhoven v. NetApp, Inc. The appeals court ruling affirmed in part and vacated in part the district court’s summary judgment in favor of the Defendant.

The Case: Daniel Warmenhoven v. NetApp, Inc.

The Court: United States Court of Appeals for the Ninth Circuit

The Case No.: 19-16960

The Plaintiff: Daniel Warmenhoven v. NetApp, Inc.

Daniel Warmenhoven, the plaintiff in the case, was one of seven retired executives who sued NetApp (and the Plan, together referred to as NetApp) alleging that termination of the Plan violated ERISA since the plan members were promised lifetime benefits in PowerPoint presentations given to employees by plan administrators.

The Defendant: Daniel Warmenhoven v. NetApp, Inc.

In 2005, NetApp, Inc., the Defendant in the case, created the NetApp Executive Medical Retirement Plan, an employee welfare benefit plan governed by the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001–1461. The plan was intended to provide health insurance benefits to its retired senior executives. However, in 2016, NetApp implemented a phased termination of the Plan, which would eliminate benefits Warmenhoven and other retired executive’s planned to have in place for life.

Summary of the Case on Appeal: Daniel Warmenhoven v. NetApp, Inc.

The district court granted summary judgment to NetApp on both claims. Of the seven named plaintiffs, only one appealed: Warmenhoven. On appeal, the court affirmed in part and vacated in part the district court’s judgment. The appeals court’s decision restated 9th Circuit authority that there is no scienter requirement for breach of fiduciary claims. The appeals court’s findings also continued to expand equitable remedies available for breach of fiduciary claims under ERISA.

Details of the Appeals Court Decision: Daniel Warmenhoven v. NetApp, Inc.

The court quickly dismissed the legal claim under Sec­tion1132 (a) (l) (B) based on con­trolling circuit authority requiring any change to the vesting schedule from the default position at any time (such as plan termination or amendment), must be in writing in a plan document (citing Cinelli v. Secu­rity Pac. Corp. , 61 F. 3d 1437, 1441 (9th Cir. 1995)). The plaintiff also claimed that if the Power Points presented by the fiduciaries stating lifetime benefits did not actually vest lifetime benefits, he was entitled to equitable relief based on misrepresentation of plan benefits by NetApp fiduciaries. When considering this claim, the appeals court noted that a claim under Section 1131(a)(3) has two parts: 1) the existence of a remedial wrong for which the plaintiff seeks relief to redress in connection to an ERISA violation or violation of the plan terms, and 2) that the relief the plaintiff seeks is both appropriate and equitable. The court had no problem acknowledging the evidence of a remedial wrong. They quickly found the evidence Warmenhoven presented as adequate to overcome summary judgment. The court explained that Barker v. American Mobil Power Corp., 64 F. 3d 1397, 1403 (9th Cir. 199 5), held that fiduciaries breach their duties if they mislead plan participants, if they misrepresent the terms of a plan, or if they misrepresent the administration of a plan. It was also noted that intent to deceive is not a requirement under current circuit law. In conclusion, the appeals court found that the district court erred in finding that NetApp did not breach a fiduciary duty.

The Importance of the Ruling: Tort Law Versus Trust Law

Under King v. Blue Cross & Blue Shield of Ill. , 871 F.3d 730, 744 (9th Cir. 2017) and Mathews v. Chevron Corp. , 362 F. 3d 1172, 1183 (9th Cir . 2004), the fiduciary duty of loyalty is rooted in trust law, not tort law. As such, there is no reason to transplant the law of torts’ element of scienter. The court’s decision in Mathews followed a line of cases from other circuits that did not require a showing of intent to mislead plan participants. The Mathews court followed 6th Circuit precedent in James v. Pirelli Armstrong Tire Corp. , 30 5 F. 3d 439 (6th Cir. 2002).

What Happens Next: Daniel Warmenhoven v. NetApp, Inc.

ERISA’s remedies are equitable in nature and drawn from the law of trusts, where strong fiduciary duties are imposed on those who are in a position of trust and responsibility. However, the court did not address whether Warmenhoven would be entitled to appropriate equitable relief to redress the al­leged wrong (one of the requirements for an equitable claim under Section 1132 (a)(3)). They left that up to the district court on remand. Warmenhoven v. NetApp is the latest case to expand equitable relief for plan participants and plan participant beneficiaries under ERISA for breach of fiduciary duties. The court’s finding reinforces existing law that imposes potential liability for misrepresentations to employees on plan sponsors and plan administrators.

If you have questions about California employment law or if you need to discuss ERISA violations, please get in touch with Blumenthal Nordrehaug Bhowmik DeBlouw LLP. Experienced employment law attorneys are ready to assist you in various law firm offices located in San Diego, San Francisco, Sacramento, Los Angeles, Riverside, and Chicago.

Northrop Faces ERISA Class Action In Response to Pension Cuts

Northrop Grumman Space and Mission Systems Corp. faced allegations of ERISA violations in a recent California class action.  

Details of the Case: Baleja v. Northrop Grumman Space and Mission Systems Corp. Salaried Pension Plan et al.

Court: U.S. District Court for the Central District of California

Case No.: 5:17-cv-00235

Getting to Know the Case: The Allegations

In Baleja v. Northrop Grumman Space and Mission Systems Corp. Salaried Pension Plan et al., Northrop Grumman Corp faces ERISA class action. The ERISA class action includes allegations that the group improperly slashed from 1,000 to 2,000 retiree pensions. A California federal judge that heard the original claims, trimmed the suit but allowed it to continue to trial with the core claims intact. 

Getting to Know the Case: The Case Progresses

U.S. District Judge Jesus G. Bernal dismissed the retirees’ claim that a pension plan document they unearthed flouted the ERISA disclosure requirement. However, the same judge preserved accusations that the defendant improperly cut retirees’ pensions, and that in doing so, violated federal law. Judge Bernal felt it was too soon to grant the motion for summary judgement for either party. Before doing so, he could need answers to key questions about the pension cuts. 

The Retiree Pension Cuts: Brought On by an Amendment

The cuts referenced in the case refer to retiree pension cuts brought about by a pension plan amendment. The amendment, called the ESL offset provision, was added decades ago in the 1980s. The court will seek answers to these key questions during the trial phase. 

Questions About the ESL Offset Provision: 

The court will need to determine the appropriate interpretation of the ESL offset provision, as well as the 1986 TRW plan as the case moves forward. The ERISA class action was launched years ago in February of 2017. The claims were originally filed by John Baleja, a retiree who was an employee of subsidiary of the aerospace and automotive company TRW Inc.(this company was an acquisition of Northrop in 2002). 

The Pension Plan Termination: 

The subsidiary’s pension plan was terminated in the mid 80’s. Baleja and other ESL Inc. employees and retirees became part of the TRW pension plan. When terminated, the old plan made payments to those transitioning into the new plan (TRW’s pension plan). According to court documents related to the case, Baleja received payments totaling $4,078. An offset was applied when Northrup acquired TRW. The amount was based on the termination payment. According to Baleja, Northrup significantly overcalculated the offset amount. Baleja alleged that the company cut his approximate $1,000 pension by close to 50% based on the fact that he received a payout of a few thousand dollars in the 1980s. 

The Class Members: 

Class members include plan members who had their accrued pension benefits cut due to the ESL offset since the end of 1984. Class certification was granted in March 2020, and estimates of class numbers are between 1180 and 2000. 

If you have questions about ERISA violations or the law protects you, please get in touch with Blumenthal Nordrehaug Bhowmik DeBlouw LLP. Experienced employment law attorneys are ready to assist you in various law firm offices located in San Diego, San Francisco, Sacramento, Los Angeles, Riverside, and Chicago.

ERISA Lawsuit Argues Pharmaceutical Company Ignored Outrageous 401(k) Fees

In a recent ERISA lawsuit, plan fiduciaries allegedly failed to use the lowest cost share class for several mutual funds in a plan. They did not consider investment vehicles available at lower-costs. The plaintiffs claim the Pharmaceutical Product Development LLC Retirement Savings Plan fiduciaries have violated their fiduciary duties under the Employee Retirement Income Security Act (ERISA) since April 15, 2014.

Plan Fiduciaries Violated ERISA Failing to Use Lowest Cost Share Class:

Plaintiffs in the case claim that the plan fiduciaries failed to adequately (and objectively) review the plan investment portfolio to make sure that chosen investments were prudent both in terms of costs and maintenance of certain plan funds. This failure meant that ignoring other similar investment options that offered lower costs and better performance histories. Plaintiffs also allege that the fiduciaries failed to use the most economical cost share class for some mutual funds in the plan, and failed to contemplate collective trusts, separate accounts, or commingled accounts as options to the mutual funds (despite lower fees).

Plaintiffs Allege that Plan Fiduciaries Failed in Their Duties:

On average, 401(k) plans pay significantly lower fees than regular industry investors. This is true even as expense ratios for all continued to drop over the last several years. Additionally, the plan in question holds over $700 million in assets. The $700 million was managed since December 31, 2018, and the plan should have the ability to negotiate lower fees and invest in specific vehicles that require investment/balance minimums. The lawsuit documentation claims the plan funds have remained mostly unchanged through the past six years. As of 2018, plaintiffs were able to show data comparisons indicating over 60% of the plan funds were significantly more expensive than comparable funds in plans of a similar size.

Fulfilling a Fiduciary Responsibility for Retirement Plan Participants:

Plaintiffs argue that a prudent retirement plan fiduciary searches for and chooses the lowest-priced share class available. In this case, the plaintiffs’ fiduciaries failed to monitor the plan prudently and pinpoint whether or not it was invested in the lowest cost share class possible for the plan’s mutual funds. The plaintiffs also offered data illustrating how much more expensive the funds were in comparison to their similar situated options. Using more expensive share classes does not benefit plan participants in any way since the high-cost share classes did not provide any additional benefits or services. They did come with a consequence for plan participants, though.  

If you need to discuss violations of fiduciary duty or would like to talk about filing an ERISA class action, we can help. Get in contact with Blumenthal Nordrehaug Bhowmik DeBlouw LLP. Experienced employment law attorneys are ready to assist you in any one of various law firm offices located in San Diego, San Francisco, Sacramento, Los Angeles, Riverside, and Chicago.