Compliance August 29, 2005

Court Denies Venue Change for ERISA Case

August 29, 2005 (PLANSPONSOR.com) - A judge in the US District Court for the District of Maryland decided that it was the proper venue for an ERISA case since one of the plaintiffs lived in Maryland and was denied benefits while he lived in Maryland.
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In the case of Cross v. Fleet Reserve Association Pension Plan, D. Md., No. WDQ-05-CV-0001, 8/23/05, the court denied the defendant’s motion to change venue, BNA reports.   According to the court opinion, ERISA says a claim can be brought in a district where the plan is administered or where the breach took place.

The defendants could not deny that one of the plaintiffs in the case was a resident of Maryland when he was denied benefits for which he is now suing.So the breach occurred in the District of Maryland, according to the court opinion.   The court rejected the plaintiffs’ argument that the plan was administered in the district, though, saying the plan could not be “found” in the district simply because an employee traveled to Maryland often for work.

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Other arguments for the change in venue were also rejected.   Even though the plan is administered in Eastern Virginia, that is close enough in proximity to Maryland for the venue to be convenient and the court found no reason the plan could not receive a fair trial in Maryland.

Compliance August 26, 2005

Recovering Losses For Individual Participants Is Recovery For The Plan

August 26, 2005 (PLANSPONSOR.com) - The US Court of Appeals for the 3rd Circuit has disagreed with a lower court decision that an ERISA case be dismissed because it was seeking financial recovery of losses on behalf of some plan participants and not the plan as a whole.
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In the 3 rd Circuit’s  opinion , it said at issue was “whether the complaint seeks relief for the Schering-Plough Employees’ Savings Plan based on allegations that there were ‘losses to the plan resulting from [a] breach’ of fiduciary duty.   In the opinion, the court pointed out that Section 1109 of ERISA allows recovery of “any losses” to the plan and doesn’t just allow recovery of losses that will be distributed to all participants.

The court also pointed out that a loss to any investment, though held in individual accounts, is a loss to the plan since all assets are held in trust by the plan.

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Two employees of Schering-Plough Corp. sued the plan for breaches in fiduciary duty after company stock prices fell drastically.   Company stock was offered as an investment option in the company’s retirement savings plan.   According to an EBIA report, the employees alleged that the plan fiduciaries breached their duties by continuing to offer company stock when they new the price was “unlawfully and artificially inflated.”  

The lower court dismissed the suit saying it sought relief for individual participant losses and not the plan as a whole.   The 3 rd Circuit now says the suit may go to trial and the plaintiffs may seek monetary relief for their losses.

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