Justia U.S. Supreme Court Opinion Summaries

M&G purchased the Point Pleasant Polyester Plant in 2000 and entered a collective bargaining agreement and a related Pension, Insurance, and Service Award Agreement with the union, providing that certain retirees, surviving spouses, and dependents, would “receive a full Company contribution towards the cost of [health care] benefits”; that such benefits would be provided “for the duration of [the] Agreement”; and that the Agreement would be subject to renegotiation in three years. After the expiration, M&G announced that it would require retirees to contribute to the cost of their health care benefits. Retirees sued, alleging that the 2000 Agreement created a vested right to lifetime contribution-free health care benefits. On remand, the district court ruled in favor of the retirees; the Sixth Circuit affirmed. The Supreme Court vacated and remanded, noting that welfare benefits plans are exempt from the Employee Retirement Income Security Act, 29 U.S.C. 1051(1), 1053, 1081(a)(2), 1083, and applying ordinary principles of contract law. The Court stated that Sixth Circuit precedent distorts ordinary principles of contract law, which attempt to ascertain the intention of the parties, “by placing a thumb on the scale in favor of vested retiree benefits in all collective-bargaining agreements.” The Sixth Circuit did not consider the rules that courts should not construe ambiguous writings to create lifetime promises and that “contractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement.” View "M&G Polymers USA, LLC v. Tackett" on Justia Law

Fifth Third maintains a defined-contribution retirement savings plan for its employees. Participants may direct their contributions into any of several investment options, including an “employee stock ownership plan” (ESOP), which invests primarily in Fifth Third stock. Former participants sued, alleging breach of the fiduciary duty of prudence imposed by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1104(a)(1)(B) in that the defendants should have known—on the basis of both public information and inside information available to Fifth Third officers—that the stock was overpriced and risky. The price of Fifth Third stock fell, reducing plaintiffs’ retirement savings. The district court dismissed; the Sixth Circuit reversed. A unanimous Supreme Court vacated. ESOP fiduciaries are not entitled to any special presumption of prudence, but are subject to the same duty that applies to ERISA fiduciaries in general, except that they need not diversify the fund’s assets. There is no requirement that plaintiffs allege that the employer was, for example, on the “brink of collapse.” Where a stock is publicly traded, allegations that a fiduciary should have recognized, on the basis of publicly available information, that the market was over- or under-valuing the stock are generally implausible and insufficient to state a claim. To state a claim, a complaint must plausibly allege an alternative action that could have been taken, that would have been legal, and that a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than to help it. ERISA’s duty of prudence never requires a fiduciary to break the law, so a fiduciary cannot be imprudent for failing to buy or sell in violation of insider trading laws. An allegation that fiduciaries failed to decide, based on negative inside information, to refrain from making additional stock purchases or failed to publicly disclose that information so that the stock would no longer be overvalued, requires courts to consider possible conflicts with complex insider trading and corporate disclosure laws. Courts confronted with such claims must also consider whether the complaint has plausibly alleged that a prudent fiduciary in the same position could not have concluded that stopping purchases or publicly disclosing negative information would do more harm than good to the fund. View "Fifth Third Bancorp v. Dudenhoeffer" on Justia Law

Hartford is the administrator of Wal-Mart’s Group Disability Plan, which is covered by the Employee Retirement Income Security Act. The policy requires any suit to recover benefits pursuant to ERISA, 29 U. S. C. 1132(a)(1)(B), to be filed within three years after “proof of loss” is due. Heimeshoff filed a claim for long-term disability benefits. Following mandatory administrative review process, Hartford issued a final denial. Almost three years after the final denial but more than three years after proof of loss was due, Heimeshoff sought judicial review under ERISA. The district court dismissed, reasoning that while ERISA does not provide a statute of limitations, the contractual limitations period was enforceable under state law and Circuit precedent. The Second Circuit affirmed. The Supreme Court affirmed, finding the limitations provision enforceable. A participant’s ERISA cause of action does not accrue until the plan issues a final denial, but it does not follow that a plan and its participants cannot agree to commence the limitations period before that time. The Court noted that contractual limitations provisions should ordinarily be enforced as written. The period at issue is not unreasonably short and does not undermine ERISA’s two-tiered remedial scheme by causing participants to shortchange the internal review process. If administrators attempt to prevent judicial review by delaying the resolution of claims in bad faith, the penalty for failure to meet regulatory deadlines is immediate access to judicial review for the participant and courts can apply waiver or estoppel. Plans offering appeals beyond what is contemplated in the internal review regulations must agree to toll the limitations provision during that time, 29 CFR 2560.503–1(c)(3)(ii). View "Heimeshoff v. Hartford Life & Accident Ins. Co." on Justia Law

Fifth Third maintains a defined-contribution retirement savings plan for its employees. Participants may direct their contributions into any of several investment options, including an “employee stock ownership plan” (ESOP), which invests primarily in Fifth Third stock. Former participants sued, alleging breach of the fiduciary duty of prudence imposed by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1104(a)(1)(B) in that the defendants should have known—on the basis of both public information and inside information available to Fifth Third officers—that the stock was overpriced and risky. The price of Fifth Third stock fell, reducing plaintiffs’ retirement savings. The district court dismissed; the Sixth Circuit reversed. A unanimous Supreme Court vacated. ESOP fiduciaries are not entitled to any special presumption of prudence, but are subject to the same duty that applies to ERISA fiduciaries in general, except that they need not diversify the fund’s assets. There is no requirement that plaintiffs allege that the employer was, for example, on the “brink of collapse.” Where a stock is publicly traded, allegations that a fiduciary should have recognized, on the basis of publicly available information, that the market was over- or under-valuing the stock are generally implausible and insufficient to state a claim. To state a claim, a complaint must plausibly allege an alternative action that could have been taken, that would have been legal, and that a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than to help it. ERISA’s duty of prudence never requires a fiduciary to break the law, so a fiduciary cannot be imprudent for failing to buy or sell in violation of insider trading laws. An allegation that fiduciaries failed to decide, based on negative inside information, to refrain from making additional stock purchases or failed to publicly disclose that information so that the stock would no longer be overvalued, requires courts to consider possible conflicts with complex insider trading and corporate disclosure laws. Courts confronted with such claims must also consider whether the complaint has plausibly alleged that a prudent fiduciary in the same position could not have concluded that stopping purchases or publicly disclosing negative information would do more harm than good to the fund. View "Fifth Third Bancorp v. Dudenhoeffer" on Justia Law

Hartford is the administrator of Wal-Mart’s Group Disability Plan, which is covered by the Employee Retirement Income Security Act. The policy requires any suit to recover benefits pursuant to ERISA, 29 U. S. C. 1132(a)(1)(B), to be filed within three years after “proof of loss” is due. Heimeshoff filed a claim for long-term disability benefits. Following mandatory administrative review process, Hartford issued a final denial. Almost three years after the final denial but more than three years after proof of loss was due, Heimeshoff sought judicial review under ERISA. The district court dismissed, reasoning that while ERISA does not provide a statute of limitations, the contractual limitations period was enforceable under state law and Circuit precedent. The Second Circuit affirmed. The Supreme Court affirmed, finding the limitations provision enforceable. A participant’s ERISA cause of action does not accrue until the plan issues a final denial, but it does not follow that a plan and its participants cannot agree to commence the limitations period before that time. The Court noted that contractual limitations provisions should ordinarily be enforced as written. The period at issue is not unreasonably short and does not undermine ERISA’s two-tiered remedial scheme by causing participants to shortchange the internal review process. If administrators attempt to prevent judicial review by delaying the resolution of claims in bad faith, the penalty for failure to meet regulatory deadlines is immediate access to judicial review for the participant and courts can apply waiver or estoppel. Plans offering appeals beyond what is contemplated in the internal review regulations must agree to toll the limitations provision during that time, 29 CFR 2560.503–1(c)(3)(ii). View "Heimeshoff v. Hartford Life & Accident Ins. Co." on Justia Law

The US Airways health benefits plan paid $66,866 in medical expenses for injuries suffered by McCutchen, its employee, in a car accident caused by a third party. The plan entitled US Airways to reimbursement if McCutchen recovered money from the third party. McCutchen’s attorneys secured $110,000 in payments, and McCutchen received $66,000 after deducting the contingency fee. US Air¬ways demanded reimbursement of the full $66,866 and filed suit under section 502(a)(3) of the Employee Retirement Income Security Act, which authorizes health-plan administrators to bring a civil action “to obtain ... appropriate equitable relief ... to enforce .. the plan.” The district court granted US Airways summary judgment. The Third Circuit vacated, reasoning that equitable doctrines and defenses overrode the reimbursement clause, which would leave McCutchen with less than full payment for his medical bills and give US Airways a windfall. The Supreme Court vacated and remanded, holding that the plan’s terms govern. An administrator can use section 502(a)(3) to obtain funds that its beneficiaries promised to turn over. ERISA focuses on what a plan provides; section 502(a)(3) does not authorize “appropriate equitable relief” at large,” but only relief necessary to enforce “the terms of the plan” or the statute. While equitable rules cannot trump a reimbursement provision, they may aid in construing it. The plan is silent on allocation of attorney’s fees, and the common¬fund doctrine provides the appropriate default rule. View "US Airways, Inc. v. McCutchen" on Justia Law

Respondents, on behalf of beneficiaries of the CIGNA Corporation's ("CIGNA") Pension Plan, challenged the new plan's adoption, claiming that CIGNA's notice of the changes was improper, particularly because the new plan in certain respects provided them with less generous benefits. At issue was whether the district court applied the correct legal standard, namely, a "likely harm" standard, in determining that CIGNA's notice violations caused its employees sufficient injury to warrant legal relief. The Court held that although section 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. 1022(a), 1024(b), 1054(h), did not give the district court authority to reform CIGNA's plan, relief was authorized by section 502(a)(3), which allowed a participant, beneficiary, or fiduciary "to obtain other appropriate relief" to redress violations of ERISA "or the [plan's] terms." The Court also held that, because section 502(a)(3) authorized "appropriate equitable relief" for violations of ERISA, the relevant standard of harm would depend on the equitable theory by which the district court provided relief. Therefore, the Court vacated and remanded for further proceedings.