November 11, 2011 – The Office of the Solicitor of the Department of Labor filed an amicus brief with the United States Court of Appeals for the Third Circuit, in which the Solicitor of Labor argues that the Employees Retirement Income Security Act (ERISA) 502(a)(2) does not require that 401(k) plan participants and beneficiaries to first make a demand upon plan trustees before bringing a suit for breach of fiduciary duty.
DOL Files Amicus Brief with US Court of Appeals on Behalf of LK Clients in Shareholder Derivative & Class Action Suit
NEW YORK, New York, November 11, 2011 – The Office of the Solicitor of the Department of Labor filed an amicus brief with the United States Court of Appeals for the Third Circuit, in which the Solicitor of Labor argues that the Employees Retirement Income Security Act (ERISA) 502(a)(2) does not require that 401(k) plan participants and beneficiaries to first make a demand upon plan trustees before bringing a suit for breach of fiduciary duty.
Class action attorneys at Levy Konigsberg LLP (“LK”), along with Szaferman, Lakind, Blumstein & Blader, P.C., filed a nationwide shareholder derivative and class action lawsuit against John Hancock Life Insurance Co. (”John Hancock”) on behalf of participants and beneficiaries in an ERISA-covered 401(k) retirement plan sponsored by their employer. John Hancock administered group annuity contracts to the 401(k) plan sponsor. The Plaintiffs alleged, among other things, that certain investment fees charged by John Hancock, an ERISA fiduciary, are excessive under various provisions of ERISA. Plaintiffs alleged that, among other things, John Hancock breached its duties of prudence and loyalty and engaged in prohibited transactions in violation of various provisions of ERISA by charging and receiving excessive fees for sales and service of John Hancock and other funds and through its receipt of spurious administrative charges.
The shareholder derivative and class action complaint was filed in the U.S. District Court for the District of New Jersey on October 22, 2010. On May 23, 2011, the Court granted John Hancock’s motion to dismiss the ERISA claims based upon its conclusion that participants and beneficiaries cannot sue under ERISA section 502(a)(a) without first making a demand on the plan trustees to bring a fiduciary suit. Plaintiffs/Appellants filed an appeal with The United States Court of Appeals on September 6, 2011, and the Department of Labor filed its brief as amicus curiae on September 30, 2011, in support of Plaintiffs/Appellants.
The Secretary of Labor is charged with interpreting and enforcing the provisions of Title I of ERISA. Accordingly, the Secretary has significant interests in the proper application of the safeguards Congress established through ERISA for the administration of employee benefit plans and the protection of participants in those plans. These interests include promoting uniformity of law, protecting beneficiaries, enforcing fiduciary standards, and ensuring the financial stability of employee benefit plan assets.
In its brief as amicus curiae, The Department of Labor argued that the District Court erred in dismissing Plaintiffs/Appellants’ ERISA claims because the remedial provisions of ERISA under which the Plaintiffs/Appellants brought the class action portion of the suit, give plan participants and beneficiaries the express and co-equal right with plan fiduciaries and the Secretary of Labor to sue plan fiduciaries who violate ERISA. These provisions do not condition the participants’ right to file suit in any way or imply that, prior to bringing their own action, plan participants must first request the plan trustees to file suit. The Department of Labor further noted that ERISA has an expressly-stated intent to remove procedural barriers and to provide plan participants and beneficiaries “ready access to the Federal courts.”
Plaintiffs/Appellants’ appellate motion is now under consideration by The United States Court of Appeals for the Third Circuit. Moshe Maimon, the lead plaintiffs’ attorney handling the shareholder derivative and class action suit at LK, estimate that there could be hundreds of plan participants and beneficiaries who have fallen victim of the defendants’ actions.