“You can’t always get what you want…” — and, in Some Cases, You Can’t Get a Court to Declare that the Defendant is an ERISA Fiduciary

To avail themselves of the protections of the Employee Retirement Income Security Act (“ERISA”), plaintiffs must prove, as a threshold matter, that the defendant was a fiduciary. If plaintiffs are successful in meeting their burden, the fiduciary is subject to the mandates of ERISA, which requires it to perform certain duties (the highest duties known to law) vis-à-vis a pension plan’s participants and beneficiaries. Simultaneously, ERISA’s prohibited transaction provisions (describing what a fiduciary cannot do) are triggered.

Pursuant to ERISA, a fiduciary can be a named fiduciary by an employer sponsoring the plan. Alternatively, one can become a fiduciary simply by exercising (or having) any discretionary authority or control over a plan’s administration or assets. ERISA Section 3(21).

Recently, in Malone v. Teachers Ins. & Annuity Ass’n of Am., 2017 U.S. Dist. LEXIS 32308 (S.D.N.Y., Mar. 7, 2017), plaintiff asked the court to determine that defendant Teachers Insurance and Annuity Association of America (“TIAA”) was a fiduciary in its capacity as record keeper. On defendant’s motion to dismiss, the court found that TIAA was not a fiduciary.

Per the complaint in Malone, TIAA, as part of its investment services to the plan, had five-year annuity contracts which provided in part that the investment fees charged would offset any record keeping fees so long as the record keeper was TIAA (a practice knoCakewn in the industry as “revenue sharing”).

At the time these contracts were signed, this revenue sharing arrangement was not disclosed to the plan and, according to plaintiffs, this failure to disclose constituted a breach of fiduciary duty under ERISA. The primary issue for the Court was whether TIAA “exercised discretion” over the plan’s administration or assets thus making it a fiduciary. The Court ultimately rejected plaintiff’s arguments after considering the following facts:

  • TIAA locked in the plan to a five-year contract;
  • TIAA failed to disclose revenue sharing at signing of the contract;
  • Plaintiff did not plead that the contracts were not negotiated at arm’s length;
  • TIAA had no prior relationship with the plan;
  • Fees paid from plan assets do not give the collector, in and of itself, fiduciary status;
  • TIAA periodically collected fees; and
  • TIAA adhered to a specific contract term. 

Best practice Tips: Despite the ruling in Malone in favor of the Defendant, there is always a risk that one could be deemed a fiduciary. Thus, it is important to not get caught by surprise. One should review all relevant plan documents and outline every party involved in servicing the plan. Aside from named fiduciaries, determine at an early stage who has the critical “discretionary authority” in order to identify other fiduciaries and to ascertain if they are meeting their duties.

– Jose M. Jara

“And if the Wind is Right You Can Sail Away and Find Tranquility…” – Unless You Are Forced to Litigate in an Unwanted Forum!

This is the first post by PLUS Blog contributor José M. Jara, a partner at FisherBroyles, LLP. Mr. Jara has over 20 years of ERISA and employee benefits law experience. In the field of employee benefits law, he provides innovative solutions to his clients by incorporating into his guidance a business and practical perspective.  In addition, he understands the triad relationship between the law firm, the client, and the insurance carrier and in litigation matters manages the relationships to produce optimal results for the trio involved.  He has also acted as monitoring counsel and coverage counsel.  


sunset_sailingOver 20 years ago the Supreme Court found that, even though there was unequal bargaining power between the parties, a forum selection clause on cruise tickets was reasonable and valid, requiring a couple from Washington State to litigate in Florida personal injuries sustained on a cruise from L.A. to Mexico. Carnival Cruise Lines, Inc., v. Shute, 499 U.S. 585, 111 S.Ct. 1522, 113 L.Ed. 2d 622 (1991). Recently, a court has held that a forum selection clause added to the company’s retirement plans was invalid because, unlike the plaintiffs in Carnival Cruise Lines — who could have chosen another cruise line for their travels — in this case the plaintiff could not simply have chosen to work for another employer. Dumont v. PepsiCo, Inc., 2016 U.S. Dist. LEXIS 84853 (D. ME., June 29, 2016).

In reaching its decision, the court in Dumont focused on the fact that the plaintiff had worked 31 years for the company, was already vested in his retirement benefits, did not negotiate the terms of the plans, and did not sign off on any clauses in the plans. Thus, when the plan sponsor amended the plans in 2011 to include a forum selection clause, the plaintiff at that time “could [not] have walked away with impunity if [he] did not want to be bound by the forum selection clause.” Dumont, at *13.

In providing broad access to the federal courts, ERISA’s venue provision provides that an action “may be brought in the district (1) where the plan is administered, (2) where the breach took place, or (3) where a defendant resides or may be found. ERISA 502(e)(2). The Court in Dumont noted that the clause “where the breach took place” has been interpreted to mean “where benefit payments are received” and, thus, allowed the plaintiff to keep his claim in Maine.

As with most areas of ERISA, the case law is not settled. In another recent case, a court ruled that ERISA forum selection clauses are not per se invalid and transferred the case to the court designated in the forum selection clause.  Malagoli v. AXA Equitable Life Ins. Co., 2016 U.S. Dist. LEXIS 39112 (S.D.N.Y. Mar. 24, 2016). Yet, in another recent case, a court “decline[d] to endorse the legal fiction that all the terms of ERISA plans are freely negotiated ….” Harris v. BP Corp. N. Am., 2016 U.S. Dist. LEXIS 89593, at *23 (N.D. Ill., July 8, 2016). In doing so, the Court found the forum selection clause unenforceable because, while the language of ERISA 502(e)(2) is ambiguous, ERISA’s overriding purpose of guaranteeing participants ready access to federal courts and legislative history is not. Id. at *25-26.

More often than not, the choice of forum matters. In ERISA cases, it appears that while judges are not against forum selection clauses in ERISA plan documents per se, plan sponsors should nonetheless review their plan documents to assess whether the forum selection clause bears a reasonable relationship to the plan and its participants.

– José M. Jara