Cases—ERISA / Pensions and Employee Benefits
Investigations
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ESOP Litigation
The owners of closely-held corporations frequently establish an Employee Stock Ownership Plan (ESOP) to sell all or part of the corporation to the employees. Unfortunately, the owners sometimes use this as an opportunity to take advantage of the employees by selling company shares to the ESOP at a price much higher than any willing third party would pay. This scenario most often occurs when the owner is the trustee of the ESOP, and therefore is both the buyer and the seller in the ESOP transaction. Lewis, Feinberg, Lee, Renaker & Jackson, P.C., has successfully represented ESOP participants in several ERISA class actions.
If you are an ESOP participant who is concerned that your ESOP may have bought or sold company stock at an unfair price, please contact Dan Feinberg or Todd Jackson.
Current Cases
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Taylor, Crosswhite, and Godsey v. ANB Bancshares, Inc., et. al., Case Number: 5:2008cv05170
A class action filed on behalf of over 250 former employees of ANB Financial, N.A., charges that the bank holding company, individual trustees, and other fiduciaries of the ANB Employee Stock Ownership Plan (ESOP) breached their duties to plan participants by continuing to invest participants’ retirement savings in company stock even after the fiduciaries knew that the bank was engaged in unsafe and unsound banking practices. The action further charges that the fiduciaries actively misrepresented the condition of company stock to the employees and failed to disclose to the employees the information they needed to protect their retirement savings. For more information, contact Teresa Renaker or Jeff Lewis, or review the case documents below:
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Lively v. Dynegy, Inc., Case Number: 05-cv-0063
Preliminary Approval of Dynegy Settlement. On April 30, 2008, the United States District Court for the Southern District of Illinois granted preliminary approval of the class action settlement in Lively v. Dynegy, Inc.. The class plaintiffs alleged that the fiduciaries of the Illinois Power Company Incentive Savings Plan for Employees Covered Under a Collective Bargaining Agreement breached their duties to the Plan’s participants by investing and permitting the investment of Plan assets in stock of the sponsoring employer, Dynegy, Inc. The Court had previously certified a class of all Plan participants whose accounts held Dynegy stock beginning February 1, 2000, and had appointed the law firms of Lewis, Feinberg, Lee, Renaker & Jackson and Schuchat, Cook & Werner as class counsel. The Defendants’ appeal from the class certification order was pending at the time of the settlement. The Court will hold a fairness hearing on the settlement on September 4, 2008. For more information, contact Teresa Renaker, Jeff Lewis, or Margo Hasselman, or review the case documents below:
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Fernandez v K-M Holding Company, Inc., et. al. Case Number: C06-07339 MJJ
Lewis, Feinberg, Lee, Renaker & Jackson, P.C., along with co-counsel Rukin, Hyland, Doria & Tindall, filed suit on behalf of thousands of employees of Kelly Moore Holding Company, including both Kelly Moore Paint and Capital Insurance Group, on November 29, 2006, alleging a nationwide class action charging that the paint and insurance company failed to account for asbestos liability when its founder sold shares of the company to employees as part of the Kelly Moore Employee Stock Ownership Plan (“ESOP”), thereby causing the employees to pay millions of dollars too much for their shares.
The complaint charges that William Moore and Kelly Moore management failed to provide full information regarding the financial status of the company before selling shares of the company to the employees and that the company withheld that information year after year. Additionally, the complaint charges that Mr. Moore and other members of Kelly Moore management were in a conflicted position because they acted on behalf of both the buyer and the seller in the ESOP transactions. The plaintiffs are asking the federal court to issue an injunction requiring Kelly Moore to repay the ESOP participants for the millions they overpaid for the stock or give the ESOP a larger stake in the company.
For further information, please contact Todd Jackson, Dan Feinberg, Margo Hasselman, Nina Wasow or Kirsten Gibney Scott.
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Paulsen, et al., v. CNF, Inc., et al., Case No. C 03-3960
Lewis, Feinberg, Lee, Renaker & Jackson, P.C., along with co-counsel Lieff Cabraser Heimann & Bernstein, LLP, represents former employees of CNF, Inc. and CFC in a federal class action lawsuit charging that the trucking and air freight conglomerate CNF, Inc., and its actuarial firm, Towers, Perrin, Forster & Crosby, Inc., caused the Consolidated Freightways Company, Inc., (“CFC”) Pension Plan to become under-funded, costing retirees millions of dollars in lost pension benefits. The case is currently on appeal to the U.S. Court of Appeals for the Ninth Circuit.
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Dobson v. Hartford Financial Services
Federal Appeals Court Victory for Long-Term Disability Benefit Recipients. On November 19, 2004, the United States Court of Appeals for the Second Circuit reversed a federal district court’s dismissal of claims in a class action lawsuit that the firm brought against Hartford Financial Services. The case was brought under the Employee Retirement Income Security Act (“ERISA”). We challenged Hartford’s failure to pay interest to long-term disability insurance claimants in situations where Hartford ultimately began paying benefits, but only after long delays. Although we successfully obtained a judgment on behalf of our individual client, the district court dismissed our claim that the terms of the group long-term disability policy required payment of interest in all situations in which Hartford unreasonably delayed its decision. The district court also denied class action status to the case. The federal appeals court ordered the district court to reconsider both its dismissal of the claim based on the policy terms and its denial of class action status. Although the appeals court did not order the district court to decide in our client’s favor, it did state, “At first blush, plaintiff’s view seems to be a more reasonable interpretation of the Plan than defendant’s….” The decision is Dobson v. Hartford Financial Services, 389 F.3d 386 (2d Cir. 2004). AARP Foundation Litigation filed a friend of the court brief supporting our appeal. In 2007, the district court granted summary judgment to the individual plaintiff on his claim for interest under the policy terms, but again denied class certification. A second appeal to the Second Circuit is pending.
The firm is investigating potential claims for interest against other insurers. Please contact Jeff Lewis or Dan Feinberg for further information.
Significant Past Cases
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Court Grants Final Approval of Class Action Settlement in Lawsuit Challenging Fireman’s Fund Insurance Company’s (“Fireman’s Fund”) Policy of Terminating Disabled Participants in Its Medical Plan
On March 30, 2007, Judge Claudia Wilken of the United States District Court for the Northern District of California granted Plaintiff’s motion seeking final approval of a class action settlement reached between the parties on December 22, 2006.
The lawsuit was brought under Section 510 of the Employee Retirement Income Security Act of 1974 (“ERISA”) which specifically prohibits termination of a participant in an ERISA-regulated plan “for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan.” On January 14, 2005, the firm filed suit against Fireman’s Fund on behalf of a class of former and current employees of Fireman’s Fund. The complaint alleged that Fireman’s Fund adopted the new policy at least in part for the purpose of disqualifying disabled individuals who could no longer work from continuing to obtain medical coverage, and, therefore, violated section 510. The certified class consists of not only individuals who have been terminated under the new policy but also current employees who are not on medical leave but may become disabled and unable to work in the future. Under the settlement, previously terminated class members will be able to enroll or re-enroll in FFIC’s medical, dental, and vision care plans. The settlement also provides for a fund of $225,000 to reimburse expenses incurred by class members whose employment was terminated under the alleged unlawful policy.
The firm was co-counsel in the case with Cohen, Milstein, Hausfeld & Toll, P.L.L.C. View the Settlement Agreement.
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Settlement Approved in Landmark Challenge to Use of “Explanation of Benefits” Forms By Health Plans
On February 9, 2007, the U.S. District Court for the Western District of Pennsylvania approved a settlement in a landmark class action in which we, along with co-counsel, including AARP Foundation Litigation, challenged the use of standardized “Explanation of Benefits” forms by a major administrator of health insurance plans. View our Press Release about the settlement. View the full Settlement Agreement.
Previously, in November, 2001, the Court had granted summary judgment to the individual plaintiffs. The Court ruled that Highmark’s computerized “Explanation of Benefit” (EOB) forms sent to our clients when their health care claims were denied did not comply with the Employee Retirement Income Security Act (“ERISA”) regulations. Among other things, the Court held that these “one size fits all” forms did not give information about the specific health plan provisions that supposedly supported the denial of payment and did not give adequate information about how our clients could appeal. To view the Court’s November, 2001 Opinion, click here. Then, on January 10, 2005, the Court certified a class action in the case. View the January 10, 2005 class certification Opinion. View the January 10, 2005 class certification Order.
The use of these types of forms is widespread in health plans and we are investigating similar cases against other health plan insurers and administrators. The case is Turpin v. Consolidation Coal Co., et al. For more information, please contact Jeff Lewis.
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Benefits for San Diego Gas & Electric “Contingent” Workers.
On February 2, 2004, the U.S. District Court in San Diego, California gave final approval to the settlement of a class action brought by the firm on behalf of workers and former workers at San Diego Gas & Electric Company who were excluded from the company’s benefit plans because they were allegedly “independent contractors” or “leased employees.” The lawsuit alleged that the workers were actually employees of the company and were entitled to participate in SDG&E’s retirement and other plans. In the settlement, SDG&E agreed that anybody who performed services for the company and was a “common law employee” (under a legal test described in a U.S. Supreme Court decision) will be entitled to retirement credits and benefits from two different plans. Under the settlement, over 600 class members are presumed to be common law employees. Disputes over whether individuals are common law employees and over the amounts of benefits were decided by a court-appointed Independent Fiduciary, not by SDG&E. The case is Mascari v. San Diego Gas & Electric Co.
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Horn, et al., v. McQueen, et al., Case No. 3:98 CV591
On July 29, 2002, after a 10-day long trial, Judge Jennifer Coffman of the United States District Court for the Western District of Kentucky ruled in favor of the Plaintiffs, Tom Horn and Fermin Heaton, in an ERISA case. In her ruling, Judge Coffman found that former executives at United States Corrections Corporation (USCC) had engaged in a prohibited transaction under ERISA when they failed to adequately investigate the value of shares of stock sold to an Employee Stock Ownership Plan (ESOP) set up on behalf of the employees of the company. View the Decision. On December 2, 2004, Judge Coffman determined that the ESOP participants were entitled to restitution, and on January 3, 2005, Judge Coffman entered final judgment. View Judge Coffman’s December 2, 2004 Order. View Judge Coffman’s January 3, 2005 Order. After entry of judgment, and prior to appeal, the parties settled the matter for over 13 million dollars.
The Plaintiffs were represented by Todd Jackson of Lewis, Feinberg, Lee, Renaker, & Jackson, P.C., of Oakland, California; Douglas Richards of Lexington, Kentucky; David Cook of Cincinnati, Ohio; and Alfred H. Sigman of Oakland, California.
If you have questions about your rights under another company’s Employee Stock Ownership Plan (ESOP), please contact Todd Jackson.
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Victory for Individuals Seeking Disability Benefits
On August 15, 2006, the U.S. Court of Appeals for the Ninth Circuit issued a unanimous en banc ruling overturning a judgment in favor of defendant Alta Health and holding that all courts in the Ninth Circuit must use a new legal standard for evaluating how an insurance company’s financial conflict of interest may have influenced the insurer to deny a claim. Dan Feinberg argued the case on behalf of the plaintiff. Under the new legal standard articulated by the Ninth Circuit, the court must always weigh the insurer’s conflict of interest and permit the claimant to introduce evidence on this issue. The decision is Abatie v. Alta Health & Life Ins. Co., 455, F.3d 958 (9th Cir. 2006) (en banc).
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Federal Appeals Court Victory for Long-Term Disability Benefit Recipients
On November 19, 2004, the United States Court of Appeals for the Second Circuit reversed a federal trial court’s dismissal of claims in a class action lawsuit that the firm brought against Hartford Financial Services. The case was brought under the Employee Retirement Income Security Act (“ERISA”). We challenged Hartford’s failure to pay interest to long-term disability insurance claimants in situations where Hartford ultimately began paying benefits, but only after long delays. Although we successfully obtained a judgment on behalf of our individual client, the trial court dismissed our claim that the terms of the group long-term disability policy required payment of interest in all situations in which Hartford unreasonably delayed its decision. The trial court also denied class action status to the case. In its November 19 decision, the federal appeals court ordered the trial court to reconsider both its dismissal of the claim based on the policy terms and its denial of class action status. Although the appeals court did not order the trial court to decide in our client’s favor, it did state, “At first blush, plaintiff’s view seems to be a more reasonable interpretation of the Plan than defendant’s….” The decision is Dobson v. Hartford Financial Services, 389 F.3d 386 (2d Cir. 2004). AARP Foundation Litigation filed a friend of the court brief supporting our appeal.
The firm is investigating potential claims for interest against other insurers.Please contact Jeff Lewis or Dan Feinberg for further information.
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Partial Settlement in WorldCom 401(k) Case
In July, 2004, the United States District Court for the Southern District of New York gave final approval of a settlement of a nationwide class action lawsuit on behalf of participants in WorldCom’s 401(k) plan. Jeff Lewis actively participated in representing the class members, who are current and former WorldCom employees. Under the terms of the settlement, more than $47 million was paid by the settling defendants. Further information about the settlements is available at www.kellersettlements.com. In March, 2002, even before the bankruptcy of WorldCom, Lewis, Feinberg, Lee, Renaker, & Jackson, along with co-counsel, filed the first ERISA lawsuit against fiduciaries of the plan, and then obtained a significant decision from the United States District Court for the Northern District of California rejecting a motion to dismiss the case. In November, 2002, following consolidation of the case with other lawsuits, Mr. Lewis was appointed by the United States District Court for the Southern District of New York to advise lead counsel for the plan participants with regard to ERISA issues.
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Victory for Perdue Farms Workers
In 2002, the United States District Court in Delaware gave final approval to a settlement of a private class action lawsuit brought on behalf of over 60,000 Perdue Farms chicken processing workers. Under the settlement, Perdue paid $10 million for wages lost by its chicken processing employees and attorneys’ fees and costs. The workers were represented by a group of law firms, including Lewis, Feinberg, Lee, Renaker, & Jackson, P.C. The lawsuit alleged that Perdue had violated the Fair Labor Standards Act (“FLSA”) and the Employee Retirement Income Security Act (“ERISA”). As a result of the settlement, tens of thousands of workers received payments for time spent “donning and doffing”; that is, obtaining, putting on, sanitizing and removing protective clothing and gear. In addition, Perdue was required to issue retroactive credit under one of its retirement plans for “donning and doffing” work if the credit would improve employees’ or former employees’ eligibility for pension benefits. The case is Trotter v. Perdue Farms, Inc.
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RJR 401(k) Plan Participants Can Pursue Their Claims
On December 14, 2004, the United States Court of Appeals for the 4th Circuit overturned a lower federal court’s dismissal of a class action lawsuit that we brought against R.J. Reynolds Tobacco Company and fiduciaries of the company’s 401(k) Plan. The lawsuit alleged that the elimination of the plan’s Nabisco stock fund after RJR separated its business from Nabisco was a breach of fiduciary duty that caused the plan and its participants (employees and retirees) to lose millions of dollars. The lower court had dismissed the claim, but the appeals court ordered it reinstated. The appeals court decision is Tatum v. R.J. Reynolds Tobacco Co., 2004 WestLaw 2857376 (4th Cir. 2004). Our firm is co-counsel in the case with Lieff, Cabraser, Heimann & Bernstein, LLP of San Francisco, CA, and Elliot, Pishko, & Morgan, P.A. of North Carolina.