Case Sensitive:Second Chances

Illustration By Greg Mably

Steven Harris, Dennis F. Ramos, on Behalf of Themselves and All Others Similarly Situated, v. Amgen, Inc., Frank J. Biondi, Jr.; Jerry D. Choate; Frank C. Herringer; Gilbert S. Omenn; Baltimore; Judith C. Pelham; Kevin W. Sharer; Frederick W. Gluck; Leonard D. Schaeffer; Robert A. Bradway; Retirement Benefits Committee of the Board of Directors of Amgen No. 08-55389 (9th U.S. Cir. 2009)

Venue:  9th U.S. Circuit Court of Appeals

The Question:  Does a participant who took a voluntary distribution still have legal standing to sue for a fiduciary breach under the Employee Retirement Income and Security Act (ERISA) despite no longer having a balance in the employer's­ defined contribution plan?

The Ruling:  Circuit Judge Ronald M. Gould, writing for the court, said plaintiff Steve Harris had the right to pursue his suit against Amgen, a biotech company and Harris's former employer, despite his voluntary distribution. In doing so, the 9th Circuit threw out a lower-court decision from U.S. District Judge Philip S. Gutierrez of the U.S. District Court for the Central District of California dismissing the claims by Harris and those of fellow plaintiff Dennis F. Ramos. Gutierrez ruled Harris had no legal standing after having taken the distribution and that both men had not leveled properly drafted breach claims against anyone considered a legal fiduciary.

The Case:  As in other so-called "stock drop" cases, in Harris, plaintiffs alleged that biotech company Amgen continued to keep company stock investments in their defined contribution plans after the company suffered a major financial "event" causing its share price to drop significantly. In this case, there were allegations of improper off-label drug marketing and sales that Harris and Ramos charged were directly at fault for the resulting losses to plan assets with company stock investments.

However, in this case, the two plaintiffs had different financial postures: Harris had taken a plan distribution in July 2007 while Ramos' assets remained in an Amgen plan when the suit was filed in August 2007. That difference in the plaintiffs' financial postures came into play when Gutierrez considered Amgen's request to dismiss the case prior to trial, with the lower court ruling that Harris no longer had the legal right to pursue his case because of his prior distribution.

On appeal, Gould reversed the lower court's decision, holding that even participants who had taken a full distribution could have standing to bring suit: "When employees withdraw their funds from a benefit plan, but claim that they would have had more to withdraw absent breach of fiduciary duty by those managing the plan, it is not difficult to see a common sense loss of benefits in their plan caused by the alleged fiduciary breach. [W]e hold that employees who cash out of a defined contribution ERISA plan are still 'participants' in that plan, as defined by 29 U.S.C. 1002(7), regardless of whether they withdrew their assets voluntarily. Harris had standing to complain about his retirement benefits plan."