UpFront | Published in June 2012

Request Not Denied!

Court refuses to dismiss claims over misplaced transfer

By Tara Cantore | June 2012
Illustration by Marc Rosenthal

A federal court decided neither a plan participant nor ConAgra Foods’ retirement plan and committee have met their summary judgment burden in a breach of fiduciary duty suit. Plaintiff James Simpson filed under the Employee Retirement Income Security Act (ERISA) § 502(a)(2) against defendants ConAgra Foods Retirement Income Savings Plan and ConAgra Foods Employee Benefits Administrative Committee, for breach of fiduciary duty. Simpson alleged the plan and its committee breached their duty of loyalty by failing to correctly execute his request to transfer part of his plan investments between funds and by declining his requested remedy: to have his account credited $12,000 to make up for lost interest.

The lawsuit stems from a transaction in which Simpson sought to transfer part of his plan investments from a shorter-term fixed-income fund to a large-cap growth stock fund, and from the committee’s denial of Simpson’s request to credit his account for losses, allegedly caused as a result.

The court also found that Simpson did not establish beyond doubt that the committee breached its duty of loyalty by relying on impermissible factors in deciding his claim. The court said this is because Simpson essentially relied on nothing more than the fact that his request for compensation­ was denied.

The court decided the defendants were not entitled to summary judgment based on § 404(c). The court said § 404(c) safe harbor shields fiduciaries from liability for losses in cases when, for example, a participant decides to invest all his assets in one fund, rather than splitting them among multiple funds; it was not meant to protect fiduciaries from liability for breaching their duty.

In 2009, Simpson made a phone transfer, via EasyAccess (EA), of his plan’s investment funds. He requested 60% of his account be placed into a large-cap growth fund. The EA representative he spoke with instead transferred 60% of his account to a longer-term fixed-income fund. The representative transferred the funds after she received a responsive statement­ from Simpson approving the latter, rather than in accordance with his initial request.

After Simpson contacted defendants to inquire about the transaction, they sent him a recording of the conversation and informed him that the EA representative executed the transaction that she had read back to him and that he had confirmed. Defendants also informed Simpson of his right to file a claim with the plan. Simpson then sent the defendants a letter requesting that his account be credited $12,000, due to the EA representative’s mistake. The committee denied Simpson’s request and, in doing so, referenced the fact that he was making a trade very late in the trading day, speaking quickly and had confirmed the trade as read back to him by the EA representative.

The committee also informed Simpson of his right to appeal the decision, which he exercised through counsel. However, it also denied Simpson’s appeal, citing his confirmation of the EA representative’s misstatement as the basis. Simpson then filed the breach of fiduciary duty suit.