Compliance July 28, 2005

Appeals Court Sets Rehearing in Blackout Challenge Case

July 28, 2005 (PLANSPONSOR.com) - Appeals judges at the US 5th Circuit Court of Appeals have agreed to rehear as a group a case involving allegations of a mismanaged plan conversion against an employer and a TPA.

Reported by

Fred Schneyer

The so-called en banc rehearing – in which all 16 Circuit judges hear a case together – has been scheduled for September 12. The sessions are relatively unusual in appeals courts and are generally reserved for issues in which unsettled portions of the law need to be definitively resolved in the particular area covered by the court – in this case, federal courts in Mississippi, Louisiana, and Texas.

The 5th Circuit order setting up the September session said one of the court’s jurists had asked for a poll of the whole court and that a majority of members voted to schedule the rehearing. The US Department of Labor (DoL) and the AARP filed legal papers supporting the move, according to a BNA report.

The New Orleans-based appeals court ruled in March 2005 that two pilots for a commuter air carrier later acquired by American Airlines were not allowed to bring the suit under theEmployee Retirement Income Security Act (ERISA). Appeals judges upheld a ruling by a federal judge in the US District Court for the Northern District of Texas that the two pilots were pursuing their claims against American and Towers Perrin for their individual interests or on behalf of a small group of participants instead of for the plan as a whole (See Appeals Court Upholds Suit Dismissal in Conversion/Blackout Case ).

Plaintiffs Michael Milofsky and Robert Walsh alleged in their original lawsuit against American and Towers Perrin that the transfer of assets in the savings and profit sharing plan at commuter carrier Business Express Inc. to the American Eagle $uper $aver Plan – and the accompanying plan transaction blackout – wasn’t finalized until months after the timeline set out in participant notices prepared by Towers Perrin. The pilots’ suit requested that any damages from asset losses they suffered because of the transfer delay be paid to the plan and allocated among individual participants according to their losses. The retirement plan conversion came about as part of American’s acquisition of Business Express.

The March appeals court ruling is here . The case is Milofsky v. American Airlines Inc., 5th Cir., No. 03-11087, rehearing en banc granted 7/19/05.