Appeals Court Upholds Suit Dismissal in Conversion/Blackout Case

>The US 5 ^th Circuit Court of Appeals upheld a ruling by a federal judge in the US District Court for the Northern District of Texas that plaintiffs Michael Milofsky and Robert Walsh weren’t allowed to bring the suit under the Employee Retirement Income Security Act (ERISA).

>The lower court ruled and the appeals judges later agreed that the two pilots didn’t meet a standard first set in a 1985 decision later upheld in a 1999 ruling that Section 502(a)(2) of ERISA requires the legal relief being sought to be for the plan as a whole and not for individual participants or small groups of participants.

“Despite plaintiffs’ contrary claims, this suit concerns individualized relief for the particularized harm suffered by a subset of plan participants and does not seek to vindicate the rights or interests of the plan as a whole,” wrote Circuit Judge Jerry Smith for the court. “The district court properly observed that, apart from conclusional claims that the suit is on behalf of the plan, all the specific allegations deal only with the individual accounts held by the plaintiff class members.”

>Milofsky and 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.

>Appeals judges also upheld the lower court ruling throwing out the ERISA fiduciary breach claims against Towers Perrin.

>Wrote Smith: “Taking all alleged facts as true, the extent of Towers Perrin’s involvement is that it provided plaintiffs with the notices that contained the alleged misrepresentations. There is no allegation that Towers Perrin exercised discretion or control regarding the content of the notices, the transfer of the funds from the (Business Express) plan to the $uper $aver Plan, the length of the blackout periods or the investment of the accounts. The transmission of notices and forms advising plan participants of their rights and options under a plan is nothing more than an administrative or ministerial service, which is insufficient to elevate Towers Perrin to the status of a fiduciary under ERISA for purposes of this lawsuit.”

>The appeals court ruling is  here .