DOL Defends Against Forfeiture Litigation in 3 Oral Arguments

The Department of Labor continued its active defense of employers against claims they violated fiduciary duties in their use of forfeited funds when department lawyers made brief oral arguments in three separate appeals, having already filed amicus briefs siding with the employers in each.

The DOL was allotted five minutes from the defendants’ time during the hearings in Hutchins v. HP Inc., Jim Cain v. Siemens Corp. and Luciano Barragan v. Honeywell International Inc. et al. The U.S. 9th Circuit Court of Appeals heard Hutchins on May 20, and the U.S. 3rd Circuit Court of Appeals heard both Barragan and Cain on May 27.

During their remarks, the DOL attorneys requested that the appeals courts affirm the district courts’ decisions to dismiss claims of fiduciary breach under the Employee Retirement Income Security Act.

Hutchins v. HP

In the 9th Circuit hearing in San Francisco, U.S. Assistant Secretary of Labor Garry Hartlieb represented the DOL, arguing for an affirmation of the lower court’s decision to dismiss the amended complaint challenging the legality of HP’s management of forfeited 401(k) contributions from employees. The department had filed an amicus brief supporting the company on July 9, 2025, .

Paul Hutchins, a participant in HP’s 401(k) plan, filed the complaint in late 2023, claiming that from 2019 to 2023, the HP plan committee improperly used forfeited employer contributions—funds that had not vested when employees departed the company and the plan—to satisfy HP’s own obligation to make matching contributions into the plan, rather than to offset plan administrative expenses. Hutchins alleged that failure constituted a breach of ERISA.

The U.S. District Court for the Northern District of California dismissed the case in 2024, and Hutchins appealed to the 9th Circuit.

“The Department has [an] important interest in ensuring the uniform enforcement of ERISA, as the primary enforcer of ERISA,” Hartlieb said during oral arguments. “The creation of ERISA plans has been one of—if not the greatest—source [sic] of wealth creation for the American worker. The department seeks to protect the American worker while balancing the flexibility and process requirements of ERISA to ensure that such plans continue to be offered by companies.”

In its brief, the DOL had pushed back on Hutchins’ argument, stating that “a fiduciary’s use of forfeited employer contributions in the manner alleged in this case, without more, would not violate ERISA.”

The brief distinguished between fiduciary responsibilities and “settlor” functions, which relate to the formation, design and funding of benefit plans; such functions are not subject to ERISA’s fiduciary standards. The department noted that “funding a plan is a settlor function” and that employers retain discretion in deciding how to cover plan expenses or provide contributions.

Hartlieb argued that because the plan participants received all the benefits promised under the HP plan, the lower court was correct to find that the plaintiffs failed to state a claim for breach of fiduciary duty. It is “undisputed,” Hartlieb claimed, that the forfeited funds were used to benefit the plan and that HP followed the express terms of the plan.

The plaintiffs were represented by Hayes Pawlenko LLP, and Morgan Lewis Bockius LLP represented HP.

Cain v. Siemens

In the U.S. 3rd Circuit Court of Appeals, U.S. Assistant Secretary of Labor Edward Wenger represented the DOL in Cain and Barragan, arguing that the plan participants based their claim for fiduciary breach on their dissatisfaction with the way plan discretion was exercised.

The complaint in Cain, originally filed in U.S. District Court for the District of New Jersey in August 2024, alleged that Siemens violated ERISA by using forfeitures “in its own interest,” rather than in the interests of participants.

Siemens’ 401(k) plan documents allow the company to use forfeitures to reduce the company’s contributions to the plan or to pay plan expenses. The 2024 complaint alleged that the latter was more favorable to participants, while the former only benefited the sponsor. The complaint alleged that the options worked as a “conflict of interest,” since Siemens had an incentive to use forfeited funds to offset future contributions.

In his oral arguments, Wenger stated that the DOL wants employers to be able to use their settlor discretion to decide how forfeitures are used. He stated that the plan participants’ argument supposed, incorrectly, that fiduciary duty can alter or amend the settlor decision.

“The plan documents were followed to a ‘T,’” Wenger said. There was “nothing more to suggest [an] objectively reasonable fiduciary in the circumstance would have done anything different.”

The plaintiffs were represented by Hayes Pawlenko, and Siemens was represented by Mayer Brown LLP.

Barragan v. Honeywell

Wenger argued for the DOL in Barragan as well, calling discretion in plan documents a recent “litigation trap.”

The complaint in Barragan, originally filed in February 2024 in U.S. District Court for the District of New Jersey, was dismissed by U.S. District Judge Evelyn Padin in December 2024. The plaintiff, Luciano Barragan, representing participants of Honeywell’s plan, amended the initial complaint, which had alleged that Honeywell breached its fiduciary duties of loyalty and prudence and engaged in self-dealing by using 401(k) forfeiture funds to offset contributions, rather than to pay plan expenses.

The amended complaint was dismissed by Padin with prejudice—meaning it could not be amended again—on August 18, 2025, and the plaintiffs appealed the ruling to the 3rd Circuit on August 19.

In his argument, Wenger said fiduciary breach-of-duty claims like the one in the case at hand would “flip” ERISA from a process-based law into a law of liability based on outcomes. He cautioned that the flurry of litigation could mean that employers—sponsors of small plans in particular—might no longer deem offering retirement benefits worth the cost of defending themselves.

Barragan was represented by Lawrence Hersh, and Honeywell was represented by Morgan Lewis.