PSNC 2011: So, Sue Me

That was one message to plan sponsors from attorneys on a panel at the PLANSPONSOR National Conference. Nancy G. Ross, Partner, McDermott, Will & Emery told attendees that if they find themselves in litigation, discovery is a long, tedious process, and the plaintiffs will ask for documentation of everything.  

One new trend is e-discovery; plaintiffs ask for e-mails, sometimes going back years, and Ross says plan sponsors can’t say they’re deleted.  There are companies out there that can retrieve deleted e-mails from servers.  

Ross adds that what you think may be privileged, may not be. In benefits litigation, when a fiduciary goes to an attorney for advice for the benefits of participants, there is no confidentiality privilege.  

Another message from H. Douglas Hinson, Partner, Alston & Bird LLP, is to keep good records and minutes. Hinson reminded sponsors not to leave loose ends in meeting minutes or investment policies statements; sponsors should do what they say they’re going to do.  

Hinson said this message was clear from the recent decision in George v. Kraft (see Appellate Court Sends Back Kraft Fee Case) where, James Fleckner, Partner, Goodwin Procter LLP, said, the 7^th U.S. Circuit Court of Appeals decided the case would have to go to trial because Kraft hadn’t done an RFP every three years. Kraft hadn’t done an RFP in 15 years.  

However, Hinson pointed out that Kraft had had experts consult on the plan. Fleckner also noted that the appellate court let the unitized stock accounting issue go to trial because Kraft had no record of evaluating whether to do something different and making a decision to keep things as they were.  

Another critical lesson for sponsors, made clear from the U.S. Supreme Court decision in CIGNA v. Amara (see Supreme Court Sends Back Cash Balance Notice Decision), according to Ross, is don’t hide the bad stuff. Hinson explained that the decision has changed the law for plan sponsors and other fiduciaries. For years, participants could only sue for equitable relief, but the high court decision cleared the way for suing for damages to participants rather than the plan.   

The reason for this, according to Hinson, is that there was evidence indicating CIGNA had purposefully left things out of the Summary Plan Description to put a positive spin on the conversion of its pension plan to a cash balance plan.  

Hinson said he doesn’t think there will be a lot of suits cropping up about intentional misconduct, but he fears that other courts with less egregious tacts  will use the language of the high court decision to award damages.