Disclosure - PowerPoint by niusheng11

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									BREAKING FIDUCIARY
ISSUES

By Richard L. Menson and
   Sally Doubet King
Who Is A Fiduciary?

       • Fiduciary Status




         Pegram v. Herdrich, 120 S. Ct. 2143 (2000).
Disclosure

       • Duty to Disclose
         – Future Changes
             • Inquiry
             • Serious Consideration




              Bins v. Exxon Company USA, 2000 US App.
              LEXIS 19080, (en banc) (2000); Fischer v.
              Philadelphia Elec. Co., 96 F.3d 1533 (3rd Cir.
              1996); Pocchia v. NYNEX Corp., 81 F.3d 275
              (2nd Cir. 1996), cert. denied, 117 S. Ct. 302
              (1996).
Disclosure
       • Duty To Disclose
         – Referral Minimization Incentive
           Programs
         – Negative Tax Consequences Regarding
           Various Forms Of Benefits

             Metzler v. Solidarity of Labor Organizations Health
             and Welfare Fund, 1998 U.S. Dist. LEXIS 12565
             (S.D.N.Y. 1998); Ehlmann v. Kaiser Foundation
             Health Plan, 1998 U.S. Dist. LEXIS 13326 (N.D. Tex
             1998); Farr v. U.S. West Communications, Inc., 1998
             U.S. App. LEXIS 12657 (9th Cir. 1998); Shea v.
             Esenten, 107 F.3d 625 (8th Cir. 1997).
Disclosure
       • Voluntary Disclosure
         – Advice About Plan Options Or
           Coverage
             • Complete And Accurate


              Bins v. Exxon Company USA, 2000 US App.
              LEXIS 19080 (en banc) (2000); Wayne v. Pacific
              Bell, 189 F.3d 982 (1999); Farr v. U.S. West
              Communications, Inc., 1998 U.S. App. LEXIS
              12657 (9th Cir. 1998); Librizzi v. Children’s Mem.
              Medical Center, 134 F.3d 1302 (7th Cir. 1998),
              reh. denied, 1998 U.S. App. LEXIS 5740 (7th Cir.
              1998).
Disclosure
       • Voluntary Disclosure
         – Statements About Security Of The Plan
             • Truthful



               Librizzi v. Children’s Mem. Medical Center, 134
               F.3d 1302 (7th Cir. 1998), reh. denied, 1998 U.S.
               App. LEXIS 5740 (7th Cir. 1998); Varity v. Howe,
               116 S. Ct. 1065 (1996).
Provide Documents
       • Duty To Provide
         – Formal Or Legal Documents About The
           Plan And Benefits


           ERISA Section 104(b)(4); Franklin v. First Union
           Corporation, 84 F.Supp. 720 (2000); Kerr v. Charles
           F. Vatterott & Co., 184 F.3d 938 (1999); Faircloth v.
           Lundy Packing Co., 91 F.3d 648 (4th Cir. 1996), cert.
           denied, 117 S. Ct. 738 (1997); Hughes Salaried
           Retirees v. Administrator of Hughes Non-Bargaining
           Retirement Plan, 72 F.3d 686 (9th Cir. 1995), cert.
           denied, 116 S. Ct. 1676 (1996). DOL Prop. Reg.
           Section 2520-102.3.
Provide Documents

       • No Duty To Provide
         –   Tax Qualification Letters
         –   Bonding Policies
         –   Appraisal Reports Or Valuation Reports
         –   Meeting Minutes
         –   List Of Participants
         –   Claim Forms
             Allinder v. Inter-City Products Corp., 1998 U.S. App.
             LEXIS 18321 (6th Cir. 1998); Faircloth v. Lundy
             Packing Co., 91 F.3d 648 (4th Cir. 1996), cert.
             denied, 117 S. Ct. 738 (1997).
Duty To Diversify
        • Factors To Consider Re Extent Of
          Duty
          –   Purpose Of The Plan
          –   Amount Of Plan Assets
          –   Financial And Industrial Conditions
          –   Type Of Investments Involved



           Franklin v. First Union Corporation, 84 F.Supp. 720 (2000);
           Bussian v. RJR Nabisco, Inc., 2000 US App. LEXIS 19839
           (2000).
Duty To Diversify
        • Factors To Consider Re Extent Of
          Duty
          – Distribution As To Geographic Location
          – Distribution As To Industries
          – Dates Of Maturity



            Metzler V. Graham, 20 EBC 2857 (5th Cir. 1997); In
            re Unisys Sav. Plan Litigation, 74 F.3d 420 (3d Cir.
            1996), cert. denied, 117 S. Ct. 56 (1996).
Conflict Of Interest
        • Minimum Duty
           – Secure Independent Assessment Or Valuation
           – Investigate The Expert’s Qualifications
           – Provide Expert With Complete And Accurate
             Information
           – Engage A Second Firm To Assist In Review Of
             Assessment If Necessary
             Harris Trust and Savings Bank v. Salomon Smith Barney, 120 S. Ct.
             2180 (2000); Owen v. Soundview Financial Group, 2000 US App.
             LEXIS 4321 (2000); Bussian v. RJR Nabisco, Inc., 2000 US App.
             LEXIS 19839 (2000); Howard v. Shay, 100 F.3d 1484 (9th Cir. 1996),
             cert. denied, 117 S. Ct. 1838 (1997); Metzler V. Graham, 20 EBC
             2857 (5th Cir. 1997).
Conflict Of Interest

        • Remedy Available
           – Against Non-fiduciary Party In Interest
             Who Knowingly Participates In A
             Fiduciary Breach




             Harris Trust and Savings Bank v. Salomon Smith
             Barney, 120 S. Ct. 2180 (2000); LeBlanc v. Cahill,
             1998 U.S. App. LEXIS 18542 (4th Cir. 1998).
Liability For Actions Of Others
        • Agents
           – Specific Authority To Speak
           – Participants Rely On Agent For Information
        • Benefits Counselors
           – Provide Inaccurate Or Incomplete Information
        • Negligence in Hiring/Training Non-
          Fiduciary Agents

          Malone v. Commonwealth Edison Co., 1999 US Dist. LEXIS
          16172 (1999); Schmidt v. Sheet Metal Workers’ National
          Pension Fund, 128 F.3d 541 (1997); Estate of Becker v.
          Eastman Kodak Co., 1997 WL 400787 (July 19, 1997) (2nd Cir.
          1997); Taylor v. The Peoples Natural Gas Co., 49 F.3d 982 (3rd
          Cir. 1995).
Settlor Or Fiduciary?
        • Settlor Actions
          – Adopt Plans
          – Terminate Plans




            Hamilton v. Allen-Bradley Company, 217 F.3d 1321 (2000);
            Franklin v. First Union Corporation, 84 F.Supp. 720 (2000);
            Hunter v. Caliber System, Inc., 220 F.3d 702 (2000);
            Curtiss-Wright Corp. v. Schoonejongen, 115 S. Ct. 1223
            (1995).
Settlor Or Fiduciary?
        • Settlor Actions
          – Modify Plans
             • Surplus Distrubition Criteria
             • Early Retirement Package
                 – Waiver Requirement OK
                 – Differentiation Based Upon Risk Of Job Elimination
                   OK for Single Employer Plans


                   Walling v. Brady, 1997 WL 545795 (July 30, 1997) (3rd
                   Cir. 1997); Lockheed v. Spink, 116 S. Ct. 1783 (1996);
                   Siskind v. The Sperry Ret. Prog., Unisys, 47 F.3d 498
                   (2nd Cir. 1995).
Settlor Or Fiduciary?

        • Fiduciary Actions
          – Amend Plan To Affect Allocation Of
            Asset Pool
          – Choose Annuity Provider



            Jacobson v. Hughes Aircraft Co., 105 F.3d 1288 (9th Cir.
            1997), cert. granted, 118 S. Ct. 1558 (1998); Abbott v.
            Pipefitters Local Union No. 522, 94 F.3d 236 (6th Cir. 1996),
            cert. denied, 117 S. Ct. 948 (1997); Waller v. Blue Cross of
            California, 32 F.3d 1337 (9th Cir. 1994).
Administrator Not Fiduciary
        • Re Actions Of Investment Manager
        • Re Participant Directed Voting Of
          Shares



          Bussian v. RJR Nabisco Inc., 2000 US App. LEXIS 19839
          (2000); Pegram v. Hendrich, 120 S. Ct. 2143 (2000); Beddall v.
          State Street Bank and Trust Co., 137 F.3d 12 (1st Cir. 1998);
          Herman v. Nationsbank Trust Co., 126 F.3d 1354 (11th Cir.
          1997), reh. denied, 135 F.3d 1409 (11th Cir. 1998).
Attorney-Client Privilege
        • Does Not Extend To Implementation
          Of Amendments




          Fischel v. The Equitable Life Assurance, 191 F.R.D. 606 (2000);
          In re Long Island Lighting Co., 129 F.3d 268 (2nd Cir. 1997).
Liability For Breach Of
Fiduciary Duty
        • To Plan
        • To Individuals
        • Civil Penalties




          Rodrigues v. Herman, 1997 WL 469680 (Aug. 19, 1997) (9th Cir.
          1997); Varity v. Howe, 116 S. Ct. 1065 (1996).
Plan Interpretation
        • Rules Of Interpretation
          – Ordinary Meaning Of Terms
          – In Harmony With Plan As A Whole
          – May Look To Extrinsic Evidence If
            Ambiguous



            Bowerman v. Wal-Mart Stores, Inc., 2000 US App. LEXIS
            21067 (2000); Barker v. Ceridian Corp., 1997 WL 523751
            (Aug. 26, 1997)
            (8th Cir. 1997).
Plan Interpretation
        • Language In SPD Controls
          – If Language Of SPD Conflicts With Language Of
            Plan
          – If SPD Silent Re Circumstances Resulting In
            Prejudice
          – Not If SPD Silent Re Grant Of Discretionary
            Authority
          – Not Re Reservation Of Right To Amend Or
            Terminate

            Adams v. Southern Labor Union Pension Trust Fund, 1999 US
            App. LEXIS 30167 (1999); Sprague v. General Motors Corp.,
            133 F.3d 388 (6th Cir. 1998), cert. denied, 118 S. Ct. 2312
            (1998); Martin v. Blue Cross & Blue Shield of Virginia, Inc., 115
            F.3d 1201 (4th Cir. 1997).
Eligibility
          • Determination Must Be Based In
            Plan Language



              Vizcaino v. Microsoft Corp., 1997 WL 411663 (July 24, 1997)
              (9th Cir. 1997) (en banc), cert. denied, 118 S. Ct. 899 (1998), on
              remand, Vizcaino v. Microsoft Corp., 1998 U.S. Dist. LEXIS 2008
              (W.D. Wash. Feb. 13, 1998), amended by, White v. United
              States Dis. Court (In re Vizcaino), 184 F.3d 1070 (9th Cir. 1999),
              cert. denied, 120 S. Ct. 844 (2000).
Standard Of Review

       • If Discretionary Authority
          – Arbitrary And Capricious
       • If Discretionary Authority But Conflict
         Of Interest
          – Heightened Arbitrary And Capricious


            McDaniel v. The Chevron Corporation, 203 F.3d 1099
            (2000); Pinto v. Reliance Standard Life Insurance Co., 214
            F.3d 377 (2000); Vega v. National Life Ins. Serv., Inc., 145
            F.3d 673 (5th Cir. 1998); Buckley v. Metropolitan Life, 115
            F.3d 936 (11th Cir. 1997); Firestone Tire and Rubber Co., v.
            Bruch, 489 U.S. 99 (1989).
Standard Of Review
       • If No Discretionary Authority
         – De Novo
       • Fact Findings Regardless Of
         Discretion
         – Arbitrary And Capricious

           Kinstler v. First Reliance Standard Life Insurance Co., 181
           F.3d 243 (1999); Kearney v. Standard Insurance Co., 175
           F.3d 1084 (en banc) (1999); Pierre v. Connecticut Gen. Life
           Ins. Co., 932 F.2d 1152 (5th Cir. 1991), cert. denied, 502
           U.S. 973 (1991); Firestone Tire and Rubber Co., v. Bruch,
           489 U.S. 99 (1989).
Claims Denial
       • Claims Denial Letter Must Include
          – Basis for Adverse Initial Decision -- Specific
            Plan Provision
          – Notice Of Right To Review File
          – Notice Of Right To Have Decision Reviewed,
            Procedure & Time Limit
          – Necessity For Submitting Additional Documents
            If Necessary


            Harte v. Bethlehem Steel Corporation, 214 F.3d 446 (2000);
            Brehmer v. Inland Steel Indus. Pension Plan, 114 F.3d 656
            (7th Cir. 1997), aff’d, 114 F.3d 656 (1997); Kinkead v.
            Southwestern Bell Tel. Co., 49 F.3d 454 (8th Cir. 1995).
The End

								
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