Tuesday, April 10, 2007

More on Upcoming Beck ERISA Supreme Court Oral Argument

4united_states_supreme_court_112904 The llibulletin at the Legal Information Institute (LII) at Cornell Law School recently provided this helpful blurb outlining the arguments in the upcoming ERISA fiduciary duties case of Beck v. Pace Int'l Union, 05-1448 (opinion below):

The Employee Retirement Income Security Act of 1974 (ERISA) requires private sector pension plan managers to discharge their management duties solely in the interest of plan participants and beneficiaries. When Crown Vantage, Inc. entered into bankruptcy proceedings, it terminated its existing pension plan by purchasing an annuity, rather than merging the plan into a group of plans administered by PACE International Union (PACE), which represented a number of Crown's employees.

On behalf of those employees, PACE then sued Crown for failure to discharge its ERISA duties by adequately investigating the proposed merger. The Court of Appeals for the Ninth Circuit upheld the lower court's decision that Crown's failure to adequately consider the merger was a violation of its fiduciary duty under ERISA. The Supreme Court's decision in this case will determine whether an employer's adoption, modification, or termination of a pension plan can be based on its own business needs or the best interests of its employees.

A more full summary and analysis by LII can be found here.  Oral argument will be on April 24th.



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Here is a terrific and in-depth review of the underlying facts and issues in the pending Supreme Court case of Beck v. Pace International Union, which is scheduled to be argued later this month, and which involves the extent, if... [Read More]

Tracked on Apr 12, 2007 8:25:10 AM


Thanks for providing this posting.
I am curious what may be the reaction of the Supreme Court, if Beck would claim that it did research the multiemployer option thoroughly, and decided against it.
The case suggests that Beck did the research, albeit not on a thorough basis.
The assumption is that if Beck had done its homework, it would have decided to go through with the multiemployer merger.
Would Beck's decision under those circumstances, then have to satisfy the reasonable test, under an arbitrary and capricious type standard?
Don Levit

Posted by: Don Levit | Apr 11, 2007 9:18:00 AM

Don, thanks for the question. This is not a denial of benefits claim, so the arbitrary and capricious standard is not in play. Unlike 502(a)(1)(B) claims, there are no internal procedures to exhaust with breach of fiduciary claims (whether under 502(a)(2) or 502(a)(3)). There are potentially two issues, though I think the Supreme Court will only address one. That one is whether the employer engaged in fiduciary activities in deciding against the plan merger. If no, and the employer was just acting in a settlor capacity, that ends the analysis. If, on the other hand, the court finds the employer to be a fiduciary, then the question under Section 404 is whether the employer acted in the best interests of the participants and in a prudent manner. As far as prudence, the question really goes to whether the fiduciary went through the appropriate process in coming to its decision, not so much what the results of the decision were. If it comes to it, I think this later question will be remanded for further factual findings. Hope this helps. Paul

Posted by: Paul M. Secunda | Apr 11, 2007 12:38:51 PM

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