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Volume XI, Number 268

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Fifth Circuit: Plan Participants Lacked Standing to Bring ERISA Fiduciary Breach Claims

American Airlines, Inc. and its affiliated credit union recently defeated an appeal challenging a low-yield investment option in the airline’s 401(k) plan when the Fifth Circuit ruled that the plan participants lacked Article III standing to bring their ERISA claims.

In 2016, the plaintiffs filed suit on behalf of a putative class of nearly 20,000 American Airlines 401(k) plan participants who invested money in American’s Federal Credit Union Option (FCU Option), a demand deposit fund offered under the plan. The plan participants argued, among other things, that American and its Asset Administrative Committee breached their fiduciary duties and engaged in prohibited transactions by selecting and retaining the FCU Option instead of a stable value fund. The plaintiffs’ claims were primarily based on the higher interest rate available from stable value funds, disregarding the increased investment risk of the stable value funds relative to the FCU Option, and that stable value funds would not have had the government-backed guarantee. The participants also brought a claim against FCU, alleging that it breached its fiduciary duty of loyalty by improperly benefitting from the allegedly unreasonable rate of return for the FCU Option.

The Fifth Circuit affirmed the district court’s conclusion that the plaintiffs lacked standing to assert their breach of fiduciary duty claims against American and its Asset Administrative Committee. In so holding, the Fifth Circuit observed that although the plan eventually began offering a stable value fund—the plaintiffs’ preferred type of capital preservation investment—the participants never invested in this option. For that reason, the appellate court concluded that the participants failed to show that the challenged acts of the defendants caused their injury because they “would not have invested in a stable value fund in a counterfactual world since they did not place their money in one when given the opportunity to do so.”

Regarding the plaintiffs’ breach of loyalty claim against FCU, the three-judge panel reversed the district court’s decision that the plan participants had standing to sue FCU, once again concluding that the plaintiffs failed to show causation. Specifically, the court adopted FCU’s contention that there was “no connection between any alleged losses to the plan” and “the statutory claim against FCU.” The appellate court held that the plaintiffs lacked standing to accuse FCU of improperly using the plan assets held by the FCU Option for its own benefit because the plaintiffs presented no evidence “demonstrating that investors in FCU funds other than the FCU Option received higher interest rates generated by investments of Plan assets.”

Jackson Lewis P.C. © 2021National Law Review, Volume XI, Number 210
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About this Author

Associate

James Wayne Barnett is an associate in the New Orleans, Louisiana, office of Jackson Lewis P.C. As a former officer in the United States Air Force, Jim brings his experience overseeing high-level criminal and counterintelligence operations and investigations to his dedication in serving clients in his current practice.

Jim’s practice focuses on defending employers, fiduciaries, all types of plan sponsors, third-party administrators, managed care entities, and other ERISA actors in complex class-actions and individual...

504-208-5851
René E. Thorne, Jackson Lewis, Employment Litigation, ERISA Attorney"
Office Managing Principal and Office Litigation Manager

René E. Thorne is Office Managing Principal of the New Orleans, Louisiana, office of Jackson Lewis P.C. Her practice covers the full range of employee benefit litigation matters, including representation of employers, plans, plan fiduciaries, and trustees.

In that regard, she has handled numerous ERISA class actions for clients such as Nortel Networks, Target, Krispy Kreme Doughnuts, Owens Healthcare, United Airlines ESOP Committee, Dunbar Armored, United Companies, Benefits Administration Corporation, and Beverly Enterprises. Ms. Thorne also has handled...

504-208-1755
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