Washington, D.C., May 9, 2024 – The ERISA Industry Committee (ERIC) and a coalition of employee benefit industry groups today urged the U.S. Supreme Court to review the Ninth Circuit Court of Appeals’ decision in Bugielski et al v. AT&T. In their amicus brief, ERIC and its coalition partners (the Amici) asked the Supreme Court to accept the case, explaining that the Ninth Circuit’s decision misinterpreted an important provision of the Employee Retirement Income Security Act (ERISA) prohibiting certain transactions between an employee benefit plan and other parties.
The Ninth Circuit’s decision widened a split of authority among the federal Courts of Appeals and makes it easier for plaintiffs to bring lawsuits against plan fiduciaries without being subject to a motion to dismiss. The amicus brief explains that if the Supreme Court does not correct the Ninth Circuit’s misreading of ERISA, there will be corrosive effects to the foundation of ERISA that Congress could not possibly have intended when the law was enacted in 1974.
“Under the Ninth Circuit’s interpretation of Section 406 of ERISA, a plaintiff could sue a plan fiduciary for the routine renewal of its contract with its recordkeeper,” said Tom Christina, Executive Director of the ERIC Legal Center. “Based on the Ninth Circuit’s decision, a complaint alleging nothing more than that would survive a motion to dismiss and become an expensive burden for the employer. The amicus brief demonstrates that the resulting legal fees and perverse incentives to settle will make it harder for plan sponsors and administrators to provide benefits, which will reduce benefits for employees to instead pay trial attorneys’ legal fees.”
Christina added, “The Ninth Circuit’s interpretation of Section 406 will result in the exact opposite of what Congress intended under ERISA. This case would give the Supreme Court a significant opportunity to reaffirm the foundation of ERISA and protect beneficiaries, plan sponsors, and administrators from higher legal costs. Left unchecked, the Plaintiffs’ bar will continue to pursue frivolous and costly litigation.”
The amicus brief filed today by ERIC and its allies in support of AT&T argues that:
• The Ninth Circuit’s decision renders standard and ubiquitous contracts, such as renewals of recordkeeper agreements, in American retirement plans presumptively unlawful.
• The Ninth Circuit’s decision will open the floodgates to speculative claims regarding routine matters, multiplying frivolous litigation and costing employees and employers.
• Allowing claims that all re-negotiations of service provider agreements are prohibited transactions unless proven otherwise will have far-reaching negative consequences for plan sponsors, fiduciaries, and participants.
• The Ninth Circuit’s interpretation of federal law did not consider the entirety of § 406 of ERISA or the overall purpose of ERISA as a whole.
In addition to ERIC, allied groups filing the amicus brief include the American Benefits Council, the SPARK Institute, and the Committee on Investment of Employee Benefit Assets.
The coalition’s amicus brief was prepared by Seyfarth Shaw LLP and is available here.