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Fiduciary Duty


Randy Watson
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Assume that a class action suit has arisen and certain participants in an ERISA plan potentially qualify as members of the class. Would it be sufficient for the fiduciaries to simply disclose this information to the plan participants to give the participants the opportunity to join the class if they wish? Could this be considered to be acting in the best interest of participants, or would the fiduciaries need to join the class on behalf of the participants? I'm sure it's difficult to come up with an answer without knowing more details, but any comments would be welcome. Also, is anyone aware of commentary or case law addressing this issue? Thanks.

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Randy,

I'm assuming the way your question is worded that the targeted defendant of the class action suit is not the plan nor the fiduciaries themselves, but some third party. The plan fiduciaries are, of course, to act on behalf of the plan beneficiaries in matters affecting the plan. If it is some third party vendor that is the targeted defendant of the suit, and it is the same services or charges for services that the plan receives that is the subject of the suit, I think the plan fiduciaries are required to investigate the suit, evaluate joining in and actually join the class action on behalf of the plan, if that's the prudent thing to do for the plan and its beneficiaries under all the circumstances. If the plan is the recipient of the services or charges in question, then the plan beneficiaries may have no standing of their own to join the suit except through the plan. This would be particularly true of any breach of contract claims that might apply, where the plan is privy to the contract with the vendor, but the participants are not.

You're right, not knowing the details does make answering difficult.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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