Avoiding an ERISA ‘Fender Bender’
Several years back, one of my daughters was involved in what some would call a “fender bender.”
It was a wintry day in the Northeast. She had just left work — had barely managed to get out of the parking lot, when another driver blew through a red light, and struck her car as it entered the intersection.
Living only a couple of miles away, her mother and I were there in minutes. Time enough to see that the car was still drivable, and that everyone seemed to be okay and milling around. The officer on the scene told us that no citations would be issued — that since he didn’t see the accident, the weather conditions were likely going to be named as the culprit, though he was personally of the opinion that the other driver was responsible. Insurance information was exchanged, and we went on our way.
Other than the process of repairing our car, we thought nothing more of the incident until several weeks later, when about dinner time a policeman showed up at our door. He was delivering a summons informing us that we were being sued — by the driver that the officer on the scene had said was likely the cause of the whole mess.
Needless to say we were stunned, and more than a bit shaken. Our insurance company, to their great credit, was not only reassuring but strongly so. They didn’t relent on the position that we had no liability in the incident, though over the next several months we continued to receive notices of hearings — that were, one after the other, postponed by the party suing us. Until one day — perhaps because they had had no success in pushing for a settlement — they stopped. Though the worry of another notice to appear in court lingered for well over a year. And my daughter will never feel the same about driving again. That other driver? She wasn’t in the right, but our system gave her the right to sue nonetheless.
I have watched with more than passing interest the evolution of litigation, particularly the so-called “excessive fee” litigation that has been going on for more than a decade now. Early on, many were quick to dismiss it as the work of a “former personal injury firm,” and yet the allegations made in these lawsuits, particularly as they relate to the behavior of mammoth institutions with multibillion-dollar plans, have often been jaw-dropping, even when one makes allowances for the occasional hyperbole of advocacy.
I have long dismissed the notion that fee litigation was something that was going to be an issue for most plan sponsors. Not that you couldn’t find situations where fiduciaries are not living up to their obligations, or where participants are paying more than they might (arguably many of the lawsuits filed to date have been successful at addressing both) — but simply because the dollars involved wouldn’t be enough to get a participant’s attention, much less that of a serious class action litigator.
Then a couple of months back, I got an email from my other daughter, who works at a college in the Northeast. She had gotten a notice from a law firm she’d never heard of (via Facebook, no less), telling her that she might have been overcharged in her 403(b), and offering to look into the matter for her. And then, over the weekend, I saw a posting on Twitter of a law firm “trolling” for plaintiffs. That’s right, a firm that lists as practice areas motor vehicle accidents, product liability, workers compensation, wrongful death and drunk driving accidents, is now trolling for 401(k) retirement plan class action litigants. Their criteria for consultation? “If you did have a plan through your employer, please contact our office.” And they even “Habla Espanol.”
Yes, the bar on such things appears to be dropping. Not so much because some of these retail approaches are likely to have the expertise or wherewithal to actually carry an ERISA lawsuit to trial. But because the suit, justified or not, might come anyway.
That being the case, plan fiduciaries — and those who advise them — would be well advised to make sure their fiduciary houses are in order before a potential “fender bender” becomes something much worse.