Plaintiff James Simpson filed under the Employee Retirement Income Security Act (ERISA) § 502(a)(2) against defendants ConAgra Foods Retirement Income Savings Plans and ConAgra Foods Employee Benefits Administrative Committee for breach of fiduciary duty. Simpson alleged that the plan and its committee breached their duty of loyalty by failing to correctly execute his request to transfer part of his plan investments between funds and declining his requested remedy.
The lawsuit stems from a transaction in which Simpson sought to transfer part of his plan investments from a shorter-term fixed-income fund to a large-cap growth stock fund, and from the committee’s denial of Simpson’s request to credit his account for losses allegedly caused as a result.
The defendants argued that the plan could not be sued for breach of fiduciary duty because it was not a proper defendant. However, the U.S. District Court for the Northern District of Texas found the plan is a proper defendant, and therefore denied the defendants’ motion for summary judgment as to all claims asserted against the plan.
The court also found that Simpson does not establish beyond doubt that the committee breached its duty of loyalty by relying on impermissible factors in deciding his claim. The court said this is because Simpson essentially relies on nothing more than the fact that his request for compensation was denied.
Finally, the court decided the defendants were not entitled to summary judgment based on § 404(c). The court said § 404(c) safe harbor shields fiduciaries from liability for losses in cases when, for example, a participant decides to invest all his assets in one fund rather than splitting his assets among multiple funds. It is not meant to protect fiduciaries from liability for breaching their duty.
Simpson made a telephone transfer of his plan’s investment funds in 2009. He requested 60% of his account be placed into a large-cap growth fund. However, the EA representative he spoke with transferred 60% of his account to a longer-term fixed-income fund. The representative transferred the funds after she received a responsive statement from Simpson that this was OK, rather than in accordance with Simpson’s initial request.
After Simpson contacted defendants to inquire about the transaction, they sent him a recording of the conversation and informed him that the EA representative executed the transaction that she had read back to him and that he had confirmed. Defendants also informed Simpson of his right to file a claim with the plan. Simpson then sent defendants a letter requesting that his account be credited $12,000 due to the EA representative’s mistake. The committee denied Simpson’s request and, in doing so, referenced the fact that he was making a trade very late in the trading day, speaking quickly, and had confirmed the trade as read back to him by the EA representative. The committee also informed Simpson of his right to appeal the decision, which Simpson exercised through counsel.
Simpson’s appeal was also denied by the committee, citing his confirmation of the EA representative’s misstatement as the basis for the denial. Simpson then filed the suit, alleging defendants breached their fiduciary duty of loyalty under ERISA.
The court's opinion is here.