Industry Groups Push to Dismiss PRT Lawsuit Against Bristol-Myers Squibb

In an amicus brief, several advocacy groups warned that letting the lawsuit proceed past a motion to dismiss could open the door to a wave of frivolous lawsuits.

The ERISA Industry Committee, American Benefits Council and the Committee on Investment of Employee Benefit Assets Inc. are encouraging the dismissal of a lawsuit filed against Bristol-Myers Squibb Co. over a pension risk transfer it conducted in 2019 with Athene Annuity and Life Co.

The industry groups filed an amicus brief on Thursday, arguing that the plaintiffs lack standing and that the continuation of the case threatens a surge in frivolous litigation.

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In Doherty v. Bristol-Myers Squibb, filed in U.S. District Court for the Southern District of New York last September, former employee Charles Doherty said the pharmaceutical company, along with its independent fiduciary State Street Global Advisors Trust Co., failed to select the safest insurer available when it entered into a $2 billion PRT deal with Athene, claiming the insurance company is “highly risky.”

Several other companies, including AT&T Inc., General Electric Co. and Lockheed Martin Corp., have also been sued over PRT deals with Athene. The plaintiffs in the Bristol-Myers and AT&T cases are represented by law firms Edward Stone Law P.C. and Zuckerman Spaeder LLP, and the plaintiffs in the other cases are represented by Schlichter Bogard LLP.

A spokesperson from Athene said in a statement, “These complaints are entirely baseless attempts by class action attorneys to enrich themselves at the expense of retirees. Every pension group annuity participant whose benefits have been guaranteed by Athene has received and will receive their promised benefits in full. In each pension group annuity transaction for which Athene has been selected, there has been a robust review process carried out by a fiduciary and their independent advisers who are experts at assessing insurer safety…”

The industry groups argued in their brief that the use of annuities to provide pension benefits is a long-standing practice and that the plaintiffs “do not cite a single instance in which any of those participants were paid anything less than their [Employee Retirement Income Security Act] plans would have paid them.”

“Like the 401(k) fee class actions that came before them, this new wave of pension risk transfer litigation appears to be the next proverbial pot of gold for the plaintiffs’ bar,” said Tom Christina, executive director of the ERIC Legal Center, in a statement. “If meritless claims like this advance beyond swift dismissal, there is significant risk the floodgates will burst open, and plaintiffs’ firms will get a big payday while employers and employees will be faced with big legal bills and an even bigger threat to the retirement system we know today. This would be devastating to plan sponsors and, in turn, to the participants who rely on them for jobs and benefits.”

The industry groups further argued that allowing the anti-PRT litigation to proceed would be “directly contrary” to one of the central purposes of ERISA, because it would undermine plan sponsors’ ability to make settlor decisions about their plans and create “significant disincentives” for employers to establish plans.

The brief stated that these PRT claims should be rejected at the pleading stage, because if they survive motions to dismiss, other similar suits are likely to follow, which would come at a great cost to plans and, ultimately, plan participants.

In regard to Athene, the groups argued that the Doherty plaintiffs failed to allege facts that support their theory that their benefits are at a greater risk now that Athene is making the annuity payments.

“As a result of the transaction they seek to challenge, plaintiffs’ benefits are secured by irrevocable commitments from a regulated insurance provider, and Athene is obligated to pay plaintiffs everything they would have received under the plan,” the brief stated.

As a result, the groups argued that the plaintiffs lack standing because they have received all of their vested pension benefits so far and are legally entitled to receive the same monthly payments for the rest of their lives.

“Winning or losing this suit would not change the plaintiffs’ monthly pension benefits,” the brief stated.

The Doherty plaintiffs also allege that because they are no longer participants in an ERISA plan, they have been injured because they no longer have the Pension Benefit Guaranty Corporation backing their pensions if the payor defaults on its obligations. In response, the industry groups argued that losing PBGC coverage is not an injury and that PBGC guarantees are capped by law, and they both can and have resulted in a reduction of promised benefits for participants in the past.

“The selection of Athene did not cause the harm plaintiffs complain about; they are instead scapegoating that selection to create an avenue to attack all pension risk transfers,” the brief stated.

Bristol-Myers and SSGA filed a motion to dismiss the case on January 15, and the industry groups filed in support of a dismissal.

Law firm Covington & Burling LLP is representing Bristol-Myers and SSGA in the case.

Education and Workforce Committee Renews Call to Probe EBSA for Alleged ‘Power Abuse’

The committee has once again urged the Department of Labor’s Office of Inspector General to investigate claims that the Employee Benefits Security Administration disclosed confidential plan information to a plaintiff’s attorney.

The U.S. House Committee on Education and the Workforce has re-issued a request that the Department of Labor’s Office of Inspector General investigate allegations that DOL personnel shared confidential information regarding pension benefit plans with a plaintiff’s attorney.

Committee Chair Tim Walberg, R-Michigan, sent a letter Thursday to Inspector General Larry Turner, requesting that he investigate an instance in which the DOL shared “confidential retirement plan information” involving at least six employee benefit pension plans with at least one law firm—Cohen Milstein Sellers & Toll PLLC.

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The request reiterates a similar request made when then-Chair Virginia Foxx, R-North Carolina, wrote a letter last November urging the OIG to investigate the DOL’s use of common interest agreements and relationships with plaintiffs’ law firms that affect employee benefit plans and their fiduciaries.

Walberg wrote in his letter, “As we saw in the first [President Donald] Trump administration, career bureaucrats have sought to undermine the goals of the President and his cabinet Secretaries. We know of cases where bureaucrats have leaked sensitive information or are working with plaintiffs’ attorneys to skew court cases against employers.”

Walberg said the committee’s oversight work brought to light how the Employee Benefits Security Administration is “abusing its authority to secretly share information with class action law firms.”

“This is a blatant abuse of the law, and our Committee will hold EBSA accountable,” Walberg wrote.

In response to Foxx’s letter, a spokesperson for Cohen Milstein Sellers & Toll told PLANSPONSOR in November that common interest agreements between the DOL and private sector are “common, legal and have been entered into by different administrations for decades.”

However, Walberg claimed the plan sponsor community was unaware that EBSA was commonly feeding employee benefit plan information gathered during investigations to plaintiff law firms.

Andrew Oringer, general counsel and partner in Wagner Law Group, says while he believes there has been a long history of DOL cooperation in private litigation, such as with friend-of-the-court filings, it seems that the use of common interest agreements by the DOL has been a more recent development.

Oringer says making legal arguments is one thing, but becoming a “de factor co-investigator” at an early stage of litigation could put the DOL on questionable ground.

“Putting aside the question of legal authority and legitimacy, there is a potential problem with perception,” Oringer says. “There are those who view the activity of plaintiffs’ firms as an element of a litigious society that allows settlements to be unfairly extracted in light of high litigation costs and risks, even where the cases might be meritless. The idea that the DOL might effectively become an active investigative ally of the plaintiffs’ firm under these circumstances could feed into those kinds of objections.”

The House committee has requested that the OIG investigate the practice, including whether the DOL shared information with other firms, and publish a public report.

The lawsuit in which confidential information was shared was Harrison v. Envision Management Holding Inc. Board of Directors et al., filed in U.S. District Court for the District of Colorado in January 2021, in which Envision Management was accused of breaching its fiduciary duties for mismanaging its employee stock ownership plan.

According to Foxx’s letter, the common interest agreement between the DOL and the law firm is dated April 21, 2023, but it does not disclose when the information was shared.

A DOL spokesperson did not immediately respond to a request for comment.

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