Justia Banking Opinion Summaries

The trustees of an ERISA-regulated pension plan invested in six classes of residential mortgage-backed securities (RMBSs). Three of these investments were in notes issued by Delaware statutory trusts via indenture agreements, while the other three were in regular-interest certificates issued by trusts governed under New York law and classified as REMICs for tax purposes. The trustees alleged that the mortgage servicers mismanaged the loans and engaged in self-dealing, violating ERISA fiduciary duties. They also claimed that Wells Fargo, as master servicer for some trusts, failed to adequately supervise Ocwen (another servicer) and failed to pursue litigation on behalf of the trusts.The United States District Court for the Southern District of New York granted summary judgment in favor of all defendants, holding that, under the Department of Labor’s regulation, only the RMBSs themselves—not the underlying mortgages—were plan assets for ERISA purposes. The court determined that both the notes and the regular-interest certificates were treated as indebtedness without substantial equity features, so the look-through exception did not apply. The trustees’ cross-motion for partial summary judgment was denied.On appeal, the United States Court of Appeals for the Second Circuit affirmed in part, reversed in part, and remanded. The court agreed that the notes issued by the indenture trusts lacked substantial equity features and thus the underlying mortgages were not plan assets. However, it held that the regular-interest certificates represented beneficial interests in the REMIC trusts; under the controlling regulation, the assets of such a trust in which a plan holds a beneficial interest are themselves plan assets. The case was remanded to the district court to consider whether Ocwen acted as an ERISA fiduciary with respect to the mortgages underlying the REMIC trusts. View "Powell v. Ocwen Fin. Corp." on Justia Law

This case concerned the withdrawal liability for a pro rata share of unfunded vested benefits to a multiemployer pension fund of Scott Brass, Inc. (SBI), a bankrupt company. SBI had withdrawal pension obligations to the multiemployer pension fund (TPF), which sought to impose the obligations on two private equity funds (Plaintiffs). Plaintiffs asserted they were passive investors that indirectly controlled SBI and sought a declaratory judgment against the TPF. The TPF counterclaimed and sought payment of the withdrawal liability at issue. The district court entered summary judgment for Plaintiffs. The First Circuit Court of Appeals affirmed in part, reversed in part, and vacated in part, holding (1) at least one of the private equity funds that operated SBI sufficiently operated and was advantaged by its relationship with SBI, and further factual development was necessary as to the other equity fund; (2) the district court erred in entering summary judgment for Plaintiffs under the "trades or businesses" aspect of a two-part "control group" test under 29 U.S.C. 1301(b)(1); and (3) the district court correctly entered summary judgment for Plaintiffs on TPF's claim of liability on the ground that the funds had engaged in a transaction to evade or avoid withdrawal liability. Remanded. View "Sun Capital Partners III, LP v. New England Teamsters & Trucking Indus. Pension Fund" on Justia Law

Plaintiffs brought this civil enforcement action under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1001 et seq., alleging that defendants, the Bank, and individual members of the Bank's Corporate Benefits Committee, engaged in prohibited transactions and breached their fiduciary duties by selecting and maintaining Bank-affiliated mutual funds in the investment menu for the Bank's 401(k) Plan and the Bank's separate but related Pension Plan (collectively, the Plans). The court affirmed the district court's dismissal of the Pension Plan claims in the Second Amended Complaint on the basis that plaintiffs lacked Article III standing. The district court correctly determined that plaintiffs' remaining claims were time-barred under the limitations period in 29 U.S.C. 1113(1)(A). Finally, the district court's dismissal of the Third Amended Complaint with prejudice did not constitute an abuse of discretion where plaintiffs failed to file a motion to amend and had already amended their original complaint three times. Accordingly, the court affirmed the judgment of the district court. View "David v. Alphin" on Justia Law

Former Fifth Third employees participated in a defined contribution retirement plan with Fifth Third as trustee. Participants make voluntary contributions and direct the Plan to purchase investments for their individual accounts from preselected options. The options included Fifth Third Stock, two collective funds, or 17 mutual funds. Fifth Third makes matching contributions for eligible participants that are initially invested in the Fifth Third Stock Fund but may be moved later to other investment options. Significant Plan assets were invested in Fifth Third Stock. Plan fiduciaries incorporated by reference Fifth Third’s SEC filings into the Summary Plan Description. Plaintiffs allege that Fifth Third switched from being a conservative lender to a subprime lender, its loan portfolio became increasingly at-risk, and it either failed to disclose or provided misleading disclosures. The price of the stock declined 74 percent. The district court dismissed a complaint under the Employee Retirement Income Security Act, 29 U.S.C. 1001, based on a presumption that the decision to remain invested in employer securities was reasonable. The Sixth Circuit reversed, holding that the complaint plausibly alleged a claim of breach of fiduciary duty and causal connection regarding failure to divest the Plan of Fifth Third Stock and remove that stock as an investment option. View "Dudenhoefer v. Fifth Third Bancorp" on Justia Law

Plaintiffs David McCorkle and William Pender appealed a district court order dismissing two of their class action claims against Bank of America Corporation for alleged violations of certain provisions of the Employment Retirement Income Security Act of 1974 (ERISA). Their claims centered on the Bank's use of a normal retirement age (NRA) that allegedly violated ERISA in calculating lump sum distributions and further ran afoul of ERISA's prohibition of "backloading" the calculation of benefit accrual. Upon review, the Fourth Circuit agreed with the district court's conclusion that Plaintiffs failed to state a claim upon which relief could be granted, and it affirmed the district court's judgment to dismiss those claims. View "Pender v. Bank of America Corp." on Justia Law

Stokes owned 1Point, which managed employee-benefits plans and 401(k) retirement plans as a third-party administrator (TPA). Most were governed by the Employee Retirement Income Security Act, 29 U.S.C. 1002. TPAs generally provide record-keeping and assist in transferring money, but do not handle money or securities. Stokes directed clients to send funds to accounts he had opened in 1Point’s name. Cafeteria plan clients deposited $45 million and 401(k) clients deposited $5.7 million in accounts at Regions. Because the accounts bore 1Point’s name, Stokes was able to transfer money. Between 2002 and 2006, Stokes stole large sums. Regions failed to comply with the Bank Secrecy Act, 31 U.S.C. 3513, requirements to report large currency transactions, file suspicious-activity reports, verify identities for accounts, and maintain automated computer monitoring. In 2004, the U.S. Financial Crimes Enforcement Network assessed a $10 million fine against Regions. In 2006, Stokes and 1Point filed for bankruptcy. The Trustee filed suit against Regions in bankruptcy court on behalf of victimized plans for which he assumed fiduciary status. The suit was consolidated with plaintiffs’ suit. The district court withdrew the Trustee’s case from bankruptcy court, dismissed ERISA claims, and found that ERISA preempted state law claims. The Sixth Circuit affirmed. View "McLemore v. Regions Bank" on Justia Law