E&W Blog

Today, the Subcommittee on Health, Employment, Labor, and Pensions held a hearing to examine the rise in frivolous class action lawsuits against ERISA plans and their impact on American retirements.
 
Subcommittee Chairman Rick Allen (R-GA) started off the hearing by summarizing the problem at hand. “Employer-sponsored retirement plans are the backbone of American retirement. Employer-sponsored health care and other plans provide important benefits to American workers and their families…These assets represent the savings and contributions of workers and their employers. But make no mistake, such a large pool of assets is attracting predatory lawyers who are targeting employee benefit plans for easy, quick-money, sue-and-settle lawsuits,” he said.

Witnesses mentioned some jaw-dropping examples of these money-grabbing lawsuits.
 
“In one recent lawsuit, plaintiffs’ counsel sued over a dozen defendants—including a defendant’s infant grandchild. Plaintiffs there went so far as to send a process server to the infant’s home—a wholly unnecessary step that only harassed the other defendants in an effort to increase settlement pressure. In another recent example, plaintiffs’ counsel unnecessarily sued dozens of defendants, who were eventually represented by roughly a half dozen different law firms. This put enormous financial strain on the plan’s sponsor which was obligated to indemnify most of the defendants for their defense costs and settlement payments—during the multi-year pendency of the meritless lawsuit,” said Mr. Andrew Salek-Raham, Principal at the Groom Law Group.
 
Chairman Tim Walberg (R-MI) asked witnesses how these baseless lawsuits threaten retirees’ ability to get high-quality plans and services. “We recently conducted an informal survey of our plan sponsor members and almost 89 percent of the [sponsors] noted that the risk of litigation is a significant factor in their decision to offer services and investment options or products to their participants…The risk of litigation is impacting plans sponsors and their decision and ability to offer a wider range of services and benefits to their participants—and that hurts participants, that hurts everybody,” explained Ms. Lynn Dudley, Senior Vice President of Global Retirement and Compensation Policy at the American Benefits Council.
 
In an exchange with Rep. Ryan Mackenzie (R-PA), Mr. Glenn Butash, Chair of the ERIC Legal Center at The ERISA Industry Committee, shared the disturbing trend of lawsuits he has seen in his career. “[These lawsuits] seem to be largely brought by a handful of the same law firms. So they are recycling the same pleading against deep-pocketed defendants or large plans in the [effort] of getting a quick settlement,” Mr. Butash stated.
 
Rep. Randy Fine (R-FL) discussed how his legislation, the ERISA Litigation Reform Act, curtails these meritless lawsuits. “There are bad actors that need to be sued, but there are also plenty of bad lawyers who take advantage of the system. What my bill intends to do is to strike that balance to give people the opportunity to sue when that bad [action] does take place but also to protect people from having their retirement savings sucked away from unscrupulous lawyers,” he said. 

Bottom line: Committee Republicans are safeguarding workers’ retirement savings and the employers who provide these benefits from meritless, predatory class-action lawsuits.