Category: Erisa

An interesting article from Forbes.com: “Mr. Class Action.” (Thanks to the 10b-5daily.com for the pointer.)

With all of the recent mutual fund scandals and investigations, the legal and benefits community have been very focused on the ERISA fiduciary implications for plan sponsors and plan fiduciaries, with law firms and benefits consulting firms getting into the act by writing article after article on the subject. (Many of these articles are listed in the links section over in the right-hand column which includes one at Benefitsblog: “Plan Fiduciaries: Navigating the Rough Waters of the Mutual Fund Investigations.”) That being said, I have often wondered from time to time why we have not heard from one government agency that would seem to have a great deal to say about all of this–that is, the Department of Labor. And yes, we do have the remarks of Assistant Secretary Ann L. Combs Before the Annual Conference of The National Defined Contribution Council, which many of those who have written on the subject have referred to. However, I was glad to see that last week the Investment Company Institute issued a letter to the Department of Labor requesting “guidance from the Department of Labor that will help retirement plan sponsors and fiduciaries protect plan participants from any negative impacts of market timing activity.” The letter highlights some of the legal issues under ERISA which plan sponsors and plan fiduciaries are struggling with and asks the DOL to issue guidance with respect to these issues:

• that nothing in ERISA prohibits plan fiduciaries from restricting the activities of participants who engage in market timing of plan investment alternatives;
• that a plan sponsor should take into account and, under ordinary circumstances, be entitled to rely upon a determination made by an investment vehicle (or its manager) that certain trading activity is harmful to the interests of other shareholders (and, therefore, other plan participants);
• that it is consistent with ERISA’s fiduciary rules for a plan sponsor to take reasonable steps to facilitate the application of any restrictions imposed at the fund level to plan participants; and
• that section 404(c) relief will continue to be available for plan fiduciaries who select an investment option that imposes measures to restrict market timing and apply such restrictions to individual participants.

It is interesting to note this portion of the letter:

“[W]e understand that some plan sponsors confronted with concerns about the trading activity of one or more plan participants have suggested that ERISA prevents them from restricting market timing. This position is inconsistent with a recent federal district court ruling (dismissing an ERISA claim by participants challenging a plan’s terms and practice that restricted excessive trading in plan accounts) and, we submit, the clear dictates of ERISA to act solely in the interest of plan participants. To eliminate any confusion regarding ERISA’s dictate, we urge a strong statement by the Department affirming that ERISA contains no prohibition on restrictions imposed by plan fiduciaries to deter market timing in their retirement plans.

The ICI is likely referring to this case, Straus v. Prudential Employee Savings Plan, 253 F. Supp 438 (E.D.N.Y. 2003), which was highlighted here in a previous post at Benefitsblog: “An Unsuccessful ERISA Legal Challenge to Market-Timing Restrictions.”

The ICI asks that any guidance issued by the DOL be “prospective in scope, and that plan fiduciaries be given a reasonable period of time to implement.”

Some of you may have read a recent article in a newsletter from a major benefits consulting firm which discussed developments in the cash balance plan litigation arena. The article states that “[t]he first appellate court to consider whether the plan design violates federal age discrimination laws has ruled in favor of the plans.” The article later describes how in an unpublished opinion, the “Ninth Circuit Court of Appeals ruled on CBS’ adoption of a cash balance plan and the conversion method it used” and “held that the plan and conversion method do not violate ERISA’s fiduciary standards, do not result in an impermissible cutback of benefits and do not violate federal age discrimination laws.”

Here is what the unpublished opinion in Godinez et al. v. CBS Corporation et al., 81 Fed.Appx. 949, 2003 WL 22803700 (9th Cir. 2003), actually said:

1. “Appellants’ ERISA fiduciary claim fails because ERISA’s fiduciary duty provisions are not implicated where the employer, acting as the Retirement Plan’s settlor, changes the form or structure of the Plan.”

2. “Appellants’ claim under 29 U.S.C. section 1054(g) fails because Appellants did not put forth any substantive evidence to show a decrease in their benefit accruals. As CBS carried its burden of production on summary judgment, Appellants were required to present specific evidence in response. . . .The closest Appellants came to offering evidence of a decline in their accrual rate was their experts’ promise that future study and analysis of the Cash Balance Plan would establish that the Appellants’ pensions would have been larger had CBS continued the Traditional Pension Plan. However, no calculations were provided to the court, and Appellants’ conclusory assertions are insufficient to defeat summary judgment. Therefore, the district court did not err in granting summary judgment in favor of CBS on Appellants’ claim for decrease of accrued benefits under ERISA.”

3. “Appellants’ ADEA claim fails because they failed to produce any evidence that conversion to the Cash Balance Plan disproportionately impacted older employees.”

When I first read the article, I became intrigued that there might now be a Court of Appeals decision supportive of cash balance plans. However, after reading the unpublished opinion, I do not think the case comes out quite as strongly in favor of cash balance plans as the article seems to imply, ruling instead that there was not any substantive evidence presented in favor of appellants’ claims.

For more on the cash balance plan controversy, there are links pertaining to cash balance plan litigation in the right-hand column. You can also access previous posts on the subject here or here.

To what extent are directors fiduciaries under ERISA and charged with monitoring the appointment of fiduciaries under ERISA? That is the question being debated again and again in the latest wave of ERISA cases. In the In re: WorldCom, Inc. ERISA Litigation, the DOL filed an Amicus Brief discussing this issue. You can read the press release here. The DOL states its position in the press release:

The department’s brief argues that appointing fiduciaries have an obligation to periodically monitor the work of those they appoint, and to take appropriate action if the appointees’ conduct falls short of ERISA’s standards. The brief stresses, however, that appointing fiduciaries are not guarantors of the actions or of the success of the investment decisions made by the fiduciaries they appoint. Rather, the obligation of appointing fiduciaries is to make appointment and removal decisions with prudence and loyalty, and to periodically monitor the performance of those they appoint. Appointing fiduciaries have an important responsibility to implement reasonable procedures to review and evaluate the performance of appointees on an ongoing basis.

The courts have in the last year been forced to focus again and again on this issue of when directors should be liable under ERISA for a failure to monitor. Here are a few of the cases and what they have said:

• In re: WorldCom, Inc. ERISA Litigation: In the first round of motions to dismiss by defendants, the court addressed the plaintiffs’ contention that members of the Board of Directors for WorldCom were fiduciaries. According to the plaintiffs’ argument, the Plan had named WorldCom as the appointing fiduciary, and therefore under corporate law, the Board had supervisory authority and therefore a duty to monitor under ERISA. The court, however, held that the complaint did not sufficiently allege that “the Director Defendants functioned as ERISA fiduciaries” and said that the plaintiffs’ argument had gone too far.

• In re: Williams Cos. ERISA Litigation: The DOL filed an amicus brief in the case, advocating this duty to monitor on the part of the Board under ERISA, but apparently lost the argument as reported in an unpublished decision on October 27, 2003. The DOL comments on the result in the Williams case in its WorldCom Amicus Brief:
  

  The Williams decision misapprehended the Secretary’s position, however, and is contrary to the weight of precedent. Thus, the Secretary believes that the decision in Williams was simply wrong, and should be accorded no weight by this Court.

• Tittle v. Enron Corp., 2003 WL 22245394 (S.D. Tex. Sept. 30, 2003): The court in Enron held that the directors did have a duty to monitor, and distinguished the result in WorldCom stating:
  

  This Court finds that the facts in the case before Judge Cote {e.g. WorldCom] can be easily distinguished from those in Tittle. . . this Court has cited a number of opinions holding that the exercise of the power to appoint, retain and remove persons for fiduciary positions triggers fiduciary duties to monitor the appointees. Moreover in WorldCom, Worldcom did not appoint anyone as a fiduciary and there apparently were no allegations that Director Defendants functioned as fiduciaries, i.e., actually appointed persons to or removed persons from such positions. In Tittle, on the other hand, Defendants did appoint fiduciaries who, in turn, exercised discretionary authority or control over the plan and allegedly breached their fiduciary duties, while Director Defendants allegedly failed in their duty to monitor those appointed.

Just how far does the DOL go in this assertion that directors must monitor the ERISA fiduciaries who are appointed? The DOL provides some clarification in its Amicus Brief:

[A]ppointing fiduciaries are not charged with directly overseeing the investments and thus duplicating the responsibilities of the investment fiduciaries whom they appoint. At a minimum, however, the duty of prudence requires that they have procedures in place so that on an ongoing basis they may review and evaluate whether investment fiduciaries are doing an adequate job (for example, by requiring periodic reports on their work and the plan’s performance, and by ensuring that they have a prudent process for obtaining the information and resources they need.) In the absence of a sensible process for monitoring their appointees, the appointing fiduciaries would have no basis for prudently concluding that their appointees were faithfully and effectively performing their obligations to plan participants or for deciding whether to retain or remove them. The Secretary does not suggest that the appointing fiduciaries must follow one prescribed set of procedures for monitoring the investment fiduciaries, but that they apply procedures that allow them to assure themselves that those they have entrusted with discretionary authority to invest the plan’s assets are properly discharging their responsibilities.

This is basically the same position declared by the DOL in its Interpretive Bulletin at Reg. section 2509.75-78:

D-4 Q: In the case of a plan established and maintained by an employer, are members of the board of directors of the employer fiduciaries with respect to the plan?

A: Members of the board of directors of an employer which maintains an employee benefit plan will be fiduciaries only to the extent that they have responsibility for the functions described in section 3(21)(A) of the Act. For example, the board of directors may be responsible for the selection and retention of plan fiduciaries. In such a case, members of the board of directors exercise “discretionary authority or discretionary control respecting management of such plan” and are, therefore, fiduciaries with respect to the plan. However, their responsibility, and, consequently, their liability, is limited to the selection and retention of fiduciaries (apart from co-fiduciary liability arising under circumstances described in section 405(a) of the Act). In addition, if the directors are made named fiduciaries of the plan, their liability may be limited pursuant to a procedure provided for in the plan instrument for the allocation of fiduciary responsibilities among named fiduciaries or for the designation of persons other than named fiduciaries to carry out fiduciary responsibilities, as provided in section 405(c)(2).

. . .
FR-17 Q: What are the ongoing responsibilities of a fiduciary who has appointed trustees or other fiduciaries with respect to these appointments?

A: At reasonable intervals the performance of trustees and other fiduciaries should be reviewed by the appointing fiduciary in such manner as may be reasonably expected to ensure that their performance has been in compliance with the terms of the plan and statutory standards, and satisfies the needs of the plan. No single procedure will be appropriate in all cases; the procedure adopted may vary in accordance with the nature of the plan and other facts and circumstances relevant to the choice of the procedure.

It will be interesting to follow the case law’s development with respect to this issue and to see how far the courts are willing to go down this road of holding directors personally liable for failure to monitor appointed fiduciaries under ERISA.

Mutual funds have been the focus of the news over the past couple of days. You can access information about the open meeting of the Securities and Exchange Commission held yesterday here. You can access the opening statement by Chairman William H. Donaldson at the meeting here. The SEC proposed three regulatory initiatives:

• Investment Company Governance. The Commission voted to propose amendments to its rules to enhance fund boards’ independence and effectiveness. The proposal includes requirements for the independent composition of the Board, an independent Chairman of the Board, provisions requiring an annual self-assessment of the Board, separate sessions for the independent Board members (providing Board members with “opportunity for candor”), and provisions enabling independent members of the Board to hire their own staff.
• Codes of Ethics for Investment Advisers. The Commission voted to propose new rule 204A 1 and related rule amendments under the Investment Advisers Act of 1940. New rule 204A 1 would require registered investment advisers to adopt and enforce codes of ethics applicable to their supervised persons and would seek to prevent fraud by reinforcing the fiduciary principles that must govern the conduct of advisory firms and their personnel. The code of ethics would have certain minimum provisions governing (1) standards of business conduct that would govern the conduct of an adviser’s supervised persons so that it reflects the adviser’s fiduciary duties, (2) compliance with Federal securities laws, (3) safeguards for nonpublic information, (4) reporting of personal securities holdings and transactions, (5) pre-approval of certain transactions by supervised person, and (6) required reporting of code of ethics violations.
• Confirmation Requirements and Point of Sale Disclosure Requirements for Transactions in Certain Mutual Funds and Other Securities, and Other Confirmation Requirement Amendments, and Amendments to the Registration Form for Mutual Funds. The Commission voted to propose two new rules and rule amendments that require broker-dealers to provide certain information to their customers in connection with transactions in certain types of securities. The two new rules would require broker-dealers to provide their customers with targeted information, at the point of sale and in transaction confirmations, regarding the costs and conflicts of interest that arise from the distribution of mutual fund shares, unit investment trust (UIT) interests (including insurance company separate accounts that offer variable annuity contracts and variable life insurance policies), and municipal fund securities used for education savings (commonly called 529 plans).

Comments on the “Investment Company Governance” and the “Codes of Ethics for Investment Advisers” proposals must be received by the SEC within 45 days of being published in the Federal Register. Comments on the Disclosure requirements must be received within 60 days of being published in the Federal Register. (I discussed where to go to make comments online in this post.) View the press release for further information.

News articles on the proposals:

• The New York Times: S.E.C. Plan Would Force Fund Boards to Change”
• The Associated Press via the Washington Times: “Regulators eye ethics of mutual fund sales”
• CNNMoney.com: “SEC proposes fund ethics requirement: Group votes unanimously to propose new ethics rules for fund advisers and employee disclosure”
• The Wall Street Journal: “SEC Unveils Mutual-Fund Rules.” (No link available.)

Also, the Foundation for Fiduciary Studies has issued the following press releases regarding the proposals:

• Guide to SEC Probe of Mutual Fund and Brokerage Scandals
• Guide to SEC Probe of Consultant Pay-to-Play Schemes
• Guide to SEC Proposal for Required Code of Ethics

Finally, some less current mutual fund articles of interest:

• USAToday.com: “More charges ‘almost inevitable’” (an interview with New York Attorney General Eliot Spitzer)
• The Philadelphia Inquirer: “Funds boards could get teeth to fight fraud”
• The WashingtonPost.com: “State of the Mutual Fund Industry“

A previous post–“403(b) Plans Take a Turn for the Worst in the Sixth Circuit“–discusses the Sixth Circuit’s opinion in Rhiel v. Adams holding that certain 403(b) annuities do not satisfy the trust requirement of section 542(c)(2) of the Bankruptcy Code and that such plans are not exempt from the bankruptcy estate. The reporting of the case has garnered quite a bit of interest from readers, one of which has commented that a substantial number of qualified defined benefit plans do not utilize trusts either, but rather utilize annuity contracts as their funding vehicle under Internal Revenue Code section 404(a)(2). The point being made is that the case could have application to certain defined benefit plans as well, meaning that these types of plans could also be at risk and possibly subject to bankruptcy, at least in the Sixth Circuit. The reader notes that many of the insurance companies which provide these types of defined benefit plans should take note of the case.

A previous post here at ERISAblog entitled “Perils for Plan Fiduciaries: Deciding When and How to Sue For Losses” discussed some worrisome news in the In re WorldCom, Inc. Securities Litigation case about how certain fiduciaries of pension funds had possibly jeopardized their claims on behalf of plan participants by filing individual actions prior to a decision on class action certification and how the judge in the case had followed up with tough criticism of the law firm that represented the fiduciaries. I noted how “there is much for ERISA plan fiduciaries to be wary of in contemplating individual and class action lawsuits on behalf of plan participants.” Apparently, the Department of Labor thinks so too as evidenced in their issuance of final Prohibited Transaction Exemption 2003-39 (pdf version) (html version) covering issues pertaining to the settlement of litigation by employee benefits plans with parties in interest. The main purpose of the exemption is to permit plans to release claims against “parties in interest” in connection with settlements of ongoing or threatened litigation where the DOL is not a party to the litigation. The exemption is an important one for the benefits community in light of the fact that, as discussed previously, many plans will be, or already are, bringing lawsuits on behalf of plan participants trying to recoup losses from recent corporate scandals as well as mutual fund scandals.

Why does the DOL need to issue an exemption for a plan fiduciary to enter into a settlement on behalf of a plan? When plan fiduciaries enter into such agreements on behalf of plans which are suing such entities as the employer, an investment provider, etc, those entities are normally “parties in interest” (i.e. related to the plan under ERISA and DOL regulations). And without going into detail about all of the complicated prohibited transaction rules, suffice it to say that the DOL views a potential claim or “chose in action” as a type of property and that a plan’s release of its claim against such party in interest may constitute a prohibited sale or exchange with the plan, as well as a prohibited transfer or use of plan assets for the benefit of a party in interest. (See DOL Opinion Letter 95-26A which provides some guidance regarding how this type of prohibited transaction can occur. Also, see PTE 1999-31.)

However, in spite of its views, the DOL notes the confusion surrounding the issue and that “some attorneys may have advised their clients that the settlement of litigation with a party in interest is not the type of transaction intended to be covered by section 406 of the Act.” With this in mind, here is what the DOL says about the reason for its issuance of the exemption:

As the Department noted in proposing this exemption, the fact that a transaction is subject to an administrative exemption is not dispositive of whether the transaction is, in fact, a prohibited transaction. Rather, the exemption is being granted in response to uncertainty expressed on the part of plan fiduciaries charged with the responsibility under ERISA for determining whether it is in the interests of a plan’s participants and beneficiaries to enter into a settlement agreement with a party in interest. The comments have confirmed the department’s earlier conclusion that there was considerable uncertainty surrounding this issue. After considering all of the comments, the Department has determined that the exemption, as revised, appropriately balances the concerns of these commentators while allowing plan fiduciaries to properly carry out their responsibilities under ERISA.

The exemption is really narrowly tailored to address those settlement agreements which result in prohibited transactions. However, there is DOL guidance in the exemption which really has application for fiduciaries on a broader scale so that the exemption can serve somewhat as a “manual” for ERISA plan fiduciaries who find themselves having to enter into settlements on behalf of plan participants.

However, I wish to note one aspect of the exemption which is troubling from the standpoint of the effect it will have on the cost of litigation and trying to make plan participants whole–that is, the DOL’s requirement in the exemption that the plan must obtain the opinion of an attorney representing the plan that a “genuine controversy exists.” (i>Formal legal opinions are almost always a costly endeavor.) Now I suppose I should be singing’ Dixie and praising the DOL for enhancing the flow of work to benefits and ERISA attorneys around the country, but I get concerned when I think of all that is going on here. When you think about the fact that participants have already been harmed in the matter and that attorneys representing the plan will receive a sizable portion of any settlement, and when you add to that, the requirement that the plan engage an “independent fiduciary” as well as this requirement that the plan engage an attorney to write an opinion that there is a “genuine controversy,” all of this adds up to a great deal of cost which will eat away at any recovery for plan participants. Apparently, according to language in the original proposed exemption, the purpose of the attorney opinion requirement is as follows:

The Department believes that this condition is necessary to prevent the plan and parties in interest from engaging in a sham transaction purporting to fall within this class exemption, thus shielding a transaction, such as an extension of credit, that would otherwise be prohibited. The existence of a genuine controversy must be determined by an attorney retained to advise the plan. That attorney must be independent of the other parties to the litigation.

In the preamble to the final exemption, the DOL notes one commenter who recommended retaining the requirement for a genuine controversy, but without requiring an attorney opinion so that the attorney review would be permitted, but not required, as a safe harbor in certain situations. To me, this makes much more sense and would avoid needless cost for the majority of plans which find themselves in the position of having to recoup losses in litigation, for which the issue of “genuine controversy” is a far-gone conclusion. In other words, requiring all plans to obtain the opinion of counsel to avoid the possible abuse which can occur in the minority of cases is rather like trying to kill a fly with a bazooka. Nevertheless, this final exemption will require the opinion of counsel, except in situations where the case has been certified for class-action.

Some additional comments about the exemption:

(1) The DOL has eliminated the requirement that the independent fiduciary “negotiate” the settlement because it realizes that in class action settlements, the “plan fiduciary’s role in negotiating the terms of the settlement may be limited.” However, the DOL warns that “even where negotiation does not take place between the plan and the defendant, a fiduciary will be compelled, consistent with ERISA’s fiduciary responsibility provisions, to make a decision regarding the settlement on behalf of the plan, even if that decision is merely to accept or reject a proposed settlement negotiated by other class members.”

(2) Regarding class action lawsuits, the DOL had much to say in the exemption. A Plan fiduciary, faced with a non-opt out class action settlement, “must take such actions as are appropriate under the particular circumstances” and “object to its terms” where necessary on behalf of plan participants. “If the fiduciary takes no action, and the case is settled for far less than the full value of the plan’s losses, the burden will be on the fiduciary to justify its inaction.”

(3) The original proposed exemption only allowed the receipt of cash in exchange for a release. The final exemption permits “assets other than cash” where necessary to rescind a transaction that is the subject of the litigation, or where such assets are qualifying employer securities for which there is a generally recognized market and value.

(5) The final exemption provides that the settlement must be reasonable in light of the plan’s likelihood of full recovery, the risks and costs of litigation, and the value of claims foregone.

(6) Finally, the DOL addresses the fact that it is not uncommon for the same transactions to give rise to both ERISA and securities fraud claims and that participants and/or fiduciaries have been able to modify the terms of a release to permit the plan to receive a share of the securities fraud settlement without releasing its ERISA claims against the parties in interest. The DOL notes “that plan fiduciaries should consider whether additional relief may be available for the ERISA claims before agreeing to a broad release.”

How about starting out the new year with a song? No joke here. Someone has actually written a song called the “Sarbanes-Oxley Blues” which you can access here. (Thanks to PCAOB Online for the pointer.)

Private retirement plans established under the provisions of ERISA now hold a large part of the population’s personal assets. Untold numbers of participants in these plans have found and will find themselves seeking the protection of the bankruptcy courts. Prior to the 1992 U.S. Supreme Court case of Pattersen v. Shumate, the law was in a state of disarray and the courts were split over whether or not the anti-alienation provisions of ERISA protected these assets from bankruptcy. Shumate seemed to lay to rest some of the confusion surrounding the interplay between the bankruptcy laws and ERISA, holding that participants could exclude their interests in “ERISA qualified plans” from the bankruptcy estate in a bankruptcy proceeding.

However, with bankruptcies on the rise and ERISA plans becoming many times the only source of assets, creditors and bankruptcy trustees have become more determined in pursuing these assets. One such pursuit ended in a very unhappy result for participants in the recent case of Rhiel v. Adams in which the Sixth Circuit Court of Appeals reached a surprising conclusion in the 403(b) arena, throwing the state of the law in disarray once again at least with respect to 403(b) plans.

In the Adams case, the court held that a husband and wife’s interests in 403(b) plans were included in the bankruptcy estate and not exempt under section 542(c)(2) of the Bankruptcy Code. Section 541(a) of the Bankruptcy Code provides that the bankruptcy estate is comprised of all legal and equitable interests of the debtor(s) while section 542(c)(2) then provides an exclusion from the estate as follows:

A restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable nonbankruptcy law is enforceable in a case under this title. 11 U.S.C. § 542(c)(2).

The lower federal district court had held that the 403(b) plans were ‘ERISA-qualified’ as contemplated by the Supreme Court in Pattersen v. Shumate. As such, they were not the property of the bankruptcy estate, and were not subject to administration by the bankruptcy Trustee. However, on appeal, the Sixth Circuit reversed the lower court and remanded the case for further proceedings based upon the fact that the husband and wife had not shown that the section 542(c)(2) “in a trust” language had been satisfied. According to the Sixth Circuit, the interest of the debtor had to have been held “in a trust” in order for section 542(c)(2) to apply, meaning that the 403(b) annuities did not satisfy this trust requirement and that the annuities were not exempt from the bankruptcy estate.

The court in reaching its conclusion seems to almost ignore the U.S. Supreme Court case of Pattersen v. Shumate. The U.S. Supreme Court in Shumate had held that the § 541(c)(2) language–“applicable nonbankruptcy law”–included ERISA and that the anti-alienation provision contained in the ERISA qualified plan at issue in the Shumate case (a pension plan) satisfied the literal terms of § 541(c)(2). The court in Shumate held further that the sections of ERISA and the Internal Revenue Code requiring a plan to provide that benefits may not be assigned or alienated clearly imposed a “restriction on the transfer” of a debtor’s “beneficial interest” within § 541(c)(2)’s meaning, and that the terms of the plan provision in question complied with those requirements.

Although the Shumate case did not involve a 403(b) plan, but rather a pension plan, there is language in the Shumate case (which the dissent in the Adams case emphasizes) which could have been used to support a result that the 403(b) interests should not have been included in the estate as follows:

The natural reading of the provision [e.g. § 541(c)(2)] entitles a debtor to exclude from property of the estate any interest in a plan or trust that contains a transfer restriction enforceable under any relevant nonbankruptcy law.

As the dissent states, the Sixth Circuit could have reached a different result by relying on this language in Shumate–“any interest in a plan or trust”–as well as on the reasoning espoused by the Supreme Court in Shumate, i.e. that of (1) ensuring that the treatment of pension benefits not “vary based on the beneficiary’s bankruptcy status”; (2) giving “full and appropriate effect to ERISA’s goal of protecting pension benefits” and (3) ensuring that the “important policy underlying ERISA: uniform national treatment of pension benefits” be preserved.

In my opinion, the following arguments of Sixth Circuit Judge Jennie D. Latta’s dissent are highly persuasive:

(1) Judge Latta notes the Sixth Circuit’s own language in which it stated that it would not “rely on the literal language of the statute where such reliance would lead to absurd results or an interpretation which is inconsistent with the intent of Congress.” As Judge Latta aptly states, “[t]he majority’s reading is inconsistent with the clear intent of Congress that ERISA-qualified pension plans not be subject to creditor claims.”

(2) “Outside of bankruptcy, no creditor of the Adams would be able to reach the debtors’ beneficial interests in their pension plans to satisfy claims, and this is true not because these interests are exempt from execution pursuant to state law, but because they are exempt from execution pursuant to federal law. See Guidry v. Sheet Metal Workers Nat. Pension Fund, 493 U.S. 365, 110 S. Ct. 680 (1990)(permitting no equitable exception to ERISA’s anti-alienation provision). The filing of a bankruptcy case should not change this result.”

(3) “The narrow reading of § 541(c)(2) advanced by the majority of the Panel nullifies the anti-alienation provision of ERISA for non-trust, qualified pension plans. The majority advances no policy argument in favor of this reading. Were we called upon simply to construe § 541(c)(2), without the benefit of the Supreme Court’s opinions in Guidry and Shumate, then a narrow, “plain-meaning” reading would be appropriate, but I believe that we must go beyond § 541(c)(2) and include within our discussion the plain meaning of ERISA’s anti-alienation requirement. When this is done, it is clear that ERISA-qualified pension plans, whether held in trust or not held in trust, are excluded from the bankruptcy estate.”

Robert Ambrogi here notes the discussion going on about how Jaffe Associates, in a newsletter, endorses blogs as one of the hottest law firm marketing trends of the coming year. The article by Jaffe states:

Blogs, the equivalent of an online diary, have been popular among tech-savvy folks for years, but in 2003 they emerged in the legal profession as “blawgs” – online diaries by lawyers and legal professionals. These virtual soapboxes give legal professionals an unparalleled opportunity to voice their comments and share their expertise. You are sure to hear more about blogs and blog-related technology in 2004.

Ambrogi who joined Jaffe last August writes:

At Jaffe, we have made blogs a standard element of our consulting with larger law firms on their Web sites. We build blogs for law firms and even help them plan and execute the editorial content. Clearly, there are many lawyers in larger law firms who have not even heard of blogs, but the people at law firms who are responsible for marketing are intensely interested in them.