The adviser was able to earn higher fees on the rolled over assets. While the ERISA-governed plan provided employees with a guaranteed monthly payment and placed risk on the employer to have sufficient funds for payout, the managed account plan shifted the risk of loss to the individual employees.
Plan participants alleged the adviser violated its fiduciary duties by using their personal information to encourage them to switch to the adviser’s more expensive product. Before it could reach the question of whether the adviser breached any fiduciary duties, the court held that the adviser was not an ERISA fiduciary in the first instance. ERISA imposes a number of duties on plan fiduciaries, with the primary obligation being to act “solely in the interest of the participants.” The court pointed out that while fiduciaries may have “different hats,” ERISA requires a fiduciary to wear one hat at a time. Citing the U.S. Department of Labor guidelines, the court noted that in order to prove that a defendant is a fiduciary, “a plaintiff must plead that [i] the defendant provided individualized investment advice; [ii] on a regular basis; [iii] pursuant to a mutual agreement, arrangement, or understanding that [iv] the advice would serve as a primary basis for the plan’s investment decisions; and [v] the advice was rendered for a fee.”
Finding the adviser did not provide advice on a regular basis, lacked control over the ERISA-plan investment or administration services, and that record keeping services did not create an ERISA fiduciary relationship, the court found the plan participants failed to properly prove their case and the matter was dismissed.
In the first such case to go to trial, an Illinois federal jury recently found a railway company liable for violating the Illinois Biometric Information Privacy Act (“BIPA”). The company argued that an independent contractor it hired to process drivers at the gates of its rail yards was the one that collected drivers' fingerprints and broke the law, and its failure “can't be impugned onto us.” The jurors, however, sided with the class of truck drivers, finding drivers' fingerprints were unlawfully scanned for identity verification purposes without written, informed permission or notice.
BIPA provides for up to $5,000 in liquidated damages for every willful or reckless violation and $1,000 for every negligent violation. Jurors said the railway company recklessly or intentionally violated the law 45,600 times, equal to the estimated number of drivers who had their fingerprints registered, totaling $228 million in damages.