As the bellwether cases in the ERISA actuarial assumptions litigation approach the end of the motion to dismiss stage, this is a good time to step back and assess how they are proceeding.
Test cases of this sort tend to unfold in phases.
- In the first phase, plaintiffs file a series of test cases, floating new legal theories and challenging relatively wide-spread behavior on a selective basis. Defendants respond by filing motions to dismiss, testing the sufficiency of plaintiffs’ legal theories and factual allegations.
- In the second phase, at least in cases where the plaintiff survived a motion to dismiss, the parties engage in fact and expert discovery, culminating in summary judgment practice. Here the facts are developed case-by-case, and one or both parties seek to end the litigation before trial by convincing the court that on the undisputed facts that have been developed in discovery, one of them is entitled to judgment as a matter of law.
- If the court finds that there are genuine disputed issues of material fact, motions for summary judgment will be denied, and the cases will proceed to the third phase: trial.
Of course, settlement can occur during any of these phases.
Sometimes defendants manage to defeat the early test cases in a decisive fashion, snuffing out the incentive for future litigation by obtaining early dismissals that dissuade plaintiffs’ attorneys from continuing to invest time and resources, usually on a contingent basis, in a losing cause. Other times the bellwether litigation progresses in a less decisive manner, with both sides scoring some early victories and absorbing some early setbacks, as they wrestle their way through the multiple phases of litigation.
Scorecard on the First Phase
Though the first phase is not complete for all the actuarial assumptions cases that have been filed, it is not too early to check out the scoreboard. Of the 11 cases that have been filed, three are still in the first phase (motions to dismiss pending or expected to be filed soon), one has settled, and the rest have entered the second phase (discovery and summary judgment underway, but no rulings on summary judgment yet). The 11 test cases were not all filed at the same time. In fact, the first case was filed in December 2018, and the last was filed 13 months later. In light of this lag time – and the fact that federal cases typically proceed at different paces depending on the judge, the lawyers and the parties –the cases are not moving through the litigation phases in unison.
However, as the first phase approaches conclusion, we can take an early look at the scoreboard and draw certain conclusions.
|Cases||Outcome of Phase 1|
|6||Defendants’ motions to dismiss denied.|
|1||Defendants’ motions to dismiss granted. (Plaintiff immediately filed a motion for reconsideration, which was granted, and the case settled within days on undisclosed terms.)|
|1||Defendants’ motions to dismiss granted in part, and denied in part.|
|3||Defendants’ motions to dismiss still pending or expected to be filed soon.|
So far the defendants have not delivered a knockout punch against these cases, but they have at least three more attempts.
In addition to these numerical outcomes, we can also make a few additional observations about the earliest phase of this litigation.
- Geographic Diversity. Plaintiffs are taking pains to file the early cases in a variety of federal appellate circuits, including some that are typically more plaintiff-friendly and some that are not. So far they have commenced cases in eight different circuits.
Undoubtedly this is designed to diversify the test case portfolio and soften the blow in the event of a poor outcome in one district court (or on appeal, in one circuit court).
- Procedural Basis for Many of the Denials. A procedural theme is emerging from the early opinions in which courts have denied the defendant’s motion to dismiss: courts are reluctant to embrace defendants’ theories as a matter of law and are inclined to allow plaintiffs to proceed to the discovery phase. In other words, defendants’ theories are not being rejected out of hand in most cases; rather, courts are finding that it would be premature to embrace those theories at the motion to dismiss stage, where plaintiffs are entitled to a presumption that their factual allegations are true and need only satisfy a plausibility standard on their claims.
- Risky to Read Too Much into the Early Opinions. The emphasis on procedural issues in the early opinions makes it difficult to draw too many hard and fast conclusions about what the courts think about the relative merits of the parties’ substantive positions. There are a few statements in the opinions that sound more substantive than procedural. But any such statements should be taken with a grain of salt because they were written in the context of a motion to dismiss, where plaintiffs enjoy favorable presumptions. All of the merits-based elements in the motion to dismiss opinions will be revisited, rehashed, scrutinized, debated, and refined in the summary judgment phase.
In conclusion, these cases are a long way from providing plan sponsors, fiduciaries, actuaries and participants any kind of definitive guidance on the challenged behavior and various issues teed up in these bellwether cases. It will be interesting to see if courts are comfortable granting summary judgment on the claims and defenses raised by the parties, or whether they will send a test case or two to trial – and, eventually, to appeal.
Stay tuned to ERISALitigation.com for updates when phase two nears completion.