Cypen & Cypen
January 23, 2014
Stephen H. Cypen, Esq., Editor
1. IN DISTRIBUTING ASSETS OF A TERMINATED RETIREMENT PLAN, TRUSTEES ENTITLED TO RELY ON ADVICE OF COUNSEL: When her law firm closed its doors and terminated its retirement plan, Clark had been an attorney there for almost a decade, and participated in the plan. Unfortunately, when the plan was terminated, there were not enough assets to satisfy all of its obligations. Dissatisfied with the amount of money she received, Clark sued, alleging that decisions made by the law firm partners who administered the retirement plan breached their fiduciary duties under the Employee Retirement Income Security Act of 1974. The district court rejected all of Clark’s claims, and the Federal Court of Appeals affirmed. Prior to making distribution, the trustees relied upon the advice of the plan’s lawyer. It is a principle firmly rooted and founded in the common law of trusts that a fiduciary may rely on the advice of counsel when reasonably justified under the circumstances. The propriety of that reliance must be judged based on the circumstances at the time of the challenged decision. The fundamental question is always whether a prudent trustee in those particular circumstances would have acted in reliance on counsel’s advice. Because nothing in ERISA suggests that Congress displaced this common law principle, the court concluded that ERISA’s adoption of the common law’s standard of fiduciary care permits prudent fiduciaries making important decisions to rely on the advice of counsel in appropriate circumstances. Thus, ERISA permits such reliance. Clark v. Feder Semo and Bard, P.C., Case No. 12-7902 (D.C. Cir. January 7, 2014).
2. CLAIM FOR ATTORNEY’S FEES DOES NOT PREVENT MERITS JUDGMENT FROM BECOMING FINAL FOR PURPOSES OF APPEAL: Various union-affiliated benefit funds sued Haluch in Federal District Court to collect benefits contributions required to be paid under federal law. The funds also sought attorney's fees and costs, which were obligations under both a federal statute and the parties' collective bargaining agreement. The District Court issued an order on June 17, 2011, on the merits of the contribution claim and a separate ruling on July 25, 2011 on the funds' motion for fees and costs. The funds appealed both decisions on August 15, 2011. Haluch argued that the June 17, 2011 order was a final decision, and thus the funds' notice of appeal was untimely since it was not filed within the Federal Rules of Appellate Procedure's 30-day deadline. The funds disagreed, arguing that there was no final decision until July 25, 2011. The First Circuit Court of Appeals acknowledged that an unresolved attorney's fees issue generally does not prevent judgment on the merits from being final, but held that no final decision was rendered until July 25, 2011 since the entitlement to fees and costs provided for in the CBA was an element of damages and thus part of the merits. Thus, the First Circuit addressed the appeal with respect to both the unpaid contributions and the fees and costs. On review by certiorari, the United States Supreme Court reversed and remanded. The appeal of June 17, 2011 decision was untimely. This case has instructive similarities to another U.S. Supreme Court case in which the court held a district court judgment to be a “final decision” for appeal purposes despite an unresolved motion for statutory-based attorney's fees, noting that fee awards do not remedy the injury giving rise to the action, are often available to the defending party, and were, at common law, an element of “costs” awarded to a prevailing party, not part of the merits judgment. Even if laws authorizing fees might sometimes treat them as part of the merits, considerations of “operational consistency and predictability in the overall application of the statute favored a uniform rule”. Ray Haluch Gravel Co. v. Central Pension Fund of International Union of Operating Engineers and Participating Employers, Case No. 12-992 (U.S. January 15, 2014).
3. CALLAN PERIODIC TABLE OF INVESTMENT RETURNS 1994-2013: Callan’s Periodic Table of Investment Returns depicts annual returns for ten asset classes, ranked from best to worst performance for each calendar year. The asset classes are color-coded to enable easy tracking over time, unless you are color-blind. Callan describes the well-known industry-standard market indexes used as proxies for each asset class in the text that follows:
RUSSELL 2000 GROWTH 43.30%
RUSSELL 2000 38.82%
RUSSELL 2000 VALUE 34.52%
S&P 500 GROWTH 32.75%
S&P 500 32.39%
S&P 500 VALUE 31.99%
MSCI EAFE 22.78%
BARCLAYS CORP HIGH YIELD 7.44%
BARCLAYS AGG -2.02%
MSCI EMERGING MARKETS -2.27%
4. TOP THINGS DYING PEOPLE SAY THEY REGRET:Entertainment says everyone goes through life experiencing enough mistakes and resulting damage that, by the time they are old enough, they have regrets. They say hindsight is 20/20 and when you look back at your life you will know what moments you should have changed. However, forget hindsight. Here is a list of things that you will definitely regret not having done at the end of your life:
5. FPPTA TRUSTEES SCHOOL: Florida Public Pension Trustees Association Trustees School will take place on February 2 – February 5, 2014 at the Hyatt Regency Jacksonville Riverfront. To access information please log on to www.fppta.org. All board of trustee members, and anyone interested in the administration and operation of the Chapters 112, 175 and 185 pension plans should attend the Trustees School.
9. KEEP THOSE CARDS AND LETTERS COMING: Several readers regularly supply us with suggestions or tips for newsletter items. Please feel free to send us or point us to matters you think would be of interest to our readers. Subject to editorial discretion, we may print them. Rest assured that we will not publish any names as referring sources.
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