Bloomberg Law News: Pierce Atwood Client Prevails in ERISA Suit Over COVID-19 Market Drop

Excerpted from the August 31, 2021 issue of Bloomberg Law News

Pierce Atwood client Behan Brothers Inc., a Rhode Island construction company, defeated an unusual federal lawsuit claiming it violated ERISA by adopting a “special valuation” date for its 401(k) plan that allegedly forced employees to lock in losses from the COVID-19 market downturn.

Chief Judge John J. McConnell Jr. of the U.S. District Court for the District of Rhode Island held that Behan Brothers acted reasonably when it calculated three retiring employees’ 401(k) distributions based on a special valuation date of April 30, 2020, and not the plan’s standard valuation date of Dec. 31, 2019.

Judge McConnell found that the special valuation date was justified by the extraordinary market volatility during the first quarter of 2020, and that, by pushing the valuation date to April, Behan allowed the employees’ account balances to rebound from the pandemic market low and avoided placing an “increased financial burden” on the plan’s other participants.

“Given the extraordinary economic circumstances that came about because of the pandemic, the Court finds that the Plan Administrator had the sole discretion to implement an SVD and its selection of April 30, 2020 was neither arbitrary nor capricious and was reasonable because of the drastic market fluctuations,” McConnell said.

McConnell’s ruling granting summary judgment to Behan comes nearly 10 months after he allowed the lawsuit to proceed over the company’s motion to dismiss.

The case is Lipshires v. Behan Bros., Inc. Ret. Plan, D.R.I., No. 1:20-cv-00252, 8/30/21.

Read the full article on Bloomberg Law.

Brooks Magratten is a firm partner with more than 30 years of experience in insurance, product liability, and commercial litigation. He is a frequent author, instructor, and lecturer on ERISA issues and trial skills.

Matthew O'Connor is an associate in Pierce Atwood’s Litigation and Business Practice Groups, handling complex commercial litigation, ERISA matters, corporate restructuring, and state and federal insolvency proceedings.