Five Bailey & Ehrenberg Attorneys Honored as 2013 Super Lawyers and Rising Stars

Bailey & Ehrenberg is pleased to announce that five of the firm’s attorneys have been named to the 2013 Washington, D.C. Super Lawyers and Rising Stars lists as being among the top attorneys in Washington, D.C. Three of Bailey & Ehrenberg’s partners have been selected to the 2013 Washington, D.C. Super Lawyers in the areas of employment law and employee benefits. Only five percent of all attorneys in Washington, D.C. are recognized as Super Lawyers each year. The following Bailey & Ehrenberg attorneys were named as 2013 Super Lawyers:

• James C. Bailey (Employment & Labor)
• Jeffrey B. Cohen (Employee Benefits/ERISA)
• Jason H. Ehrenberg (Employee Benefits/ERISA)

In addition, two of our attorneys have been selected to the 2013 Washington, D.C. Rising Stars list. The Rising Stars list recognizes attorneys who are 40 years old or younger, or who have been practicing for 10 years or less. Each year, no more than 2.5 percent of the lawyers in a state are selected by Super Lawyers to receive this honor. Bailey & Ehrenberg’s attorneys included in this year’s Rising Stars list are:

• Michael A. Tilghman II (Employee Benefits/ERISA)
• Sara M. Klayton (Employment & Labor)

Super Lawyers, a Thomson Reuters business, is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement. The annuals selections are made using a rigorous multiphase process that includes statewide surveys of lawyers, an independent research evaluation of candidates and peer review by practice area. Selections are made on an annual, state-by-state basis.

Participants' Stock-Drop Claims Overcome Moench Presumption in Wilmington Trust Litigation

The United States District Court for the District of Delaware ruled on May 3, 2013 that a group of participants challenging Wilmington Trust Corp.'s ("WT Corp.") decision to continue offering company stock in its defined contribution retirement plan alleged sufficiently dire circumstances to overcome the presumption of prudence that shields plan fiduciaries from liability. See In re Wilmington Trust Corp. ERISA Litigation, D. Del., No. 1:10-cv-01114-SLR, 5/3/13. The participants alleged that WT Corp. stock price declined by 90 percent during a period in which plan fiduciaries failed to acknowledge the “concerns of its banking peers” regarding problems in the housing and commercial real estate market. The Court denied the fiduciaries' motion to dismiss this claim, finding that the participants pleaded facts sufficient to overcome the presumption of prudence.

However, the Court did dismiss claims of failure to disclose material information and failure to properly monitor the plan's investment committee.

 

By way of background, according to the complaint, the plaintiffs each invested in WT Corp. stock through their individual accounts in the WT Corp. Thrift Savings Plan. In December 2010, they filed a proposed class action against WT Corp. and related individuals and entities challenging the plan's investment in company stock during a period in which the stock price declined by 90 percent.

According to the complaint, WT Corp. increased its exposure to commercial real estate and construction loans throughout 2007 and failed to acknowledge the “concerns of its banking peers” regarding the viability of the housing market as late as January 2008. In April and May 2008, WT Corp. “continued to assert that its construction and home loan portfolios were locally focused and not suffering from the deteriorating housing market conditions in the rest of the country,” the participants alleged. By December 2009, WT Corp.'s commercial real estate and construction loans made up about 22 percent of its loan portfolio, which the participants claimed was “twice that of other banks.” By the time WT Corp. was acquired by M&T Bank Corp. in 2011, its stock price fell 90 percent from $43.19 per share in January 2007 to $4.45 per share in May 2011. The complaint alleged that the defendants' continued investment of plan assets in WT Corp. stock breached their ERISA fiduciary duties of care, loyalty, and monitoring. The complaint also challenged the defendants' alleged withholding of material information about plan investments.

 

In evaluating the participants' claim of breach of the fiduciary duty of care, the Court applied the Moench presumption, which requires plaintiffs to point to a plan sponsor's impending collapse or other dire circumstances to show that a reasonable plan fiduciary would have divested the plan of employer stock. The Moench presumption, articulated by U.S. Court of Appeals for the Third Circuit in Moench v. Robertson, 62 F.3d 553,  (3d Cir. 1995), is frequently cited as a grounds for dismissal of employer stock-drop cases.The Court determined that the Moench presumption applied, because the plan language directed the fiduciaries to “primarily invest in common stock of the Employer.” Under this standard, the Court found that the participants' complaint demonstrated that WT Corp. “continued to make construction loans after its peers acknowledged the housing market decline” and “seemingly turn[ed] a blind eye to the market's decline.” Further, WT Corp. relied on “outdated appraisals for its loan decisions” throughout the class period. Given these allegations, the Court concluded that the participants set forth allegations that “plausibly suggest a dire enough situation to support an abuse of discretion by the fiduciaries (at least, sufficient to permit discovery).”The Court also allowed the participants to proceed with their claim of breach of the fiduciary duty of loyalty. The participants asserted that the compensation of certain individual defendants “was tied to the performance of WT Corp's stock and that they had information that was inconsistent with the rosy picture of WT Corp's financial condition they continued to paint as corporate officers.” Although the Court cautioned that “the mere fact that compensation is tied to stock prices…is not necessarily enough to show the existence of a breach,” it found that the participants' allegations were sufficient to withstand the motion to dismiss.

 

The Court agreed with the defendants that the participants failed to state a claim for violations of ERISA's disclosure requirements. According to the Court, the plan description and written communications provided the participants with information regarding plan investments and associated risks, including summaries of past performance and warnings against fluctuations resulting from market conditions. These activities satisfied ERISA's disclosure obligations, the court concluded.The Court also dismissed the participants' claim that WT Corp.'s chief executive officer breached the duty to properly appoint, monitor, and oversee the committee responsible for determining plan investments. According to the Court, “even if [the CEO] had informed the Committee of the true financial and operating condition of WT Corp, the Committee was precluded from doing anything with that information until the information was publicly disclosed.”

Gobble Goblle - EEOC Wins $240 Million Disability Verdict Again Turkey Company

The U.S. Equal Employment Opportunity Commission ("EEOC") on May 1 won a $240 million award in a disability discrimination suit brought on behalf of 32 men with intellectual disabilities.
A federal jury in Davenport, Iowa, found that Hill Country Farms, doing business as Henry's Turkey Service, violated the Americans with Disabilities Act ("ADA") by subjecting the men to verbal abuse and physical harassment, housing them in a sub-standard dormitory, dismissing their complaints of injuries and forcing them to carry heavy weights as punishment. The verdict follows a September 2012 order from the U.S. District Court for the Southern District of Iowa that the company pay the men $1.3 million for unlawful disability-based wage discrimination, for a combined penalty of $241.3 million. By way of background, according to the EEOC, for more than 30 years Hill Country Farms employed disabled men to work alongside non-disabled employees on the turkey processing line at a plant in West Liberty, Iowa. The EEOC in court papers described the case as "a story of the loss of human dignity that may well have been borne of better intentions in the 1960s, but which has devolved over the years into a morass of unfathomable and discriminatory, and exploitative conduct."
The men, who lived in a run-down, converted schoolhouse known as "the Bunkhouse," were paid $65 a month for working at least 35 hours a week eviscerating turkeys–or about 46 cents an hour. Wolfe later found that the men should have gotten $11 to $12 an hour. The defendants unsuccessfully argued that the pay constituted a minimum wage when room and board and in-kind care were factored in. The company also took $487 a month from each man's Social Security payments for expenses. In 2009, the Iowa Fire Marshal shut the bunkhouse down for unsafe, unclean and unhealthy conditions such as a leaky roof and insect infestation, and the men were removed. The EEOC filed suit in 2011. Hill Country Farms, which is based in Goldthwaite, Texas, and was represented by David Scieszinski, a solo practitioner in Wilton, Iowa, first argued that it wasn't actually the men's employer. The company contracted with the turkey processing plant to provide the disabled workers. The plant, which was originally owned by Louis Rich Foods, changed owners over the years, but Hill Country continued to provide the workers. During the trial, the EEOC presented evidence that supervisors called the workers "retarded," "dumb ass" and "stupid," and kicked, hit and in at least one case handcuffed them. The jury began deliberating on April 30 and reached a verdict in the morning of May 1. The jury awarded each of the men $2 million in punitive damages and $5.5 million in compensatory damages.

D.C. Court Strikes Down NLRB Poster Rule

The United States Court of Appeals for the District of Columbia struck down on May 7, 2013 a rule requiring companies to post a notice advising employees of their rights under federal labor law, including the right to form or join a union. The rule, which the National Labor Relations Board published in August 2011, would have required nearly 6 million employers, many of them small businesses, to conspicuously display the employee-rights poster. Writing for the Court of Appeals, Senior Judge A. Raymond Randolph said the poster rule made an employer's failure to post the notice an unfair labor practice. However, federal law protects "the right of employers (and unions) not to speak," he continued. "This is why, for example, a company official giving a noncoercive speech to employees describing the disadvantages of unionization does not commit an unfair labor practice if, in his speech, the official neglects to mention the advantages of having a union," Randolph said. Judges Janice Rogers Brown and Karen LeCraft Henderson agreed with the disposition of the case. Writing separately, however, Henderson said she also would have found the board lacked authority to promulgate the posting rule under a different provision of the National Labor Relations Act. Lawyers for the NLRB argued, among other things, that content of the poster reflected the board's speech, not the employer's. The board's attorneys said the poster's message was not ideological. Enforcement of the rule was on hold pending the outcome of the appeal.