Expert Testimony Regarding the ERISA Fiduciary Standard of Care

By Joseph A. Garofolo

Courts regularly allow ERISA expert testimony relating to the fiduciary standard of care, especially in complex cases.  See, e.g., In re Reliant Energy ERISA Litig., 2005 U.S. Dist. LEXIS 48034, at *3, *7-*8 (S.D. Tex. Aug. 19, 2005); Smith v. Sydnor, 2000 U.S. Dist. LEXIS 20074, at *57-*58 (E.D. Va. Aug. 25, 2000); Flanigan v. GE, 93 F. Supp. 2d 236, 242-243 (D. Conn. 2000).  As explained by one court when rejecting an effort to exclude testimony that an ERISA fiduciary breached its duties, “expert witnesses, in all types of litigation, render an opinion as to what the applicable standard of care is and whether it has been complied with.”  Harris v. Koenig, 2011 U.S. Dist. LEXIS 51860, at *6 (D.D.C. May 16, 2011).

Moreover, the vast majority of ERISA fiduciary breach cases are heard by a judge.  And courts in most federal circuits have recognized that there is a relaxed standard for admissibility of expert testimony in bench trials.  See, e.g., United States v. Wood, 741 F.3d 417, 425 (4th Cir. 2013); David E. Watson, P.C. v. United States, 668 F.3d 1008, 1015 (8th Cir. 2012); Att’y Gen. of Okla. v. Tyson Foods, Inc., 565 F.3d 769, 779 (10th Cir. 2009); United States v. Brown, 415 F.3d 1257, 1268 (11th Cir. 2005); Deal v. Hamilton Cnty. Bd. of Educ., 392 F.3d 840, 852 (6th Cir. 2004); Serby v. First Alert, Inc., 2015 U.S. Dist. LEXIS 95612, at *3 (E.D.N.Y. July 22, 2015); Wolkowitz v. Lerner, 2008 U.S. Dist. LEXIS 34698, at *5 (C.D. Cal. Apr. 21, 2008).

Thus, in addition to the fact that fiduciary breach cases are often complex, there is a significant likelihood that competing expert testimony will be heard by a judge in ERISA cases, including litigation involving 401(k) plans and employee stock ownership plans.




Courts Continue to Permit Expert Testimony on a Variety of ERISA Issues

By Joseph A. Garofolo

In Abbott, et al. v. Lockheed Martin Corporation, et al.—the 401(k) plan excessive fee lawsuit in which a provisional settlement was recently reached—expert testimony was almost certain to play a critical role had the case proceeded to trial.  Just before the provisional settlement was reported, as a potential prelude to the clash between experts if the case had continued, the United States District Court for the Southern District of Illinois ruled that it would permit a supplemental expert report of one of the plaintiffs’ experts.  In his supplemental report, the plaintiffs’ expert opined that plan “fiduciaries’ attempts (or lack thereof) to explore alternative recordkeeping and administrative processes contributed to the excessive amount of fees assessed against Plan participants over the years.”  (Order dated December 14, 2014 at 1).

As evidenced by the Abbott litigation, expert testimony can take center stage in ERISA cases all the way up to trial.  But what is the basis for allowing such testimony and what issues have experts been permitted to opine upon in ERISA cases?

To begin with, Rule 702 of the Federal Rules of Evidence focuses on the expert’s qualifications, the reliability of the proffered testimony, and whether the testimony is helpful to the trier of fact.  And Rule 704 declares that “[a]n opinion is not objectionable just because it embraces an ultimate issue.”

In light of the guidance provided by Rules 702 and 704 of the Federal Rules of Evidence, it is not surprising that federal courts across the circuits have permitted expert testimony regarding a variety of ERISA issues.  See, e.g., Hans v. Tharaldson, 2011 U.S. Dist. LEXIS 151083, at *17 (D.N.D. Dec. 23, 2011) (expert “may testify about the duty to act prudently, the standard of care applicable to a fiduciary in this situation, how [defendant’s] actions deviated from the applicable standard of care, and/or why he believes [the] . . . analysis [of the other side’s expert] is flawed”); In re Iron Workers Local 25 Pension Fund, 2011 U.S. Dist. LEXIS 34505, *15-*16 (E.D. Mich. Mar. 31, 2011); Stinker Stores, Inc. v. Nationwide Agribusiness Ins. & Order Co., 2010 U.S. Dist. LEXIS 31643, at *11-*12 (D. Idaho Mar. 31, 2010) (expert opinions would be “helpful to the jury in understanding relevant issues of employee benefit administration and ERISA, and the application of relevant . . . policy language to the day-to-day practice of employee benefits administration”); In re Reliant Energy ERISA Litig., 2005 U.S. Dist. LEXIS 48034, at *8 (S.D. Tex. Aug. 18, 2005) (expert “opinions on specific issues, such as whether Defendants were ERISA fiduciaries for certain relevant purposes” could be helpful to the court); Engers v. AT&T (In re Engers), 2005 U.S. Dist. LEXIS 41693, at *3, *10 (D.N.J. Aug. 10, 2005); Stuart Park Assocs. Ltd. Partnership v. Ameritech Pension Trust, 51 F.3d 1319, 1327 (7th Cir. 1995).

In what might actually be an understatement, one court explained that the “interactions of ERISA, the [Internal Revenue Code], and their accompanying regulations were ‘sufficiently esoteric’ to the uninitiated factfinder to justify expert witness opinion testimony under Rule 702.”  Proujansky v. Blau, 2000 U.S. Dist. LEXIS 786, at *23 (S.D.N.Y. Jan. 27, 2000).

Moreover, since most ERISA cases are bench trials, in the author’s experience, the admissibility of expert testimony may remain unresolved at trial because a judge may be inclined to delay a ruling on challenged expert testimony until after trial.

Thus, it is likely that experts will continue to assume an important role in ERISA litigation, especially in cases involving complex issues or alleged breaches of fiduciary duty.