ERISA Litigation: Best Practice Tips from Speakers

#ERISALitigation www.AmericanConference.com/ERISA
Best Practice Tips
from Speakers

#ERISALitigation www.AmericanConference.com/ERISA1
Miriam (Dusty) M. Burke
Partner
Vinson & Elkins LLP
Dusty Burke is a partner in the Employee Benefits and Executive
Compensation group at Vinson & Elkins. She devotes a significant
portion of her practice to ERISA litigation, defending clients in class
actions involving stock drop claims, cash balance plan claims, breach
of fiduciary duty claims, claims for pension plan benefits, cutback
claims, and executive compensation litigation. Dusty also frequently
counsels clients on best practices for avoiding or mitigating exposure
to ERISA litigation. She is a frequent speaker at ERISA litigation
conferences and employee benefits and executive compensation
seminars and has authored several articles on various aspects of ERISA
litigation. Dusty has been professionally recognized in The Best
Lawyers in America® in ERISA litigation, 2012, 2013, 2014; The Best
Lawyers in America® in employee benefits and executive
compensation, 2002 to 2014; The Legal 500 U.S. in employee
benefits/executive compensation, 2011, 2012, 2013; and "Texas Super
Lawyer," Texas Monthly, 2002 to 2010.

3 #ERISALitigation www.AmericanConference.com/ERISA
“The best way for a fiduciary to win—or even completely avoid—an
ERISA lawsuit is to make sure he has checked all the “best practices
boxes” before the lawsuit is filed.”
You are a fiduciary of an ERISA 401(k) plan reading a complaint recently
filed against you alleging that you breached your fiduciary duties under
ERISA. What do you and the plan sponsor of your plan wish had been
done before the lawsuit was filed?
Pre-Litigation Best Practices Check List:
• Provide fiduciary training for the plan’s administrative committee. Few
fiduciaries actually know before they get sued what duties ERISA
requires of plan fiduciaries. Two hours of fiduciary training goes a long
way.
• Be aware of the “fiduciary exception” to the attorney client privilege.
Communications relating to the administration of an ERISA plan are
generally not protected from discovery in a lawsuit—even if made to or
from inside/outside counsel. Keep protected communications (e.g.,
minutes relating to amendments to the plan) separate from
unprotected communications (e.g., minutes relating to plan
administration).

• Protect the Board of Directors, the Company, and the officers from
being named as deep-pocket defendants in a breach of fiduciary
duty action by structuring the administration of the plan to (i) give
the administrative and investment authority to a defined group of
individuals (e.g., an administrative committee, an investment
committee) and (ii) limit the individuals who are authorized to
appoint members of those fiduciary committees.
• Don’t use your corporate/securities documents as substitutes for
ERISA plan documents.
• Don’t take legal advice from your record keeper or third party
administrator.
• Draft plan documents to prevent plaintiffs from forum shopping by
including (i) a stated limitations period for bringing benefit claims,
(ii) a stated event that will trigger the accrual of that limitations
period, and (iii) a governing jurisdiction.
• Regularly update the plan fiduciaries of recent developments in
the case law. An excellent way to determine how not to act is to
know what conduct the courts have recently determined constitutes
a breach of fiduciary duty.
•

James P. Mc Elligott Jr.
Partner
McGuire Woods LLP
Mr. McElligott has a national ERISA litigation and arbitration practice,
is a Fellow of the College of Labor and Employment Attorneys, and is
listed in Best Lawyers in America (under ERISA, ERISA Litigation, Labor
Law, and Employment Law), AV-Preeminent-Rated, Labor &
Employment Law, Martindale-Hubbell, a “Leading Lawyer for
Business,” Labor & Employment: Employee Benefits & Compensation
in Chambers USA, 2008-2013, and "Virginia Super Lawyers,"
Employee Benefits/ERISA, Employment & Labor, 2007-2013.
Mr. McElligott’s practice includes defense of class action claims of
ERISA fiduciary breach; multi-employer plan withdrawals and mass
withdrawals; ERISA “stock-drop” litigation; retiree medical claims;
severance claims; “top hat” litigation; ERISA 510; PBGC lien and ERISA
4062(e) claims; and HIPAA privacy and security litigation. He has
litigated in federal district and appellate courts, in Tax Court, in
bankruptcy courts, and has handled matters before and in litigation
with the PBGC, the NLRB, the EEOC, and the Department of Labor.

Mr. McElligott is a member of the Employee Benefits Committee of
the US Chamber of Commerce, the Employee Benefits Committees of
the ABA Sections of Labor and Employment Law and Taxation, former
president of the Federal Bar Association, Richmond Chapter, and
former President of the Central Virginia Employee Benefits Council.
He received his law degree from Harvard Law School, cum laude,
served as Note Editor for the Harvard Journal on Legislation, and is a
Phi Beta Kappa graduate of the University of Illinois.
Best Practices for Dealing with Multiemployer Plans
• Large, otherwise sophisticated companies often misunderstand
liabilities of multiemployer plans.
• Investors, including private equity funds, need to know controlled
group rules to avoid liability.
• Plans audit pension and welfare contributions and frequently claim
additional contributions beyond what employers anticipated.
• The right to resist additional contribution claims may be limited and
subject to substantial penalties.
• Avoid any participation by any controlled group member in a
multiemployer plan if possible. This is difficult in certain industries
and areas, such as construction/hotels in major metropolitan areas.

• If any controlled group member participates in multiemployer
plans, due diligence should be done on estimated withdrawal
liability potential for mass withdrawal, and contribution obligation
required by the collective bargaining agreement and plan
documents.
• Understand how to repudiate NLRA 8(f) construction pre-hire
agreements.
• Study the collective bargaining agreements, trust agreements,
bylaws and rules, and on funding status and participation by
other employers, available on the plans’ Form 5500s, DOL
website, and other sources.
• Monitor potential likelihood of mass withdrawal, understand mass
withdrawal rules, and withdraw if possible before mass
withdrawal becomes likely.
• Unions are increasingly willing to agree to early withdrawal by
employers.
• Lump sum and periodic payment withdrawal liability figures are
not actuarially equivalent. Employers generally must pay
withdrawal liability while they contest it.
• Know and strictly follow the special rules and deadlines for
reviewing and arbitrating withdrawal liability.
• Courts can determine whether an entity is an “employer” subject
to withdrawal liability.
• Know how the plan can accelerate employer’s lump sum liability.

Mark Casciari
Partner
Seyfarth Shaw LLP
Mark Casciari is a partner with Seyfarth Shaw LLP. He has represented
employers, plan sponsors, plans, fiduciaries and plan administrators
in ERISA class actions and in other employee benefits cases, in federal
courts throughout the United States, in state courts and before
arbitrators and mediators. Mark has served as amicus curiae counsel
of record in two United States Supreme Court ERISA cases. He was
counsel of record in these 2013 published ERISA decisions of the
Court of Appeals for the Seventh Circuit: Hakim v. Accenture United
States Pension Plan, 718 F.3d 675 (7th Cir. 2013) and Laskin v. Siegel,
728 F.3d 731 (7th Cir. 2013). Mark is a frequent author of articles on
employee benefits litigation topics, and is a frequent contributor to
Seyfarth's ERISA & Employee Benefits Blog, which can be found at
www.erisa-employeebenefitslitigationblog.com. Mark is a Fellow in
the American College of Employee Benefits Counsel, a Fellow in the
College of Labor and Employment Lawyers and a long-standing
Adjunct Professor of Trial Advocacy at Northwestern University
School of Law.

My former partner, Congressman John Ehrlenborn, was one of the key
architects of ERISA. He was quite fond of saying that private sector
retirement security is like a three-legged stool. One leg is provided by
employers, in the form of ERISA plans. Another is provided by
individual savings. The third leg is provided by government benefits,
such as Social Security and Medicare. The three-legged stool
metaphor is an important backdrop to any discussion of ERISA
litigation developments. It forces one to appreciate that ERISA does
not stand alone in the quest for retirement security. And the legs of
the stool are not built of the same material. Social Security and
Medicare are mandates, while ERISA plans (outside the context of
medical benefits, such as those mandated by the Affordable Care Act)
and personal savings are not. The material of which ERISA is built is
flexible. It encourages employers to offer plans in the first instance by
dramatically limiting remedies and equally dramatically preempting
state law. So, when lamenting the very limited remedies in the statute
for private sector benefit plan plaintiffs, understand that without the
ERISA paradigm, there would be fewer benefit plans in the first place,
and the three-legged stool would wobble. We may get to the point of
ditching the stool altogether, but we are not there yet. Until then, the
role of the ERISA defense litigator is to keep the statute true to its
structure, by focusing on the bigger picture and the unique
composition of the ERISA leg of the stool.
Best Practice Tip from Mr. Casciari

Joseph M. Callow, Jr. is a Partner and Co-Chair of the Litigation Group
at Keating Muething & Klekamp PLL. With 20+ years of experience
solving commercial disputes, Joe helps clients manage and reduce the
risk and costs associated with litigation for his clients. When business
disputes arise, he handles and coordinates cases on a national,
regional, and local basis. Joe primarily works on class action and
complex commercial litigation including ERISA litigation. He also has
experience in securities, antitrust, False Claims Act, and general
corporate and business litigation. Joe helps manage the KMK Law E-
Discovery/Litigation Support Group and is responsible for the
development of proactive, defensible, and cost-effective, end-to-end
E-Discovery solutions for clients, both before and after litigation arises.
Joe blogs at kmklaw.com and speaks frequently at legal and business
seminars and conferences.
Joseph M. Callow, Jr.
Partner
Keating Muething & Klekamp PLL

The Search for the Goldilocks firm
Searching for the right team to help in a litigation matter often means
looking for the Goldilocks firm. As companies and in- house counsel
are under increasing pressure to find quality representation at lower
costs, there are lots of paper proposals and tough decisions to make.
Big Law has high overhead that comes with multiple offices and
mergers/expansion, which translates to higher billing rates (with
multiple firms now having partners billing at over $1,000/hr) and more
bodies on matters. Smaller law firms may offer better rates, but often
lack the depth of experience or the resources to manage significant
litigation or represent clients in multiple cities. I believe that the
recent prosperity of mid-sized law firms reflects more companies and
in-house counsel looking for Goldilocks firms and practice groups to
represent them in most matters -- not too big, and not too small, but
just right somewhere in the middle.
Goldilocks firms:
- Have invested in technology rather than bricks and mortar.
- Use litigation/project budgets and alternative fee arrangements.
- Develop a litigation plan, and adjust the plan as litigation proceeds.
- Staff matters appropriately with people you meet and know.
- Treat clients like business partners.

Finding the Goldilocks firm is more difficult than walking into a
house in the woods and tasting porridge, but you will sleep better
after investing the time and resources to get the decision right. And
in the legal climate today, it is definitely worth the time and effort to
get it right.

Doug Hinson is the leader of the firm's ERISA Litigation Group. He has
led the defense of numerous Fortune 500, government, private and
non-profit clients in all types of ERISA class actions, including 401(k)
fee and employer stock matters, welfare benefit terminations,
defined benefit calculation and anti-cutback actions, and severance
matters. In addition, Mr. Hinson has substantial experience and
expertise in securities, complex commercial and insurance class
action litigation. Mr. Hinson's practice is national in scope. He has
been recognized as a “national leader” in ERISA litigation by
Chambers USA: America's Leading Lawyers for Business, Best Lawyers
in America and The Legal 500 publications, and is listed in Who's Who
in American Law and Super Lawyers magazine. Mr. Hinson is the chair
of the Employee Benefits Committee of the Tort, Trial and Insurance
Practice Section—and a member of the Joint Committee on Employee
Benefits—of the American Bar Association.
H. Douglas Hinson
Partner
Alston & Bird LLP

Being on the front lines of ERISA Litigation provides important insight
to what all of my clients want – how to avoid spending time with me
(aka “how not to get sued”). Based on my experience, the key is having
a plan governance/fiduciary/administrative process that is designed
with potential litigation in mind, and then making sure the
organizations and individuals who have roles in that process are well-
advised and trained to do their part. ERISA Litigators bring knowledge
and a perspective to both of these key tasks (design and training) that
most compliance lawyers do not have. A modest investment of time
and money today can help you avoid being a defendant tomorrow, in
virtually all of the types of ERISA Litigation matters we are discussing at
this conference. Three quick examples from the front lines of employer
stock class actions, which is one of my panel’s topics, come to mind.
First, consider who appoints your plan fiduciaries. If your board of
directors is involved, they are potential defendants, and they don’t
have to be. Second, if your SPD still acts as part of the prospectus for
the employer stock in your plan, and it incorporates the public
securities filings by reference, you need to make a change. Third, if the
fiduciaries responsible for employer stock have not been trained on
their role, and do not have legal advisors to guide them in tough times,
they may not do all they can and should do – both to protect
participants and themselves.
Best Practice Tip from Mr. Douglass

Susan Mangiero
Managing Director
Fiduciary Leadership‚ LLC
Dr. Susan Mangiero is a CFA charterholder, certified Financial Risk
Manager and Accredited Investment Fiduciary Analyst™. She offers
independent risk management, fiduciary breach and valuation
analysis, litigation support and training for institutional investors,
asset managers, and banks and their attorneys and regulators. She
has testified before the ERISA Advisory Council, the OECD and the
International Organization of Pension Supervisors. She served as an
expert witness on regulatory and private litigation matters and
offered behind-the-scenes forensic analysis, calculation of damages
and rebuttal report commentary. She has over twenty years of
experience in capital markets, global treasury, financial statement
analysis, performance reporting, fee assessment, executive
compensation, company security risk assessment, asset-liability
management, portfolio management, economic and investment
analysis, derivatives, financial risk control and valuation. Her
experience includes work on trading desks for several global banks,
in the areas of fixed income, foreign exchange, interest rate and
currency swaps, futures and options.

Dr. Mangiero is the author of Risk Management for Pensions,
Endowments and Foundations (John Wiley & Sons), a primer on risk
and valuation issues for fiduciaries and their advisors. Her articles have
appeared in Expert Alert (American Bar Association, Section of
Litigation), Hedge Fund Review, Investment Lawyer, Valuation
Strategies, RISK Magazine, Financial Services Review, Journal of
Indexes, Family Foundation Advisor, Hedgeco.net, Expert Evidence
Report, Bankers Magazine and the Journal of Compensation and
Benefits. Dr. Mangiero has written chapters for several books, including
the Litigation Services Handbook and The Handbook of Interest Rate
Risk Management. She is the lead contributor to
www.pensionriskmatters.com and www.goodriskgovernancepays.com.

Working Effectively with a Financial Expert Witness
Commercial legal actions are often complex with potentially large
dollar payoffs. Recent headlines suggest that the trend will
continue. Some prospective litigants see investment risk woes as a
business development bonanza, with billions of dollars at stake. Law
firms and litigation support firms are creating special teams to
address the areas of subprime write-downs, option backdating, risk
controls, pricing and adequacy of disclosures. As a result, many
litigators are ramping up their knowledge of arcane topics such as
derivatives, valuation models, trading leverage and risk metrics.
Close quarters, binding deadlines, massive amounts of documents,
and the undue pressure of high visibility cases can consume even
the most experienced practitioner. Add a financial expert to the mix
and things can unravel quickly in the absence of ground rules and
managed expectations. The role of a financial expert witness is to
render analytical clarity, and that goal is best achieved when the
expert and attorney work together effectively.
Billable Time and Data Costs
If men are from Mars and women are from Venus, attorneys are
from Mercury and experts are from Neptune. Known for quick
thinking and speed, “Mercurians” seek to keep clocked time to a
necessary minimum.

While an expert should always be mindful of not overcharging,
differences of opinion about what must be done are common. At the
beginning, an attorney typically provides a verbal case overview and
a copy of the complaint. Once hired, an expert unearths relevant and
often material facts as she is given new documents. This results in
more billable time. Like Neptune, god of the sea, good experts create
tempests if asked to do a second-rate job by scaling back on work
they deem essential. Three things can occur, none of which are good.
An expert may withdraw from an assignment if she believes that her
adherence to best work practices are being compromised. An expert
may complete work but feel resentful about not being paid for a job
well done. Some may take shortcuts.
To avoid problems, attorneys and experts should share project
budget information at the outset. Scarce resources do not necessarily
preclude the use of a qualified expert. To the contrary, a professional
may be able to render a limited analysis as long as he identifies the
report accordingly and makes the appropriate disclaimers with the
opinion.1 For example, in lieu of providing a fullblown opinion of
value, an analysis of risk factors that drive worth may suffice.
Alternatively, it may not always be necessary to examine hedges for a
large portfolio if it can be shown that risk controls failed on even a
few occasions. Data is another budgetary consideration when hiring
an expert to assist with business litigations. Most commercial
disputes require accounting or financial numbers, sometimes going
back many years.

To avoid problems, attorneys and experts should share project
budget information at the outset. Scarce resources do not necessarily
preclude the use of a qualified expert. To the contrary, a professional
may be able to render a limited analysis as long as he identifies the
report accordingly and makes the appropriate disclaimers with the
opinion.1 For example, in lieu of providing a fullblown opinion of
value, an analysis of risk factors that drive worth may suffice.
Alternatively, it may not always be necessary to examine hedges for a
large portfolio if it can be shown that risk controls failed on even a
few occasions. Data is another budgetary consideration when hiring
an expert to assist with business litigations. Most commercial
disputes require accounting or financial numbers, sometimes going
back many years. The expert should inform the attorney about likely
costs and availability. When historical price or fee information is rare
or hard to obtain in a user-friendly format, the expert needs extra
time to properly assemble a dataset. An expert’s request to be paid
up front to acquire numbers is not unusual, with some datasets
costing thousands of dollars. If confidentiality and easy access to
technical support are important factors, direct subscription in the
name of the expert is the way to go. Business data varies by vendor,
packaging and quality. To illustrate, consider financial futures price
data. A 90-day constant maturity contract is not the same instrument
as the traded spot contract that gets closer to expiration with each
passing day.

Beta, a measure of a stock’s volatility vis-à-vis a general index like the
S&P 500, can be reported on a levered or unlevered basis. Unless one
is familiar with how a particular supplier does its calculations, trouble
is sure to follow, especially with multiple step analyses.2
A good financial expert will be able to identify relevant information
sources, know how to handle data "idiosyncrasies” and understand
how bad inputs can distort computational outputs. In a similar
fashion, a financial expert should be relatively familiar with canned
software choices and know when and how a particular analytics
program or model is likely to influence a result. Even when Daubert
factors do not directly apply, a financial expert should be able to
guide a thorough discussion about ease of use, ability to replicate
numbers and acceptance by academic and industry peers.
Clear Communication
Some attorneys favor experts who carefully listen. Others want
fearless analysts who ask the right questions. A majority enjoy
individuals who can explain difficult concepts without the use of
jargon or overly technical language. Clear communication goes a long
way to making everyone’s life easier. Anything can be restated in
common terms or illustrated in a manner that puts laymen at ease.
Writing well and speaking persuasively are “must have” skills for any
expert, but arguably more crucial for complex financial litigation.

Imagine trying to explain funding status to a jury of part-time or
unemployed workers who do not have a pension plan. Discuss
regression or Monte Carlo simulation as a rocket scientist and wait
for the inevitable request to speak plainly. Clever use of visuals is
another preferred tool for clear communication. With complex
financial cases, a timeline is an invaluable tool. Even when oft-used
methods are relied upon (such as an event study to determine “but
for” impact on stock price), a simple graph, tied to date of
occurrence, speaks volumes. That said, graphs and statistical
tabulations vary by quality and purpose. A savvy analyst should be
familiar with how information can be effectively or deceptively
presented. For example, volatility may appear dire when asset prices
are reported for a particularly turbulent calendar interval that is far
from representative of “average” performance.
Meaningful conversation is a two-way responsibility. Attorney and
expert must each understand what the other is saying acknowledging
that attorneys are seldom comfortable with the intricacies of
investing, valuation or risk mitigation techniques. The use of a few
buzz words by the attorney might convey a false impression of
financial literacy that tempts an expert to launch into an overly
technical discussion of the issues in the case. The converse is true as
well. Experts frequently benefit when an attorney takes the time to
provide an overview of basic legal concepts.

For example, concepts such as investment suitability or prudence
vary by venue or type of organization. A primer on legal viability can
assist an expert in identifying what economic characteristics or
elements of the process to emphasize. Egos checked at the door
make for a smooth communication channel in both directions.
Feigning comprehension does no party any good. “Give me the 101
version” is an apt mantra if doing otherwise adds to billable hours, or
corrupts the process by introducing more confusion and prevents
resolution of the dispute.
When citing academic studies or explaining statistical techniques,
experts should refrain from automatically assuming that the work is
known, understood or legitimate. If research is considered leading
edge or dominates a field, the expert should say so and explain why.
If some dispute the underlying assumptions, methodology or
conclusions, elaborate rather than inviting a successful rebuttal.
Conclusion
The use of a financial expert or team of experts is more a necessity
than a luxury in cases involving complex securities or transactions.
Managing expectations and understanding budgetary and time
constraints contribute to a smooth process. When litigations stretch
into months or even years, attorneys must keep experts apprised as
their schedules fill with other projects during interim lulls.

Many financial experts enjoy the intellectual stimulation of working
on multi-faceted cases. At a time of unprecedented and large-scale
courtroom encounters, attorneys and financial experts must learn to
work together effectively as they will likely be spending a lot of time
together.
1 Some certification standards expressly prohibit limited analyses.
2 Bad beta numbers beget imprecise cost of capital numbers which in turn result
in economic damages that are either too low or too high.

#ERISALitigation www.AmericanConference.com/ERISA

ERISA Litigation: Best Practice Tips from Speakers

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