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Judges affirm AUL Insurance owed no fiduciary duty to 401(k) plan

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The 7th Circuit Court of Appeals has ruled in favor of an insurance company on a 401(k) plan trustee’s lawsuit that the insurance company's revenue-sharing practices breached a fiduciary duty under the Employment Retirement Income Security Act of 1974.

“This case presents a challenge to the practice known in the 401(k) services industry as ‘revenue sharing’– an arrangement allowing mutual funds to share a portion of the fees that they collect from investors with entities that provide services to the mutual funds, the investors, or both. … As the existence and extent of revenue sharing has become more widely known, some have expressed concern that the practice unduly benefits mutual funds and 401(k) service providers to the detriment of plan participants. This concern has fueled a number of lawsuits alleging that the practice violates the Employee Retirement Income Security Act of 1974 (ERISA),” Judge Diane Wood wrote in Robert Leimkuehler, as trustee of and on behalf of the Leimkuehler Inc. Profit Sharing Plan, and on behalf of all others similarly situated v. American United Life Insurance Co., 12-1081, 12-1213, & 12-2536.

Leimkuehler Inc. operates a 401(k) plan for its employees and American United Life Insurance Co. provides services to the plan. Plan participants’ contributions in mutual funds are deposited into a separate account that AUL owns and controls. AUL uses the funds in that account to invest in whatever mutual funds the plan participants have selected.

Robert Leimkuehler as trustee sued alleging AUL’s revenue-sharing practices breached a fiduciary duty to the plan under ERISA. The District Court granted AUL’s motion for summary judgment, finding AUL didn’t owe any fiduciary responsibility to the plan with respect to its revenue-sharing practices and that it wasn’t a “functional fiduciary” under 29 U.S.C. Section 1002(21)(A).

“We therefore confirm that, standing alone, the act of selecting both funds and their share classes for inclusion on a menu of investment options offered to 401(k) plan customers does not transform a provider of annuities into a functional fiduciary under Section 1002(21)(A)(i),” Wood wrote.

The judges also noted that AUL’s control over the separate account can support a finding of fiduciary duty only if Leimkuehler’s claims arise from AUL’s handling of the separate account.

“They do not. As we noted earlier and as Leimkuehler concedes, AUL selects share classes and decides how much it will receive in revenue sharing when it designs its investment-options menu. Those steps occur well before a Plan participant deposits her contributions in the separate account and directs AUL where to invest those contributions. Because the actions Leimkuehler complains of do not implicate AUL’s control over the separate account, the separate account does not render AUL a fiduciary under the circumstances of this case,” Wood wrote.

The judges also affirmed the denial of AUL’s motion for attorney fees or costs under ERISA or under the Federal Rule of Civil Procedure 54(d).
 

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  1. Living in South Bend, I travel to Michigan a lot. Virtually every gas station sells cold beer there. Many sell the hard stuff too. Doesn't seem to be a big deal there.

  2. Mr. Ricker, how foolish of you to think that by complying with the law you would be ok. Don't you know that Indiana is a state that welcomes monopolies, and that Indiana's legislature is the one entity in this state that believes monopolistic practices (such as those engaged in by Indiana Association of Beverage Retailers) make Indiana a "business-friendly" state? How can you not see this????

  3. Actually, and most strikingly, the ruling failed to address the central issue to the whole case: Namely, Black Knight/LPS, who was NEVER a party to the State court litigation, and who is under a 2013 consent judgment in Indiana (where it has stipulated to the forgery of loan documents, the ones specifically at issue in my case)never disclosed itself in State court or remediated the forged loan documents as was REQUIRED of them by the CJ. In essence, what the court is willfully ignoring, is that it is setting a precedent that the supplier of a defective product, one whom is under a consent judgment stipulating to such, and under obligation to remediate said defective product, can: 1.) Ignore the CJ 2.) Allow counsel to commit fraud on the state court 3.) Then try to hide behind Rooker Feldman doctrine as a bar to being held culpable in federal court. The problem here is the court is in direct conflict with its own ruling(s) in Johnson v. Pushpin Holdings & Iqbal- 780 F.3d 728, at 730 “What Johnson adds - what the defendants in this suit have failed to appreciate—is that federal courts retain jurisdiction to award damages for fraud that imposes extrajudicial injury. The Supreme Court drew that very line in Exxon Mobil ... Iqbal alleges that the defendants conducted a racketeering enterprise that predates the state court’s judgments ...but Exxon Mobil shows that the Rooker Feldman doctrine asks what injury the plaintiff asks the federal court to redress, not whether the injury is “intertwined” with something else …Because Iqbal seeks damages for activity that (he alleges) predates the state litigation and caused injury independently of it, the Rooker-Feldman doctrine does not block this suit. It must be reinstated.” So, as I already noted to others, I now have the chance to bring my case to SCOTUS; the ruling by Wood & Posner is flawed on numerous levels,BUT most troubling is the fact that the authors KNOW it's a flawed ruling and choose to ignore the flaws for one simple reason: The courts have decided to agree with former AG Eric Holder that national banks "Are too big to fail" and must win at any cost-even that of due process, case precedent, & the truth....Let's see if SCOTUS wants a bite at the apple.

  4. I am in NJ & just found out that there is a judgment against me in an action by Driver's Solutions LLC in IN. I was never served with any Court pleadings, etc. and the only thing that I can find out is that they were using an old Staten Island NY address for me. I have been in NJ for over 20 years and cannot get any response from Drivers Solutions in IN. They have a different lawyer now. I need to get this vacated or stopped - it is now almost double & at 18%. Any help would be appreciated. Thank you.

  5. I am in NJ & just found out that there is a judgment against me in an action by Driver's Solutions LLC in IN. I was never served with any Court pleadings, etc. and the only thing that I can find out is that they were using an old Staten Island NY address for me. I have been in NJ for over 20 years and cannot get any response from Drivers Solutions in IN. They have a different lawyer now. I need to get this vacated or stopped - it is now almost double & at 18%. Any help would be appreciated. Thank you.

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