On Thursday, Judge Thomas W. Thrash, Jr. of the Northern District of Georgia issued an order and opinion granting Cumulus Media’s motion to dismiss time-barred claims in a Employee Retirement Income Security Act (ERISA) class-action complaint. The Judge granted dismissal of one plaintiff’s claims for lack of standing because she ceased being a participant in the 401(k) plan before the time period limitations.
In their complaint, the plaintiffs averred that the defendant breached its fiduciary duties “of loyalty and prudence by offering an investment menu composed of unduly expensive mutual funds.” Moreover, the plaintiffs claimed that Cumulus “failed to monitor or control the allegedly excessive compensation paid to the Plan’s recordkeeper,” which, the plaintiffs argued, cost the Plan and its participants millions of dollars in losses for these purported breaches.
According to the order, Cumulus Media provides employees with the a 401(k) plan which allows participants to direct how their contributions are invested. The judge noted that the defendant issued a Summary Plan Description (SPD), which clearly describes the plans’ terms, as required under ERISA, before they filed their complaint in February 2020. The SPD reportedly explained the “internal review process that is available for participants who seek to challenge Cumulus’ management of the Plan” and set forth various limitation periods for lawsuits against Cumulus, depending on if the participants have exhausted the Plan’s internal review procedures first. Specifically, it says after exhausting the Plan’s internal review process, the participant has one year from the review process conclusion to file a lawsuit and if the participant has not exhausted the Plan’s internal review process, the lawsuit can only be about conduct that happened within the year before to the date that the lawsuit was filed.
The court stated that Chiappa’s “employment at Cumulus ended in August 2012 and she retained her investments in the Cumulus Plan until 2016, when she transferred them into an Individual Retirement Account and cashed out of the Plan and plaintiff Alfonso’s employment ended with Cumulus in May 2019; the plaintiffs did not submit their asserted claims beforehand to be reviewed by the Plan’s internal review process.”
Accordingly, the court found that “the Plaintiffs’ claims are barred by the terms of the Plan to the extent that they are based on conduct that occurred prior to February 24, 2019, one year before this case was filed.” The court noted that the plaintiffs’ response primarily focuses “on why the Court should excuse the Plaintiffs from exhausting their administrative remedies” and that enforcing the limitations would be “‘particularly egregious’ because the otherwise applicable repose period is six years and that doing so would ‘conflict with ERISA and strong judicial policy.’”
The court stated that in the instant action there is no “express statutory prohibition against a shorter limitations period.” The judge contended that the plaintiffs “fail to identify how the contractual limitations would conflict with ERISA, especially when the one-year period only applies when the Plan participant chooses not to submit his or her claims through the administrative process.”
As a result, the judge decided that Chiappa’s claims should be dismissed for lack of standing because in 2016 she was no longer a participant of the plan and no longer held an investment in the Plan, she was no longer a participant in the plan. Under ERISA in order to establish standing, “a plaintiff must be a plan participant, beneficiary or the Secretary of Labor.” Thus, since the court is enforcing the limitations and because she is not a participant, Chiappa lacks standing and is dismissed from the lawsuit.
Cumulus Media is represented by King & Spalding LLP. The plaintiffs and putative class are represented by Johnson Fistel, LLP and Capozzi Adler, P.C.
