Fourth Circuit Rules In Favor of Retirement Plan Participants in Tatum v. RJR

In a publishedopinion, the Fourth Circuit Court of Appeal has ruled in favor of our clients, Richard Tatum and a certified class of participants and beneficiaries in the R.J. Reynolds Tobacco Company 401(k) retirement savings plan. LFLRJ represents Mr. Tatum and the class together with co-counsel atLieff, Cabraser, Heimann & Bernstein, LLPandElliot Morgan Parsonage.

The Fourth Circuit affirmed the ruling of the Middle District of North Carolina that RJR breached its fiduciary duty of prudence by liquidating two funds held by the plan on an arbitrary timeline, without conducting the thorough investigation required by the Employee Retirement Income Security Act (“ERISA”). “Indeed,” the majority wrote, “the extent of procedural imprudence shown here appears to be unprecedented in a reported ERISA case.” The Fourth Circuit further affirmed that a breaching fiduciary bears the burden to show that it did not cause the breach.

Significantly—and favorable to Mr. Tatum and the class—the Fourth Circuit reversed the district court for applying the wrong standard on loss causation. Rejecting the lenient standard employed by the district court, the Fourth Circuit directed that a breaching fiduciary is only excused from liability if a prudent fiduciary would have, more likely than not, made the same decision. The Court also ruled that plan committees are appropriate defendants in an ERISA case when they are named fiduciaries, and remanded for further proceedings.

Mr. Tatum and the class were supported on appeal by amici AARP and the National Employment Lawyers’ Association, as well as the U.S. Department of Labor. LFLRJ shareholder Catha Worthman argued the appeal.