Judge Rachel Bloomekatz, who was nominated by President Biden to the Sixth Circuit court of appeals, cast the deciding vote in a 2-1 ruling that allowed employees and retirees of a large corporation to go forward with a complaint against the corporation for improperly harming their retirement plan, costing them millions of dollars. Judge Bloomekatz joined an opinion by Clinton nominee Judge Karen Nelson Moore, to which Trump nominee Judge Eric Murphy dissented and would have favored the corporation. The November 2024 decision was in Johnson v Parker-Hannifin Corporation.
What happened in this case?
Parker-Hannifin Corporation is a large technology and engineering company with more than 32,000 current and retired employees. It established a pension plan calling for employee contributions that is “among the largest” of such plans in the US.
In 2021, Michael Johnson and four other Parker employees or retirees filed a federal lawsuit, on behalf of themselves and as representatives of other plan participants, contending that Parker and related boards and committees have violated their duties under the Employee Retirement Income Security Act (ERISA) and damaged the pension plan to the tune of millions of dollars. In particular, their complaint contended that Parker violated its duty of prudence by including a poorly performing set of investment funds in the plan and providing only higher-cost shares to plan participants.
A district court dismissed the case as a matter of law. Johnson and the other plaintiffs appealed to the Sixth Circuit.
How did Judge Bloomekatz and the Sixth Circuit majority rule and why is it important?
In a 2-1 decision written by Judge Moore, she and Judge Bloomekatz reversed the lower court opinion and sent the case back to the district court so that Johnson and the other plaintiffs could proceed with their case. Trump Judge Murphy dissented and would have upheld the lower court opinion favoring the corporation.
Judge Moore explained that under ERISA and past precedent, plan fiduciaries like Parker have a “duty of prudence” in running a pension plan. The facts alleged by Johnson and his colleagues, they went on, could well lead a jury to conclude that Parker had violated that duty, This included Parker’s decision to select and retain an investment fund that showed “continuing underperformance” and high turnover rates, as well as its selection of shares for plan participants that cost significantly more than other alternatives. It is “for the jury” to determine whether these decisions and the costs to the plan that they produced violated Parker’s duties under ERISA.
The opinion made possible by Judge Bloomekatz’s deciding vote is obviously important to Michael Johnson and the thousands of other participants in the Parker corporation’s pension plan. It may also be signicant in future cases in which pension plan administrators are charged with violating their duty of prudence, particularly in the Sixth Circuit, which includes Kentucky, Michigan, Ohio, and Tennessee. In addition, the decision serves as a reminder of the importance of confirming fair-minded judges to our federal courts.