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WASHINGTON, DC, December 1, 2009 — The U.S. Court of Appeals for the Second Circuit today affirmed a summary judgment victory for United Technologies Corp. (UTC) in a closely-watched ERISA class action lawsuit that alleged breach of fiduciary duties in connection with 401(k) plan expenses and investment options. Covington & Burling LLP represented UTC in the litigation.
On March 3, the U.S. District Court for the District of Connecticut granted summary judgment in favor of United Technologies on all claims. Plaintiffs had sought damages in excess of $230 million. Today’s order by the Second Circuit rejects each of the plaintiff’s arguments on appeal for substantially the same reasons stated in the District Court’s decision.
The lower court’s decision established important precedent on a variety of 401(k) plan issues and was the first decision to reject a challenge to so-called “cash drag” in company stock funds. The court also rejected three other important claims: (1) that 401(k) plans should not offer actively managed mutual funds to plan participants, (2) that the so-called “revenue sharing” arrangement among service providers was improper and led to excessive fees, and (3) that plan fees and expenses were not properly disclosed to plan participants. The UTC case was the first one of this particular type of ERISA case to be resolved after full discovery by both parties.
The Covington ERISA litigation team was led by partners Jeffrey Huvelle and Thomas (T.L.) Cubbage, with associate Peter Swanson. All are based in the firm’s Washington office.