April 19, 2012 — The 3rd U.S. Circuit Court of Appeals has reversed a lower court’s decision about excessive fee claims against John Hancock. —
Plaintiffs Danielle Santomenno, Karen Poley and Barbara Poley brought a suit against defendant John Hancock Life Insurance Company under the Employment Retirement Income Security Act (ERISA) and the Investment Company Act of 1940 (ICA), alleging that John Hancock charged retirement plans excessive fees on annuity insurance contracts offered to participants.
A district court dismissed the ICA excessive fees claims because it said only those maintaining an ownership interest in the funds in question could sue under the derivative suit provision enacted by Congress. In addition, it said the participants are no longer investors in the funds in question.
The district court found that dismissal of the ERISA claims was also warranted because participants failed to make a pre-suit demand upon the plan trustees to take appropriate action and failed to join the trustees as parties. The appellate court, however, remanded on the ERISA counts.
According to the court’s opinion, ERISA Sections 502(a)(2) and 502(a)(3) do not require joinder of trustees, and no other court circuit has found pre-suit demand a requirement for civil actions brought under Sections 502(a)(2) or 502(a)(3). “[A]lthough common law may have required a prior demand before bringing an action, Congress did not incorporate that doctrine into the ERISA statute,” the court wrote.
The 3rd Circuit’s opinion is here.