EBSA Nominee Previously Urged ERISA Litigation Reform

In Why Does the Department of Labor Allow ERISA Regulation Through Litigation By Plaintiff Lawyers?, a September 2024 post on his private blog FID Guru, Daniel Aronowitz, the nominee to head the Department of Labor’s Employee Benefits Security Administration (EBSA), urged Congress to reform ERISA litigation rules. He wrote, “Congress must act with ERISA litigation reform. In the 1990s, the trial bar was filing frivolous securities fraud cases against public companies, using investors with as little as one share of stock. Congress acted with the Private Securities Litigation Reform Act of 1995 (PSLRA), creating a higher pleading standard to combat securities fraud abuse. It has not been a perfect solution, but at least Congress tried to reduce frivolous litigation.”

“We need a PSLRA for ERISA – litigation reform to stop ERISA litigation abuse. We need a fairer pleading standard that weeds out frivolous cases. We need a higher threshold for standing to sue plan sponsors – not a participant with less than $1 in plan fees like some cases. And we need the business judgment rule to protect the good faith discretionary judgments of plan sponsors from abusive litigation. A business judgment rule would establish a presumption of good faith unless plaintiff lawyers have real evidence of malfeasance. It would eliminate the attack on valid discretionary judgments for the selection of investments and service providers. We need ERISA litigation reform.”

Although the blog post refers to cases unrelated to ESOPs or ESOP-specific fiduciary issues, it suggests an approach to the DOL's role that seeks to reign in what Aronowitz sees as an overly aggressive plaintiffs' bar on ERISA cases. That is notable given that most recent ESOP litigation has come from just three law firms (Cohen Milstein, Bailey Glasser, and Engstrom Lee).