Judge Refuses to Toss Delta Pilots’ 401(K) Case

     WASHINGTON (CN) — A federal judge refused to dismiss claims from more than 1,700 former Delta Airline pilots who say the nation’s private-sector pension insurer illegally invested their retirement funds.
     U.S. District Judge Reggie Walton allowed the pilots to move forward on their breach of fiduciary duty claim, finding their complaint seeks “appropriate equitable relief” under the Employee Retirement Income Security Act, or ERISA.
     “At this early stage in the case, the court deems these allegations sufficient to state a plausible claim of fiduciary breach against the corporation as trustee of the plan,” Walton wrote in the July 6 ruling.
     The retired pilots brought the federal complaint in the District of Columbia against Pension Benefit Guaranty Corporation, the federal agency charged with insuring the nation’s pension plans.
     They claimed that the corporation earned “ill-gotten investment returns” on undistributed benefits that should have been paid to them instead of active Delta pilots.
     The airline stopped making contributions to the Delta Pilots Retirement Plan after filing for bankruptcy in September 2005. By the end of 2006, the plan terminated and the corporation obtained recoveries from Delta initially valued at approximately $1.98 billion.
     The former pilots allege that they should have received a portion of these recoveries before active pilots, but that the corporation placed benefits of active pilots ahead of retirees “to corrupt the statutory recovery ration by ensuring that hundreds of millions of dollars remained, undiluted, within the agency’s trust fund in order to maximize the corporation’s investment returns.”
     According to the complaint, the corporation was motivated by “strong incentives to minimize and delay payments to participants from the trust fund, and to allocate assets away from retirement eligible participants towards younger participants, all in an effort to manipulate the asset allocation scheme in order to maximize investment returns on the trust fund and further its own financial wellbeing.”
     In Wednesday’s ruling, Walton rejected the corporation’s argument that the pilots failed to state a claim for relief.
     “The court will therefore allow the plaintiffs to proceed with claim one of the amended complaint,” he wrote.
     The judge declined to award the pilots any attorneys’ fees, however, finding that ERISA does not authorize that recovery in an action against the corporation.

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