EDS ERISA Litigation Update

As reported on The ERISA Blog, the District Court for the Eastern District of Texas rejected a proposed settlement in the EDS litigation because it was not in the best interest of the class members. Under the proposed settlement, the class members would only receive two or three cents on the dollar of their losses. So the court concluded that a reasonable class member would rather risk litigation rather than accept such a discounted settlement.

As discussed in more detail here, EDS had appealed the class certification order contending that the plaintiffs did not have standing to bring a lawsuit under Section 502(2)(2) on behalf of the plan as a whole. Apparently, the plaintiffs' counsel faced some tough questions during oral argument, reconsidered the value of the their claims and agreed to the proposed settlement. But the district court suggested that plaintiffs' counsel should rethink their position:

[R]igorous questioning during oral argument does not necessarily indicate how an appellate court will ultimately rule on a particular legal issue, especially one as important as the issue in this case. . . . Whatever the risk of a different ruling by the Fifth Circuit, that risk must be considered in light of the potential benefits of the settlement proceeds to the proposed settlement class.

So the ball is back in the Court of Appeals. I will have more to say about this case when the 5th Circuit publishes its decision.