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Media Alerts - National Security Systems, Inc., et al. v. Iola, et al. - 3rd Circuit
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December 5, 2012
  National Security Systems, Inc., et al. v. Iola, et al. - 3rd Circuit
Headline: ERISA § 502(a)(3) provides cause of action against nonfiduciaries who knowingly participate in violation of ERISA's anti-kickback provisions

Area of Law: ERISA

Issue(s) Presented: Whether common law claims that an insurance agent's misrepresentations of the structure and benefits of an ERISA plan induced participation in that plan are preempted; whether a nonfiduciary who knowingly participated in a fiduciary's forbidden transactions is subject to suit under ERISA; whether there is a "reasonableness" defense to the ERISA prohibition on kickbacks.

Brief Summary: Four small New Jersey corporations and their executives sued when the promised tax benefits of ERISA plans they had purchased turned out to be illusory, alleging violations of the federal statute and state law. The District Court granted partial summary judgment and held both a bench trial and a jury trial, and the parties cross-appealed. The Third Circuit held, inter alia, that ERISA does not preempt common law claims that misrepresentations were made in order to induce participation in an ERISA plan; that a nonfiduciary who knowingly participated in transactions forbidden by ERISA § 406(b)(3) may be a defendant under § 502(a)(3); and that § 406(b)(3) establishes a per se prohibition of kickbacks to which § 408(c)(2) does not provide a "reasonableness" defense.

Argument (if known): 11/16/2011

Date of Issued Opinion: 11/8/2012

Docket Number: 10-4154, 10-4155

Decided: Affirmed in part, vacated and remanded in part

Counsel (if known): Steven J. Fram, Kerri E. Chewning for Appellants/Cross-Appellees; Edward M. Koch, Christopher P. Leise, Counsel for Appellee/Cross-Appellant

Author of Opinion: Judge Chagares

Edited: 12/12/2012 at 10:20 AM by Media Alerts Moderator

    Posted By: Brian Graupner @ 12/05/2012 12:23 PM     3rd Circuit  

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