by Chris C. Scheithauer and Joseph S. Adams
As previously described in this blog earlier this year, a divided Seventh Circuit panel reversed summary judgment in favor of Kraft Foods Global, Inc. in a class action involving allegedly excessive fees in the Kraft 401(k) plan. Shortly thereafter, Kraft petitioned for rehearing of the case by the entire Seventh Circuit Court of Appeals en banc. Further, a “friend of the court” brief submitted jointly by The ERISA Industry Committee (ERIC), the American Benefits Council (ABC), the Profit Sharing/401k Council of America (PSCA), and U.S. Chamber of Commerce urged the Seventh Circuit to rehear the case en banc.
However, on May 26, 2011, in a single page opinion, the Seventh Circuit denied Kraft’s motion, noting that no judge in active service for the Seventh Circuit requested a vote on the petition for rehearing en banc and that the original three judge panel voted 2-1 against rehearing the case – the same split as in the panel’s original order reversing summary judgment.
As a result, the Seventh Circuit’s original order reversing summary judgment will likely be the “go-to” cite for plaintiffs’ attorneys seeking to escape summary judgment on excessive fee claims. However, as noted by the dissent in that order, the Seventh Circuit’s decision “will only serve to steer [fiduciaries’] attention toward avoiding litigation instead of managing employee wealth.”