September 24, 2024
Michelle Yau is spearheading some of the most significant ERISA class actions in the nation. Her cases have garnered more than a billion dollars that will help workers in their retirement. She has successfully challenged the enforceability of arbitration agreements before three circuit courts of appeal in the past two years. The Supreme Court declined to review her clients’ most recent victory before the 10th Circuit in Harrison v. Envision Management Holding.
But like many plaintiff-side litigators, Yau, chair of Cohen Milstein’s ERISA/Employee Benefits practice, fears for ERISA’s future. As ERISA reaches its 50th anniversary, she is concerned that the Supreme Court’s recent overturn of Chevron deference, like arbitration agreements, will provide yet another avenue for bad-acting companies and plan managers to undermine employee protections and their rights to retirement benefits.
With a career forged in the fires of Wall Street and tempered at the U.S. Department of Labor, Yau, a first-generation American, is passionate about economic justice for retirees and workers.
Lawdragon: Congratulations on your appellate victories. First, tell us about ERISA and why it’s important.
Michelle Yau: Thank you. Yes, certainly. The Employee Retirement Income Security Act (ERISA) is a niche area of law. It was enacted by Congress in 1974, 50 years ago this September, to protect American workers’ retirement savings, whether invested in corporate pension plans, 401(k) plans, employee stock option plans (ESOPs) or other retirement plans, from being mismanaged or abused by companies and plan administrators.
In my opinion, ERISA is a hallmark of bipartisan efforts to protect workers, their retirement savings, their healthcare plans, and, in effect, to protect the American dream of upward mobility and prosperity.
LD: What do you do as a plaintiff-side ERISA litigator?
MY: Despite our having this incredibly protective worker rights law, not all plan providers and fiduciaries abide by ERISA. Sometimes it’s lack of oversight or some other form of negligence. Other times, unfortunately, it’s intentional and motivated by unchecked profits or just greed that causes hundreds of millions of dollars in retirement benefit losses. So, my litigation team tries to hold the people who control retirement plans accountable to the millions of employees and plan participants to whom they owe fiduciary duties by recouping their losses.
Plaintiff-side litigation, particularly class action litigation, plays an important role in enforcing ERISA. If we’re lucky, we can also create good law to further protect retirees and workers.
LD: What inspired you to become a plaintiff-side ERISA litigator?
MY: A few things. I taught English as a Second Language to new immigrants in high school and law school, and I saw how hard they worked. My students had several jobs, often taking multiple buses to get to each of them. They worked incredibly hard to provide for their families, which made me realize how important worker protection laws are. As an undergrad at the University of Virginia, I fought for campus workers to be paid a living wage. I planned to go to law school to fight for workers’ rights and against corporate malfeasance.
But my dad, an immigrant and consummate pragmatist, encouraged me to get a job and enter the real world before heading off to Harvard Law School. When I had the opportunity to work on Wall Street at one of the most successful investment banks, I decided to listen to my dad. I deferred my enrollment at Harvard Law and worked on Wall Street as a financial analyst doing mergers, acquisitions and initial public offerings.
LD: Big life decision. Good advice from your dad?
MY: Best advice ever! My training in financial modeling, accounting and economics was invaluable. I learned about numerous complex financial products and became facile in corporate lingo. Perhaps most importantly, I experienced firsthand the immense pressure on Wall Street for corporations to push for greater and greater profits. Seeing Wall Street from the inside has been incredibly helpful for ERISA lawsuits which often involve complex valuation issues and financial concepts.
Perhaps not surprisingly, I felt uncomfortable in a culture where “synergies” that made corporate mergers profitable boiled down to the elimination of thousands of jobs and increasing the workload of the remaining employees. These experiences were deeply motivating. I understood that America’s workers needed someone in their corner fighting to make them visible to these profit-driven institutions.
Seeing Wall Street up close and in-person made everything click for me. The ruthless focus on the bottom line made me incredibly pragmatic. My analytical skills were sharpened by the frenetic pace of Wall Street deal-making. I also gained deep confidence in my quantitative skills and financial acumen. This has made me fearless when up against large financial institutions in court.
LD: Sounds like an impactful experience. How about your DOL experience?
MY: After law school, I went to the U.S. Department of Labor as an Honors Program Attorney. For me, the DOL was the perfect next step where I got hands-on experience enforcing the law. Plus, it fulfilled that do-gooder part of me.
Both experiences really shaped and informed my work at Cohen Milstein. Our job is to get the biggest and best deal for our clients who have been harmed. By making them pay where it counts: their bottom line, this deters companies from violating the law.
LD: So, why the switch to the private sector?
MY: I loved working at the DOL. We were changing people’s lives in meaningful ways. But I wanted to do more. It was about this time that the head of Cohen Milstein’s ERISA practice reached out to me. He convinced me that I could achieve the same meaningful worker relief in the private sector, but at a much faster pace.
I’m glad he was persistent! Here I am today, 20 years later. Cohen Milstein was (and still is) like a private attorney general’s office that enforces the law through, often, cutting-edge ERISA class actions.
LD: And are you doing more now?
MY: Absolutely! I’ve got a small, dynamite team. We handle 20 to 30 cases at any given time. Just in 2024 so far, we have achieved more than $83M in class settlements and won more than a dozen motions. Plus, some of our cases, like the recent appellate victories, involve novel legal issues.
LD: That is a lot! Tell us about your appellate victories and what else keeps you awake at night.
MY: ERISA is about to celebrate its 50th anniversary, but it is at a crossroads. In addition to being challenged by corporate greed, it’s facing two steep challenges before the courts. The first is arbitration clauses with class action waivers. We see these quite frequently, for instance, in ESOP agreements.
The second is the Supreme Court’s recent decision in Loper Bright Enterprises v. Raimondo, which overturned the decades-old Chevron doctrine of judicial deference to federal agency’s interpretation of ambiguous statutes.
LD: Why are these two issues important?
MY: To date, ERISA has been implemented and interpreted through regulations issued by the IRS and the Department of Labor. Given the overturn of Chevron, these regulations may be jeopardized, which could give companies more incentive to ignore ERISA, particularly companies headquartered in circuits with less than favorable track records of upholding pro-employee statutes. This could glut the courts with unnecessary lawsuits and potentially undo decades of bipartisan work. It’s early days. A lot remains to be seen.
But even before the overturn of the Chevron deference, worker protections under ERISA faced significant legal hurdles before the courts due to corporate intervention. Namely, arbitration clauses with class action waivers and restrictions on collective remedies, which can prevent employees from bringing meaningful claims, pursuing fulsome awards, and fully holding companies and plan fiduciaries accountable.
LD: Why is challenging the enforceability of arbitration clauses so important?
MY: Companies inserting arbitration clauses with class action waivers in employment agreements is not new. But there has been a noticeable increase in arbitration clauses in employee retirement and health plans.
Congress took a lot of care in drafting and passing ERISA. As a result, it’s uniquely protective of worker rights for retirement benefits.
These arbitration clauses should be unenforceable because they undermine the very protections Congress wrote into ERISA. They are an attempt to prevent plan participants from exercising their statutory rights under ERISA and before the courts. Yet, plan providers and fiduciaries continue to insert arbitration clauses, presumably to purposefully deter such an exercise.
LD: How have you challenged this issue before the courts of appeal?
MY: The legal doctrine we’ve been relying on is Supreme Court law, which says “you can change where someone has to file a case” like a lawsuit. That’s just fine under arbitration law. (That’s why you could be pushed to an arbitral form.) But you can’t take away their rights in the process. ERISA is special and unique because the statute says a participant can sue on behalf of a plan and restore “losses to the plan,” not just to their personal account. Arbitration provisions that contain class action waivers typically bar collective remedies and therefore take away this plan-wide relief. Most of the courts of appeals have agreed that these arbitration clauses waive workers’ statutory rights. That is why we have prevailed.
So far, our clients have successfully challenged the enforceability of arbitration agreements before the 3rd, 7th, and 10th circuits. There have also been successful challenges in the 2nd and, most recently, in the 6th Circuit, although not by us. Last October, the Supreme Court declined to re-hear our clients’ victory before the 10th Circuit in Harrison v. Envision Management Holding.
LD: Congratulations. What else are you focused on?
MY: Thank you. We’ve been doing some exciting work in the pension plan space. We found that several large pension plan providers like AT&T and Citgo are using outdated mortality tables when converting retirees’ single life annuities to joint and survivor annuities. This error creates a penalty for married retirees who choose joint pensions that provide survivor payments for their spouses. This kind of “marriage penalty” can cost unsuspecting retirees of being chiseled out of tens of thousands of dollars from their hard-earned pensions.
I’m delighted to report that last week Citgo agreed to a settlement. The settlement terms are not yet public. But I can tell you that this past May, the Northern District of Illinois handed our Citgo pension plan clients two back-to-back wins by not only denying most of Citgo’s motion for summary judgment, but also granting our motion for class certification. In July, the 7th Circuit declined to hear Citgo’s appeal of the class certification ruling. We estimate that Citgo underpaid approximately 1,700 pensioners roughly $31M since the 1970s. So, I am hopeful the settlement will make up for a large portion of this loss.
LD: Wow. That is a lot of money. How about 401(k)s?
MY: In the 401(k) space, we continue to tackle self-dealing and fee-scraping practices involving large, sophisticated financial companies that have proprietary funds. This is a real and compelling issue. If you think about it, an extra ten basis points or 0.1 percent in fees can mean a windfall for the company or hundreds of millions of dollars in employee losses.
This past July, the Southern District of New York granted final approval of a $19M settlement against New York Life Insurance Company for allegedly steering participants of the company’s 401(k) to its own in-house funds.
We settled another case against a hedge fund manager that invested all their employees’ 401(k) accounts in their own niche hedge fund products. Then, even though the hedge fund company went bankrupt, we were able to recover millions of dollars for the employees, which on average will result in about $30,000 in recovery payments for each class member.
LD: What about ESOPs?
MY: ESOPs are one of my favorite areas to litigate. Our ESOP clients are usually tradespeople. Workers and professionals who are in construction, airplane repair services, food services, you name it – the backbone of America – who are invested in their work and companies.
In most of these cases, the company’s owner creates an ESOP retirement plan to enable the employees to own the company. For a lot of people that’s the American dream! Unfortunately, we have seen situations where the owner or the plan manager (intentionally or otherwise) sells the company to the ESOP at an exaggeratedly overvalued price only for the value of that company to tank shortly after.
LD: Can you give us an example?
MY: Yes. A recent case involves Triad Manufacturing’s ESOP. The company’s stock was sold to the ESOP for approximately $106M and was valued at just $3.3M two weeks later. We were able to recover $14.8M. That may not seem like much, but that was roughly $43,000 for each employee.
LD: Sounds like a big recovery. What’s the most gratifying part of your job?
MY: I love what I do! The nature of the work is incredibly gratifying because we can meaningfully change the lives of employees and retirees by getting them tens of thousands of dollars each when their rights have been trampled.
LD: You sound incredibly busy. Any final thoughts?
MY: We are incredibly busy. We also have a nice success rate. Fortunately, I have a talented team. It takes a village!
ERISA is an important area of law that some plan providers and fiduciaries abuse or ignore. Given corporate America’s use of arbitration clauses and class action waivers to thwart retirees from publicly holding them to account before the courts and Loper Bright potentially opening another avenue of abuse of ERISA, I’m not slowing down anytime soon!
Read Michelle Yau Is a Relentless Champion for Employees and Retirees.