PRT Lawsuits Get Split Rulings in District Courts

Lockheed Martin Corp.’s motion to dismiss a lawsuit related to two PRTs it conducted with Athene, in 2021 and 2022, was denied by the U.S. District Court for the District of Maryland on Friday. Meanwhile, a lawsuit against Alcoa Corp., also regarding PRTs it conducted with Athene, was dismissed by the U.S. District Court for the District of Columbia on Friday.

Schlichter Bogard LLP represents the plaintiffs in both cases.

Lockheed Martin

Lockheed Martin transferred its pension liabilities to Athene Annuity and Life Co. and Athene Annuity & Life Assurance Co. of New York on two occasions: on August 3, 2021, when the company transferred $4.9 billion in pension obligations and plan assets for 18,000 beneficiaries, and again on June 27, 2022, when it transferred an additional $4.3 billion in obligations for 13,600 beneficiaries.

The plaintiffs in Konya et al. v. Lockheed Martin, participants in the company’s plan, alleged that Lockheed retained Athene as the annuity provider “in violation of their strict fiduciary responsibilities … [because] Athene was not the safest available option.”

Several of the PRT lawsuits involving Athene, including the one against Alcoa Corp., accuse the insurer of investing in “lower-quality, higher-risk assets” and having “questionable creditworthiness,” posing a risk to retirees. Athene is not named in any of the lawsuits.

In a motion to dismiss, Lockheed argued that the plaintiffs lacked Article III standing and could not point to any concrete, imminent injury that they have suffered as a result of the PRTs. Lockheed also characterized the plaintiffs’ harm as an “inchoate fear” unsupported by adequate facts, but U.S. District Judge Brendan Hurson wrote that the plaintiffs pointed to the collapse of Executive Life Insurance Co. in the early 1990s, which shows the “very real possibility” that Athene’s allegedly high-risk insurance practices pose an imminent harm to retirees.

“The court believes that at this early stage, plaintiffs have adequately alleged facts, if only barely so, sufficient to conclude there is ‘a substantially increased risk’ that Athene will fail and plaintiffs will suffer harm because of it,” Hurson’s opinion stated.

The plaintiffs requested relief by disgorging the sums involved in the “improper transactions,” which the court found would serve their ability to receive their vested retirement benefits. As a result, the court found that the plaintiffs showed sufficient injury-in-fact to establish standing.

The court also noted that while it is rejecting Lockheed’s injury-related challenge at this early stage, subject matter jurisdiction may be challenged “at any time.”

Alcoa Corp. Case

In Camire et al. v. Alcoa USA Corp., et al., the U.S. District Court for the District of Columbia found that the plaintiffs’ monthly annuity payments have not been affected by the PRT transactions with Athene, and they did not suffer actual harm that would confer standing.

“Plaintiffs cannot escape the requirement to show that they have suffered an actual harm by framing their claim as a violation of contractual rights; they must still show that the transfer of their contractual rights concretely harmed them in some way,” U.S. District Judge Loren Alikhan’s opinion stated.

A spokesperson from Athene commented, “As we have consistently maintained, these are frivolous claims without merit, driven by predatory trial lawyers targeting the pension risk transfer industry as a whole. We believe that the court in Alcoa got it right – that the plaintiffs’ claims have no merit. A judge in a separate decision repeatedly called into question whether the plaintiffs would ultimately succeed on their claims. Independent insurance experts recognize the facts: Athene is a safe and secure annuity provider with a fortress balance sheet with $31 billion of regulatory capital and strong credit ratings.”

Lockheed Martin and Alcoa Corp. did not immediately respond to requests for comment.

Earlier this year, the ERISA Industry Committee, American Benefits Council and the Committee on Investment of Employee Benefit Assets Inc. filed an amicus brief, encouraging the dismissal of a similar lawsuit against Bristol-Myers Squibb Co. over a PRT it conducted in 2019 with Athene.

The industry groups argued that the plaintiffs lack standing and the continuation of the case threatens a “surge in frivolous litigation.”

The case against Bristol-Myers Squibb is still ongoing, and many industry groups continue to file amicus briefs in support of the company’s motion to dismiss.