Funded Status Complicates Fiduciary Lawsuit Appealed to SCOTUS

In a newly published analysis, a trio of attorneys with Bressler, Amery & Ross consider the case of Thole v. U.S. Bank, which has been appealed to the Supreme Court in the hope of testing the question of whether well-funded pensions can be sued for “harming” retirees.

The authors are Thomas Roberts, a principal in the firm’s securities practice; Donald Winningham III, counsel; and Kathryn Rockwood, an associate in the firm’s securities practice. According to the trio, the case of James J. Thole et al. v. U.S. Bank NA et al. asks the question whether participants in U.S. Bank’s pension plan can sue their employer for alleged Employee Retirement Income Security Act (ERISA) fiduciary breaches even though their pension plan is not facing funding issues—implying that individual retirees cannot establish that they have suffered an actionable harm.

Specifically, the Supreme Court has been asked to weigh the following questions: “(1) Whether an ERISA plan participant or beneficiary may seek injunctive relief against fiduciary misconduct under 29 U.S.C. § 1132(a)(3) without demonstrating individual financial loss or the imminent risk thereof; and (2) whether an ERISA plan participant or beneficiary may seek restoration of plan losses caused by fiduciary breach under 29 U.S.C. § 1132(a)(2) without demonstrating individual financial loss or the imminent risk thereof.”

As the attorneys point out, back in October 2018, the Supreme Court requested the United States Solicitor General to “opine whether the court should grant cert to the matter filed by retirees.” As detailed in a lengthy brief, the Solicitor General responded in the affirmative. The next step in the case is a conference of the Supreme Court justices on this matter, set for June 20.  

Roberts, Winningham and Rockwood recall that this case emerged after retirees alleged that U.S. Bank breached its fiduciary duties by engaging in prohibited transactions under ERISA, which the retirees say in turn caused considerable losses to their defined benefit pension plan. Crucial to the case is the fact that the pension plan is not facing insolvency, raising the question of whether these retirees can prove concrete harms occurred which are necessary for establishing standing.

“Whether the Supreme Court grants cert and how it decides the circuit split remains to be seen,” the attorneys suggest.  

In the original Supreme Court appeal, the retirees say their case presents two independent, substantial legal issues that have divided the courts of appeals regarding when an ERISA plan participant may invoke the remedies Congress explicitly authorized to police fiduciary misconduct and protect federally guaranteed benefits. They explain how alleged fiduciary breaches caused $750 million in losses to their pension plan, and why they feel injunctive relief is appropriate under 29 U.S.C. 1132(a)(3) and restoration of the plan’s losses under 29 U.S.C. 1132(a)(2).

According to the retirees, the Eighth Circuit inappropriately affirmed district court dismissal of their claims under the belief that petitioners had not yet suffered any individual financial harm—as the plan did not at that point face a risk of default.

“In so holding, the Eighth Circuit departed from holdings of other circuits under both Sections 1132(a)(3) and 1132(a)(2), and rejected the long-held position of the Department of Labor, which has repeatedly urged the courts of appeals to let these claims proceed,” the appeal states.

In its latest brief arguing against the conclusions of the Solicitor General—and against the Supreme Court weighing in—U.S. Bank argues that “despite its ultimate conclusion, the United States’ brief reads like a recommendation against certiorari.”

“The United States correctly determines the Eighth Circuit’s decision implicates no split,” the U.S. Bank opposition brief states. “It admits the Eighth Circuit passed on no Article III questions and that [the Supreme Court] is not ordinarily one of first review. And it suggests the Court consider the additional question whether the Eighth Circuit properly addressed statutory standing first—which could preclude any need to decide the actual questions presented. Nevertheless, the United States recommends the Court grant certiorari to address what amounts to a potential alternative ground for affirmance—an unaddressed question of Article III standing.”

According to U.S. Bank’s argument, the Solicitor General “presses three abstract legal ‘theories’ conceivably relevant to some plaintiffs, somewhere. But it fails to explain how this petition presents a vehicle for addressing these theories. It does not.”