On June 1, 2020, the United States Supreme Court, in an opinion by Justice Kavanaugh and joined by Chief Justice Roberts and Justices Alito and Gorsuch, held that plaintiffs—participants of a defined-benefit pension plan—lacked Article III standing to seek restoration of alleged plan losses or injunctive relief, under the Employee Retirement Income Security Act of 1974 (“ERISA”), because they had no “concrete stake” in the lawsuit. Thole v. U.S. Bank, N.A., et al., No. 17-1712 (June 1, 2020). The case was on appeal from the Eighth Circuit, and was previously previewed in our weekly newsletter at the beginning of this year. Plaintiffs alleged that the defined-benefit plan's fiduciaries mismanaged the plan, causing about $750 million in losses. The Court affirmed the Eight Circuit's dismissal of the case, after holding that, insofar as whether plaintiffs won or lost the outcome “would not change the plaintiffs' monthly pension benefits” under their defined-benefit plan, they had not suffered any concrete injury sufficient to satisfy Article III standing.
Plaintiffs argued that: (1) similar to trust law, participants in a defined-benefit plan hold an “equitable or property interest in the plan” and harm to the plan was harm to the participants of the plan; (2) they had standing as representatives of the plan; (3) they had standing under ERISA's grant of a “general cause of action” to all participants of retirement plans to sue to recover the plan's losses; and (4) the right for defined-benefit plan participants to sue for plan losses helps to “meaningfully regulate plan fiduciaries.” The Court rejected each argument in turn.
Justice Kavanaugh stated that plaintiffs' analogy to trust law was inapplicable as “participants in a defined-benefit plan are not similarly situated to the beneficiaries of a private trust or to participants in a defined-contribution plan” because the benefit they receive is “fixed and will not change, regardless of how well or poorly the plan is managed.” The Court further stated that to be a representative for other participants, plaintiffs must have suffered a harm that gives them a “concrete interest” in the outcome of the litigation, which plaintiffs failed to establish. The Court noted that the cases plaintiffs cite involve guardians, receivers, and executors who were all legally or contractually obligated to represent the plan, which plaintiffs failed to allege here. The Court also held that, merely because all plan participants had a general cause of action under ERISA, this did not in and of itself establish standing under Article III, which “requires a concrete injury even in the context of a statutory violation.” The Court also noted that it “has long rejected” as a basis for Article III standing the argument that if the plaintiff does not have standing to sue, no one would have standing. Justice Kavanaugh stated that this was a “faulty premise” as defined-benefit plans are “regulated and monitored in multiple ways,” noting that employers and the Department of Labor are motivated to “pursue fiduciary misconduct” given the potential liabilities they may face from the failure of defined-benefit retirement plans.
The Court also addressed the argument, advanced by amici, that defined-benefit plan participants have standing if the alleged mismanagement “substantially increased the risk that the plan and the employer would fail and be unable to pay the participant's future pension benefits.” The Court noted that plaintiffs did not allege this basis for standing and only made “bare allegation[s] of plan underfunding.” Justice Kavanaugh stated that there is no ERISA exception to Article III standing, and that plaintiffs lack Article III standing “for a simple, commonsense reason: They have received all of their vested pension benefits so far, and they are legally entitled to receive the same monthly payments for the rest of their lives.” Accordingly, the Court affirmed the Eighth Circuit's decision dismissing plaintiffs' claims.
Justice Thomas wrote a concurring opinion, which was joined by Justice Gorsuch, stating that none of the rights claimed by plaintiffs “belong[ed] to them”—particularly the fiduciary duties created by ERISA as they are “owed to the plan” and not its participants. Justice Sotomayor filed an extensive and strongly worded dissenting opinion, which was joined by Justices Ginsburg, Breyer, and Kagan—stating that the majority's holding would mean that “pensioners may not bring a federal lawsuit to stop or cure retirement-plan mismanagement until their pensions are on the verge of default.”
The Court's decision may limit the volume of ERISA litigation going forward.
Originally published 9 June, 2020
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