In the case of James J. Thole et al. v. U.S. Bank NA et al. (June 1, 2020), the United States Supreme Court agreed with the U.S. Court of Appeals for the Eighth Circuit and held in a 5-4 ruling that a pension plan and its fiduciaries cannot be sued for mismanaging fund assets under ERISA when the plan is fully funded.
In Thole, U.S. Bank, its parent company and certain directors were sued under the Employee Retirement Income Security Act (ERISA) for mismanaging defined benefit plan assets when they were fully invested in the stock market, and some were invested in mutual funds run by a U.S. Bank affiliate. Thereafter, the plan became underfunded. After a proposed class action lawsuit was filed, U.S. Bank voluntarily paid into the fund over $300 million dollars to make up the funding shortfall. The defendants then moved to dismiss the lawsuit, claiming that because the plan was fully funded the plaintiffs lacked standing to sue.
The trial court granted U.S. Bank’s motion to dismiss, but not because of a lack of standing. The trial court found that because the bank had fully funded the plan the case was moot. On appeal, the appellate court affirmed the dismissal, concluding that the plaintiffs had not been damaged by the defendants’ plan management decisions.
The Supreme Court agreed to hear the case and held that because the plaintiffs have no “concrete stake” in the lawsuit they lack Article III standing to sue. In other words, whether they won or lost the case it would not affect the plan benefits they would receive because the plan was fully funded.
The Supreme Court also rejected an amici argument that plan participants in a defined-benefit plan have standing to sue if the plan mismanagement was sufficiently egregious that it substantially increased the risk that the plan and the employer would fail and be unable to pay future benefits. The Supreme Court concluded that the plaintiffs had not raised this standing theory and their complaint did not plausibly claim that alleged mismanagement substantially increased the risk to them that the plan and their employer would fail and be unable to pay future pension benefits.
Justice Sonia Sotomayor dissented and was joined by Justices Ruth Bader Ginsburg, Stephen Breyer and Elena Kagan.
This ruling will have immediate implications in pending suits, as well as future claims under ERISA where, despite evidence of wrongdoing in a plan’s management, the plaintiffs’ standing can be challenged if the plan is fully funded.
Matthew J. Boettcher is a partner in the firm’s Bloomfield Hills office and a member of Plunkett Cooney’s Commercial Litigation Practice Group. He concentrates his practice in the area of commercial litigation with ...
Add a comment
- Commercial Liability
- Business Risk Management
- Civil Litigation
- Business Torts
- Commercial Real Estate
- Appellate Law
- Alternative Dispute Resolution (ADR)
- Commercial Leasing
- Real Estate
- Trade Secrets
- Litigation Discovery
- Corporate Formation
- Commercial Loans
- Real Estate Mortgages
- Mortgage Foreclosure
- Regulatory Law
- Risk Management
- Shareholder Liability
- Fraud Activity
- Cyber Attack
- Tax Law
- Damages Recovery
- Class Action
- Product Liability
- Biometric Data
- Statute of Limitations
- Banking Law
- Noncompete Agreements
- Internet Law
- Consumer Protection
- Residential Liability
- Zoning and Planning
- Department of Education (DOE)
- Fair Debt Collection Practices Act
- Fair Credit Reporting Act
- Unfair Competition
- Uniform Commercial Code (UCC)
- Dispelling Misconceptions About the Role of Appellate Lawyers at Trial
- What is 'Standing,' and Why Does it Matter in Litigation?
- What Happens When a Court Rules Your Contract is Ambiguous?
- Understanding Michigan’s Successor Liability Law can Protect Your Business Deal
- 10 Things About Trade Secrets you may not but Should Probably Know
- What New Lawyers Bring to the Practice of Law
- What Rights do Limited Liability Company Minority Members Really Have?
- Arbitration or the Courtroom, Who Decides?
- Wait, I Have to Pay my Own Attorney? But I Won the Case?
- Preliminary Injunctions in Michigan, the More They Change the More They Stay the Same