On Friday, June 28, 2019, the U.S. Supreme Court agreed to hear a case involving a hotly debated ERISA topic: standing to bring breach of fiduciary duty claims in defined benefit plans. The court will review Thole v. U.S. Bank, Nat’l Ass’n, 873 F.3d 617, 628 (8th Cir. 2017), which the Eighth Circuit decided on statutory standing grounds. In accepting the case, the Supreme Court also certified the additional issue of whether the defined benefit plan participants have demonstrated Article III standing.
The plaintiffs in Thole alleged that U.S. Bank breached its ERISA fiduciary duties by mismanaging its defined benefit plan. The defendants’ initial motion to dismiss for lack of Article III standing was denied. During the litigation U.S. Bank voluntarily contributed enough money to make the plan overfunded and again moved to dismiss. This time the district court dismissed the breach of fiduciary duty claims as moot because the plaintiffs lacked any concrete interest in relief.
On review, the Eighth Circuit upheld the dismissal but on different grounds. The court found that because the plan was overfunded, the plaintiffs no longer fall within the class of plaintiffs authorized to bring suit under ERISA. In doing so, the court relied on Eighth Circuit precedent, including Harley v. Minn. Mining & Mfg. Co., 284 F.3d 901 (8th Cir. 2002), which had concluded that a plaintiff could not bring an ERISA breach of fiduciary duty claim when a defined benefit plan is overfunded. The Eighth Circuit determined that Harley addressed statutory standing, not constitutional standing. The court reasoned that if a plan is fully funded, a breach of fiduciary duty causes no harm to the participant but allowing litigation does harm the plan. Therefore, such a participant is not in the class of plaintiffs allowed to sue under ERISA.
Although the Eighth Circuit notes that statutory standing and constitutional standing are often confused, the Thole decision adds to that confusion. By focusing on injury and harm to the plan, the Eighth Circuit addressed hallmark issues of constitutional standing in a decision that it said was based on statutory standing. Perhaps the Supreme Court added the Article III issue to help clear up this confusion.
But the Supreme Court may also believe that the issue of whether defined benefit plan participants have Article III standing needs resolution because of its reoccurrence, including in other petitions for certiorari that the Court denied. See, e.g., Lee v. Verizon Commc’ns, Inc., 837 F.3d 523, 546-47 (5th Cir. 2016), cert. denied sub nom. Pundt v. Verizon Commc’ns, Inc., 137 S. Ct. 1374, 197 L.Ed. 2d 568 (2017); see also Perelman v. Perelman, 793 F.3d 368, 375 (3d Cir. 2015) (finding a risk of future adverse effects on benefits is not an injury in fact); David v. Alphin, 704 F.3d 327, 338 (4th Cir. 2013) (“We find these risk-based theories of standing unpersuasive, not least because they rest on a highly speculative foundation lacking any discernible limiting principle.”)
There is no question that resolving this issue will have a dramatic impact on future ERISA breach of fiduciary duty claims involving defined benefit plans. The upcoming term will prove to be an important one for ERISA participants and plan sponsors as this is the third ERISA case the Supreme Court has added to its upcoming term.