Case No. 17-1712 | 8th Cir.
Preview by Taylor Dowd, Senior Online Editor
Petitioners Thole and Smith are members of a defined benefits pension plan, which Respondent U.S. Bank sponsors and controls as a fiduciary. Petitioners sued U.S. Bank under the Employee Retirement Income Security Act (“ERISA”), seeking both injunctive relief and damages, and claiming U.S. Bank violated fiduciary duties by investing all of the plan’s assets in equities instead of diversifying and lowering the risk to plan members. The plan lost about $1 billion after markets crashed in 2008, and became underfunded. At the time of the suit, the plan’s funds fell below the minimum funding required for defined benefit plans under ERISA.
After the district court first rejected U.S. Bank’s claim that Petitioners lacked standing, however, U.S. Bank contributed to the plan, bringing the funding past the level required by ERISA. Consequently, the district court held that the case lacked standing because there was no case or controversy as required Article III, and the Eighth Circuit affirmed.
The Court will consider whether ERISA plan participants and beneficiaries may seek injunctive relief for misconduct and damages for losses from fiduciary breaches under 29 U.S.C. § 1132(a)(2)–(3) without showing individual losses or imminent risk of losses. Furthermore, the Court will determine if Petitioners have standing for their challenge.
Petitioners argue that in comparison to the amount of funds that would have been in the plan if Respondents fulfilled their fiduciary duties, the plan lacked hundreds of millions of dollars, even after the post hoc contribution. They argue that longstanding trust law demonstrates that plan participants are harmed when fiduciaries breach duties, regardless of whether they suffered individual financial loss. Furthermore, Petitioners argue that if they cannot enforce ERISA protections, which they should under ERISA and Article III jurisprudence, Respondents will be able to use the plan for their own benefit in disregard of plan participants as long as they maintain the minimum amount of money in the fund.
Respondents point out that the plan benefits are fixed, therefore fluctuations in plan funding will not affect Petitioners financially, absent an “apocalyptic cascade of failures.” Response Brief for U.S. Bank, N.A. at 1, Thole v. U.S. Bank, N.A., No. 17-1712 (U.S. filed Nov. 12, 2019). The outcome of the case will not affect Petitioners, Respondents argue, because in addition to the lack of financial effect, the district court already determined that the practices that occurred ten years ago that Petitioners are seeking to enjoin will not resume. Respondents claim that Article III requires an individual claimant to suffer a concrete injury, which they believe is lacking here. Respondents add that the trust law Petitioners cite does not cure the issue and ERISA does not grant rights that supersede Article III requirements.
In reply, Petitioners counter that “it defies reality” to claim that ERISA scaled back rights recognized by the common law of trusts. Reply Brief for the Petitioners at 1–2, Thole, No. 17-1712 (U.S. filed Dec. 12, 2019). They claim that if Respondents were correct, plan beneficiaries could almost never sue under ERISA, and point out that shareholders are an improper replacement for beneficiaries as claimants.