Pension & Benefits Daily™ covers all major legislative, regulatory, legal, and industry developments in the area of employee benefits every business day, focusing on actions by Congress,...
Sept. 16 — Verizon Communications Inc.'s decision to “de-risk” and remove 41,000 retirees from its pension plan once again survived judicial scrutiny, despite an intervening U.S. Supreme Court case affecting the retirees’ ability to demonstrate standing ( Lee v. Verizon Commc’ns, Inc. , 2016 BL 302784, 5th Cir., No. 14-10553, 9/15/16 ).
The U.S. Court of Appeals for the Fifth Circuit for the second time found that Verizon retiree Edward Pundt lacked standing under Article III of the U.S. Constitution to challenge the pension transfer, because his benefits were never threatened and he therefore suffered no injury. The Fifth Circuit said in its Sept. 15 ruling that the Supreme Court’s intervening decision in Spokeo, Inc. v. Robins did nothing to change its earlier standing analysis—in fact, the Fifth Circuit republished its 2015 decision in favor of Verizon, adding only a six-page analysis of Spokeo as preface.
This move by the Fifth Circuit is one of a growing number of cases limiting the ability of pension plan participants to sue over plan mismanagement that doesn’t directly threaten their ability to receive benefits. Because pension benefits are by nature defined, courts often find that participants haven’t suffered an injury sufficient to confer standing unless the alleged mismanagement is so serious that their benefits are jeopardized.
While this reasoning has led to victories for pension plan sponsors and such service providers as Bank of America Corp., Convergex Group and Avon Products Inc., the Department of Labor is actively fighting this trend. In June, the department filed a brief urging the Second Circuit to interpret Spokeo as making it easier for pension participants to demonstrate standing.
Michelle C. Yau, counsel for Pundt and a partner with Cohen Milstein Sellers & Toll PLLC in Washington, said that the standing analysis employed by the Fifth Circuit fails to appreciate the importance of trust law.
“We believe that under Spokeo, participants in defined benefit pension plans have Article III standing to sue, just as they did under trust law, whenever there is a breach of fiduciary duty that causes losses to the plan,” Yau told Bloomberg BNA Sept. 16.
“Because Pundt’s fiduciary breach claims are essentially the same as trust law claims that have been recognized in the common law since before the passage of the Constitution, there is no question that Plaintiff Pundt has standing to sue,” she said.
Counsel for Verizon didn’t respond to Bloomberg BNA’s request for comment.
In the Spokeo decision earlier this year, the Supreme Court held that plaintiffs alleging statutory violations must show concrete—but not necessarily tangible—injury to demonstrate standing. In so ruling, the justices ordered a federal appeals court to reconsider whether a man had standing to sue a website for posting inaccurate, but not necessarily negative, information about him.
One week after that ruling, the Supreme Court ordered the Fifth Circuit to reconsider the Verizon case through the lens of Spokeo.
Obeying these instructions, the Fifth Circuit found that its previous ruling “remains as valid in light of Spokeo as it was before Spokeo was decided.”
Specifically, the Fifth Circuit interpreted Spokeo as requiring that a plaintiff challenging a statutory violation—such as pension mismanagement in violation of the Employee Retirement Income Security Act—show that the violation carries “a risk of real harm” to the plaintiff.
“A bare allegation of improper defined-benefit-plan management under ERISA, without concomitant allegations that any defined benefits are even potentially at risk, does not meet the dictates of Article III; concluding otherwise would vitiate the Supreme Court’s explicit pronouncement that ‘Article III standing requires a concrete injury even in the context of a statutory violation,’” the Fifth Circuit explained.
Judge Fortunato P. Benavides wrote the court’s opinion, which was joined by Judges Leslie H. Southwick and Gregg J. Costa.
Cohen Milstein Sellers & Toll PLLC and Curtis L. Kennedy represented the retiree. Covington & Burling LLP represented Verizon.
To contact the reporter on this story: Jacklyn Wille in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jo-el J. Meyer at email@example.com
Text of the decision is at http://www.bloomberglaw.com/public/document/Lee_v_Verizon_Commcns_Inc_No_1410553_2016_BL_302784_5th_Cir_Sept_.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)