DOL Urges Expansive View of Pension Plan Standing

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

June 28 — The Labor Department is trying to use a recent U.S. Supreme Court decision under the Fair Credit Reporting Act to make it easier for workers to sue over pension mismanagement ( Fletcher v. Convergex Grp., LLC , 2d Cir., No. 16-00734, amicus brief filed 6/27/16 ).

The department in a June 27 brief asked the U.S. Court of Appeals for the Second Circuit to allow a worker covered by the Central States, Southeast and Southwest Areas Pension Plan to sue certain Convergex Group entities for allegedly charging hidden fees in the course of providing brokerage services. According to the department, the Supreme Court's recent decision in Spokeo Inc. v. Robins casts doubt on a district judge's decision denying the participant standing to sue.

In Spokeo, the justices held that plaintiffs alleging statutory violations must show concrete—but not necessarily tangible—injury to demonstrate standing. Although the Labor Department cited Spokeo in urging an expanded view of standing, other litigants have cited it in opposingstanding, suggesting that the decision may have raised more questions than it answered.

The question of constitutional standing has derailed a number of recent lawsuits involving defined benefit pension plans. Judges have reasoned that because benefits are by nature defined, it's difficult for participants to show that they've been injured by mismanagement, unless that mismanagement is so severe that it threatens their ability to receive benefits.

This reasoning has led to appellate rulings in favor of Verizon Communications Inc. and Bank of America Corp., although the Supreme Court recently ordered reconsideration of the Verizon decision in light of Spokeo.

Department's Arguments

In the lawsuit against Central States' brokers, the district judge found that the participant hadn't suffered an injury giving rise to standing. That's because the complained-of conduct caused plan losses of less than $2,000, which was "minute" compared with the plan's $16 billion underfunding, the judge said.

The department used its brief to attack this reasoning, arguing that a pension plan participant's right to “proper fiduciary conduct” is sufficient to establish both constitutional and representational standing to sue the plan's fiduciaries.

Specifically, the department argued that plan participants such as the plaintiff in this lawsuit “are statutorily granted the right to police fiduciary obligations through civil actions.”

The department also argued that the “undisputed” plan losses of $1,578 was a sufficiently tangible harm to establish constitutional standing.

M. Patricia Smith, G. William Scott, Thomas Tso and D. Marc Sarata submitted the department's June 27 brief.

The department's arguments were echoed in a similar brief filed on June 27 by the AARP. The AARP argued that a pension plan participant's right to sue for fiduciary breaches shouldn't be conditioned on the plan's funded status.

To contact the reporter on this story: Jacklyn Wille in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at

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