Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
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.
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 email@example.com
To contact the editor responsible for this story: Jo-el J. Meyer at firstname.lastname@example.org
Text of the department's brief is at http://www.bloomberglaw.com/public/document/Fletcher_v_Convergex_Group_LLC_Docket_No_1600734_2d_Cir_Mar_09_20.
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 email@example.com.
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 firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)