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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_.
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