The Supreme Court of the United States has held many times that the federal courts do not have jurisdiction over a lawsuit unless the plaintiff has standing to sue under the federal Constitution. To have standing, the Court has said that the plaintiff must show that he or she suffered or imminently will suffer a concrete and particularized injury to his or her legal rights; that the injury is fairly traceable to the conduct of the defendant; and that the injury can be redressed by a judgment of the court.

On June 1, 2020, the Supreme Court issued a 5-4 decision in Thole v. U.S. Bank N.A., No. 17-1712, holding that participants in a defined benefit pension plan lack standing under Article III of the Constitution to seek injunctive relief. The participants’ claim for relief was based on alleged fiduciary breaches involving investment of the plan’s assets when there has been no financial harm to the participants and no showing that their benefit payments would be affected by the outcome of the case. Under those circumstances, the Court ruled, the Thole plaintiffs did not have a concrete stake in the lawsuit, and therefore did not have Article III standing.

Factual Background

The plaintiffs, retired participants in the U.S. Bank Pension Plan, brought a putative class action against U.S. Bank N.A., U.S. Bancorp, and multiple U.S. Bancorp directors for breach of fiduciary duty and engaging in prohibited transactions in connection with the investment of a defined benefit pension plan’s assets. According to the plaintiffs, the defendants’ investment of plan assets caused the plan to become underfunded. The plaintiffs sought various forms of relief under sections 502(a)(2) and 409 and section 502(a)(3) of the Employee Retirement Income Security Act (ERISA).

A defined benefit plan offers participants and beneficiaries a defined benefit upon retirement.  Payment of the promised benefit typically is made from a trust that holds employer contributions plus earnings and is adjusted to reflect investment gains or losses. Although the trust is the source of each participant’s benefit, individual participants do not have a claim to or interest in the trust assets. ERISA establishes a standard for determining the minimum amount of a trust’s assets necessary to fund the promised benefits.

The plaintiffs alleged that the trust was underfunded during 2007-2010. However, after the lawsuit was filed, the defendants contributed enough funds to cause the plan to exceed the minimum funding standard, or to be “overfunded.” At all times the plaintiffs received all of the benefit payments due to them under the plan. The defendants filed a motion to dismiss for lack of standing, arguing that the plaintiffs had not suffered a monetary loss and, thus, had not suffered any harm.

The district court granted the motion to dismiss on the grounds that the contributions made after the action was filed made the case moot. The plaintiffs appealed the dismissal.

On appeal, the U.S. Court of Appeals for the Eighth Circuit affirmed the district court’s dismissal but based its decision on a lack of “statutory standing” under ERISA. According to the court of appeals, when a defined benefit plan is overfunded, no actual or imminent injury to the plan exists and participants are not within the class of plaintiffs authorized to sue under ERISA.

The Supreme Court granted the plaintiffs’ petition to review. The plaintiffs sought review on two questions:

  1. Whether an ERISA plan participant or beneficiary may seek injunctive relief against fiduciary misconduct under section 502(a)(3) without demonstrating individual financial loss or the imminent risk thereof.
  2. Whether an ERISA plan participant or beneficiary may seek restoration of plan losses caused by fiduciary breach under section 502(a)(2) without demonstrating individual financial loss or the imminent risk thereof.

The Supreme Court granted the plaintiffs’ petition and further directed the parties to submit briefs addressing whether the plaintiffs had Article III standing.

Supreme Court Decision

The Supreme Court noted that, in order to have standing under Article III of the Constitution, a plaintiff must demonstrate (1) that he or she suffered an injury in fact that is concrete, particularized, and actual or imminent, (2) that the injury was caused by the defendant, and (3) that the injury would likely be redressed by the requested judicial relief. Here, the plaintiffs had a legally enforceable right to continue to receive the precise amount of the monthly benefits due to them, no more or no less, regardless of the outcome of the suit. Therefore, the Court ruled, the plaintiffs had no concrete stake in the suit and lacked Article III standing. Nevertheless, the participants put forth four arguments, which the Court struck down.

First, the Court rejected the plaintiffs’ attempt to analogize to trust law. The Court found that defined benefit plan participants are not similarly situated to trust beneficiaries because the participants’ benefits will not change based on how the plan is managed. The sponsoring employer, rather than the plan participants, is entitled to surplus funds and responsible for funding shortfalls.

The Court next rejected the plaintiffs’ argument that they had standing as representatives of the plan. According to the Court, the plaintiffs did not suffer an injury, which means they had no concrete stake in the suit. Additionally, the plan’s claims had not been legally or contractually assigned to the plaintiffs.

Third, the Court dismissed the plaintiffs’ assertion that they had Article III standing because they had “statutory standing,” that is, that they had Article III standing because ERISA grants them (along with all plan participants) a cause of action to seek recovery of plan losses and other equitable relief. The Court noted that statutory standing does not obviate the need to satisfy Article III’s standing requirements.

Finally, the plaintiffs argued that if defined benefit plan participants lack standing in these instances, there will be no check on plan fiduciaries. The Court stated that it had previously rejected that argument in favor of Article III standing. Moreover, the Court noted there are multiple mechanisms by which defined benefit plans are regulated and monitored.

The Court then turned to the argument, advanced by plaintiffs’ amici, that defined benefit plan participants should have standing if the fiduciaries’ behavior “was so egregious that it substantially increased the risk that the plan and the employer would fail and be unable to pay the participants’ future pension benefits.” The Court rejected this argument because the plaintiffs did not assert this theory before the Court, nor did they claim in their complaint that the defendants’ alleged mismanagement made plan failure likely.

Key Takeaways

As with so many other Supreme Court ERISA decisions, the impact of the holding in Thole may go well beyond the precise context of that case.

Narrowly, the Court’s ruling means that defined benefit plan participants will not have standing to sue plan fiduciaries for breaches of fiduciary duty arising out of mismanagement of trust assets as long as the participants receive all benefits to which they are entitled. As long as they receive their vested benefits, the participants have not suffered harm and have no concrete interest in the outcome of the suit. One potential caveat is the argument the Supreme Court did not address, i.e., whether it is possible for retirement plan participants to allege that mismanagement of the plan was so egregious that the plan would be unable to pay future benefits.

Although the decision expressly applies to defined benefit plan participants, its holding could have broader implications. Claimants who seek a penalty based on a failure to provide a summary plan description within 30 days of a written request may need to plead and prove that they do not already have a copy. To take another example, the Supreme Court distinguished defined benefit plans from defined contribution pension plans (e.g., 401(k) and 403(b) plans) because in the latter plans, participants have a direct equitable interest in the assets in their individual accounts. How the Court’s decision impacts claims under defined contribution plans remains to be seen.

Also, healthcare providers often bring claims against health benefit plans as assignees of their participants or as attorneys-in-fact of their patients. In these situations, there is an understanding—and sometimes a contractual guarantee—that the provider will not pursue a claim against the participant for money allegedly owed by the health plan if the provider is not able to recover against the health plan. In such cases, providers may not be able to pursue such claims if the patient/plan participant has no liability and, therefore, no harm.


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