Putnam Continues Fight for Supreme Court Look at ERISA Causation

Putnam Investments LLC redoubled its effort to have the U.S. Supreme Court hear a dispute over its 401(k) plan, calling the federal government’s recent brief in the case a “self-interested” attempt to avoid the resolution of an entrenched circuit split.

The case gives the court the opportunity to resolve a 6-4 split among federal circuit courts on how parties prove whether retirement plan mismanagement caused plan losses, Putnam said. This question has come to the Supreme Court three times since 2015, and the government’s agreement with the minority position “is no reason to leave the circuits split,” Putnam said in its Dec. 10 brief.

The case asks which litigants—the fiduciaries of employee benefit plans or the people covered by those plans—have the burden of proving that alleged fiduciary misconduct caused plan losses. After the Putnam plan participants showed they suffered losses related to the fiduciaries’ actions, the U.S. Court of Appeals for the First Circuit placed the burden on Putnam to prove that it didn’t cause those losses.

Putnam says this decision caused the First Circuit to join the Fourth, Fifth, and Eighth circuits on the pro-employee side of a split, with six other courts taking a more fiduciary-friendly approach.

U.S. Solicitor General Noel J. Francisco advised the Supreme Court against taking Putnam’s case after the court requested the government’s input. Francisco said the First Circuit decided the case correctly, and he pointed out that the case’s unusual procedural posture—in which the First Circuit reviewed a court order issued midway through a non-jury trial—made the case a poor candidate for Supreme Court review.

Putnam disputed these arguments. The federal government “litigates fiduciary-breach cases as a plaintiff” and therefore “understandably” prefers that the First Circuit’s approach of placing the burden on defendants be upheld, Putnam said. But that’s no reason to allow a “calcified split” among the federal appeals courts to remain intact, Putnam said.

The Supreme Court has twice before asked the federal government to file a brief stating its position on loss causation under the Employee Retirement Income Security Act. The U.S. solicitor general praised the employee-friendly approach but successfully persuaded the court against taking up the issue in 2015.

In 2018, the underlying case was voluntarily dismissed before the government filed a brief.

Goodwin Procter LLP and Skadden, Arps, Slate, Meagher & Flom LLP represents Putnam. Nichols Kaster PLLP represents the Putnam employees.

The case is Putnam Investments LLC v. Brotherston, U.S., No. 18-926, supplemental brief 12/10/19.