Bloomberg Law
June 28, 2019, 1:34 PMUpdated: June 28, 2019, 4:14 PM

U.S. Bank Pension Case Gets Supreme Court Review (1)

Jacklyn Wille
Jacklyn Wille
Lydia Wheeler
Lydia Wheeler

The U.S. Supreme Court will decide whether pension plan participants’ ability to sue over alleged plan mismanagement varies based on how well the plan is funded.

The justices agreed June 28 to review the matter in a lawsuit pension plan participants brought against U.S. Bank after it allegedly lost more than $1 billion in pension assets through risky investments.

The dispute marks the third case brought under the Employee Retirement Income Security Act that the Supreme Court has agreed to hear next term. ERISA is complex, but it is also extremely important because it sets standards for most retirement and health-care plans.

James Thole and Sherry Smith allege U.S. Bank violated the basic fiduciary principles of prudence and loyalty when it invested the entirety of the plan’s assets in high-risk equities, a move they say caused massive plan losses that U.S. bank must now pay back.

But the U.S. Court of Appeals for the Eighth Circuit tossed out their case. The Eighth Circuit said the bank’s pension plan had recovered and was now in a healthy financial condition, which meant the participants hadn’t suffered any financial losses, an injury that would give them standing to sue.

The executive branch disagrees, arguing a fiduciary breach is enough for plan participants to seek injunctive relief.

In the government’s view, a fiduciary’s breach of duty is an injury giving rise to standing, regardless of whether it causes a pension plan to lose money. The government has long advanced this position, with the Labor Department making similar arguments in cases against Bank of America, Aegon USA, and Convergex Group LLC.

Circuits Split

Federal appeals courts, meanwhile, are split on the issue.

The Second, Third, and Sixth circuits have largely followed the government’s approach, while the the Fourth, Fifth, and Ninth circuits have denied standing to benefit plan participants in similar contexts. Unlike the other circuits, the Eighth Circuit charted a slightly different course in the case against U.S. Bank. It denied standing to the pension plan participants under the statutory requirements of ERISA instead of under the U.S. Constitution, as other courts have done.

“The circuit courts, including the Eighth Circuit here, have wrongly denied participants in defined benefit plans their right to hold fiduciaries accountable for even the most egregious misconduct,” Thole and Sherry’s attorney Peter Stris, founding partner of Stris & Maher LLP, said in a statement. “Under the Eighth Circuit’s rule, participants could do nothing to stop a fiduciary from betting their retirement savings on horse races until the plan was underfunded.”

Stris called the court’s decision “unconscionable” and said it “conflicts with the remedies Congress explicitly authorized.” He said centuries of precedent allow trust beneficiaries to sue for fiduciary misconduct.

Administration Weighs In

The justices agreed to hear the case one month after U.S. Solicitor General Noel J. Francisco filed a brief advising them to take it up. The justices also followed Francisco’s advice to have the parties address constitutional standing in addition to ERISA standing.

The Department of Justice said in a statement that it was pleased the court agreed to take the case.

The other two ERISA cases the Supreme Court agreed to hear raise questions about process in ERISA litigation. In Intel Corp. Investment Policy Committee v. Sulyma, the justices have been asked to decide when the clock starts ticking on the three-year statute of limitations for lawsuits filed under the federal law.

In Retirement Plans Committee of IBM v. Jander, the court will look at the standards participants must meet when trying to sue plan managers when stocks drop and their retirement plans lose money.

U.S. Bank did not immediately respond to a request for comment.

The case is Thole v. U.S. Bank, N.A., U.S., No. 17-1712, certiorari granted 6/28/19.

(Updated with additional reporting throughout.)

To contact the reporters on this story: Jacklyn Wille in Washington at; Lydia Wheeler in Washington at

To contact the editors responsible for this story: Jo-el J. Meyer at; Andrew Childers at