Thole v. U.S. Bank

The Employee Retirement Income Security Act (ERISA) regulates the administration of employee benefit plans such as pension plans. To protect workers’ retirement benefits, ERISA requires those in charge of administering employee benefit plans—known as fiduciaries—to act in the best interest of plan participants and beneficiaries and to avoid various types of transactions that raise concerns about self-dealing and conflicts of interests.

This case concerns defined-benefit plans, which entitle employees or their beneficiaries to a pension payment. In a defined-benefit plan, pension benefits are paid out of a common pool of assets.  ERISA requires fiduciaries to manage those assets prudently and to diversify investments to mitigate the risk of financial loss. ERISA also requires employers to make contributions to a defined-benefit plan if plan assets are not sufficient to pay anticipated benefits. A plan is “overfunded” if it has more than enough assets to pay pension benefits, as calculated under ERISA’s accounting rules.

ERISA authorizes plan participants and beneficiaries to sue fiduciaries who violate their ERISA responsibilities and thereby cause financial injury to the plan. The plaintiffs in this case are plan participants who sued the fiduciaries of their pension plan for alleged misconduct that caused the plan to suffer significant losses at the time of the financial crisis. While the lawsuit was pending, U.S. Bank made additional contributions to the plan that caused the plan to become overfunded. Those contributions, however, did not restore plan assets to what they would have been if the alleged misconduct had not occurred. The lower courts determined that, because the plan had become overfunded, the plaintiffs could be assured of their pension benefits, and therefore they could not maintain their lawsuit against the plan’s fiduciaries for their alleged misconduct.

In the Supreme Court, Public Citizen filed an amicus brief that argued that the plaintiffs had standing to sue plan fiduciaries without regard to whether the plan is overfunded. Our amicus brief argued that Congress had authorized plan participants such as plaintiffs to bring suit on behalf of the plan against fiduciaries whose misconduct caused financial harm to the plan, and did not exclude overfunded plans from that grant of authority.  When a plan is financially harmed by misconduct, the brief explained, the participants do not have to suffer a distinct harm to themselves in order to represent the plan’s interests in litigation; Congress’s decision to vest plan participants with the right to represent the plan is entitled to respect by the courts because participants and beneficiaries are often the only private parties who can hold fiduciaries accountable for their misconduct, and because Congress’s decision drew upon the rights and remedies that beneficiaries have long enjoyed under traditional trust law principles.

The Supreme Court, however, held that the plaintiffs lacked standing, because their monthly pension benefits would not change based on the outcome of the litigation and because they did not have an equitable or property interest in the plan. The Court also held that the plaintiffs could not represent the plan in litigation where the plaintiffs had not suffered injury-in-fact and had not been legally or contractually appointed to represent the plan.