Supreme Court Decides Thole v. U.S. Bank N.A.

On June 1, 2020, the U.S. Supreme Court decided Thole v. U.S. Bank N.A., holding that participants in a defined-benefit pension plan who have so far been paid all of their pension benefits lack Article III standing to sue for breaches of fiduciary duty under the Employee Retirement Income Security Act of 1974 (ERISA), regardless of any injuries to the plan itself.

James Thole and Sherry Smith (the plaintiffs) are retirees and vested participants in U.S. Bank’s defined-benefit retirement plan. (Participants in a defined-benefit plan are entitled to receive fixed payments during retirement, regardless of the plan’s value or the performance of the investments made by the plan’s fiduciaries.) The plaintiffs have received all of their promised monthly pension benefits so far, and are entitled to receive those same payments for the rest of their lives.

The plaintiffs filed a putative class action against U.S. Bank, alleging that U.S. Bank violated ERISA’s fiduciary duties of prudence and loyalty by poorly investing the plan’s assets and causing the plan approximately $750 million in losses. They sought to recover actual damages and attorneys’ fees, among other things. The district court dismissed the case, and the Eighth Circuit affirmed on the ground that the plaintiffs lacked statutory standing under ERISA.

The Supreme Court affirmed. The Court observed that the outcome of the lawsuit would not change the plaintiffs’ financial status: they have received all of the benefits to which they are entitled to date, and their future benefit payments would not be affected by the outcome of the lawsuit— they win or lose the lawsuit, their monthly payments will be the same. Thus, the Court concluded that the plaintiffs had no concrete stake in the lawsuit, and therefore lacked standing to sue. The fact that their attorneys’ had a stake in the lawsuit to recover their fees did not matter, as an interest in attorney’s fees is not enough to create an Article III case or controversy where there is no such case or controversy on the merits of the claim.

The Court rejected the plaintiffs’ argument, based on an analogy to trust law, that participants in a defined benefit pension plan have an equitable or property interest in the plan as a whole, such that injuries to the plan are by definition injuries to the participants. The Court noted that defined benefit plans are more like contracts than trusts, because the plan participants’ benefits are fixed and do not change based on how well or poorly the plan is managed. In a trust, by contrast, the management of the plan’s assets directly affects the amount of money the beneficiaries will receive. And the Court has held that plan participants have no equitable or property interest in a defined-benefit plan itself.

The Court also rejected the plaintiffs’ arguments based on representative standing and statutory standing under ERISA. First, the Court noted that the plaintiffs could not sue as representatives of the plan without having suffered a concrete injury-in-fact themselves or having been legally or contractually assigned the plan’s claims. Second, the Court held that Article III requires a concrete injury even in the context of statutory violations, so ERISA’s statutory standing provisions cannot confer Article III standing.

Finally, the Court rejected the plaintiffs’ argument that fiduciaries of defined-benefit-plans would go unregulated if the participants lacked standing to sue for breaches of fiduciary duties. The Court responded that it has long held that the “assumption that if [plaintiffs] have no standing to sue, no one would have standing, is not a reason to find standing.” The Court also noted that employers already have strong incentives to monitor defined benefit plan fiduciaries (so that they are not liable for any shortfalls to defined benefit plan participants) and that the Department of Labor has the authority to enforce ERISA’s fiduciary obligations.

Justice Kavanaugh delivered the opinion of the Court, in which Chief Justice Roberts and Justices Thomas, Alito, and Gorsuch joined. Justice Thomas filed a concurring opinion, joined by Justice Gorsuch. Justice Sotomayor filed a dissenting opinion, in which Justices Ginsburg, Breyer, and Kagan joined.