WASHINGTON (Reuters) - The U.S. Supreme Court on Friday agreed to consider reviving a class action lawsuit against U.S. Bancorp that accused it of mismanaging an employee pension plan in a manner that violated the Employee Retirement Income Security Act (ERISA).
The justices took up an appeal by the bank’s pension plan beneficiaries of a lower court ruling that threw out the lawsuit because the plan’s participants had not suffered any personal financial harm and lacked the necessary legal standing to sue. The plaintiffs said the plan’s administrators pursued an investment strategy that, beginning with the 2008 financial crisis, led to nearly $750 million in losses.
The plaintiffs accused pension plan managers of breaching their fiduciary duty toward them from late 2007 to 2010 by adopting an overly risky and conflicted strategy of piling the plan’s assets solely into equities and a bank subsidiary’s mutual funds.
Plan participants, led by retired Missouri bank accountant James Thole, filed the proposed class action lawsuit in 2013 in federal court in Minneapolis, where the company is based.
ERISA, enacted in 1974, is a federal law that set up minimum standards for most voluntarily established retirement and health plans in private industry to protect beneficiaries. At issue is whether the plaintiffs can sustain their lawsuit alleging ERISA violations even if there is no current risk that the bank will not fulfill its pension obligations.
The lawsuit alleged that the 2008 stock market crash caused the plan’s assets to plummet in value, causing it to be underfunded.
The St. Paul, Minnesota-based 8th U.S. Circuit Court of Appeals in 2017 threw out the lawsuit because in the course of the litigation the bank made contributions and returned the plan to a surplus. The 8th Circuit said that since the plan had become overfunded there was no risk of underpayment of participants’ benefits, eliminating the basis for a lawsuit.
Backed by President Donald Trump’s administration, the plaintiffs urged the justices to hear their appeal and revive the lawsuit. The Justice Department told the justices that pension plans may frequently swing between overfunded and underfunded.
“It would be bizarre to tether a plaintiff’s standing - and thus a federal court’s power to hear a case - to such a volatile and arbitrary metric,” the Justice Department said in a legal filing.
The court will hear arguments in the case during its next term, which begins in October, with a ruling due before June 2020.
Reporting by Andrew Chung; Editing by Will Dunham