Plaintiffs in a defined contribution plan fiduciary breach case, Tussey et al. vs. ABB Inc. et al., have filed an appeal with the U.S. Supreme Court.
In their petition filed on Tuesday, the plaintiffs asked the Supreme Court to review the Tussey case and another fiduciary breach case, Tibble et al. vs. Edison International et al., arguing federal appeals courts are using different standards to rule on complaints regarding fiduciaries’ “statutory duties of prudence and loyalty.”
The petition, asking the Supreme Court to establish a single standard, was filed by the lead attorney for the plaintiffs, Jerome J. Schlichter, founding and managing partner of law firm Schlichter, Bogard & Denton.
The request follows a split decision by a three-judge panel for the 8th U.S. Circuit Court of Appeals, St. Louis, in March over claims by current and former participants in two 401(k) plans at ABB Inc., Cary, N.C. Attorneys representing both the plaintiffs and ABB had asked the full court to rehear the case, but were denied.
“The courts of appeals are divided over whether to defer to plan administrators in cases asserting breaches of ERISA’s statutory fiduciary duties,” the Aug. 5 petition said. It added rulings by the 2nd U.S. Circuit Court of Appeals and the 3rd Circuit Court of Appeals differ in their standards from rulings by the 8th Circuit Court of Appeals as well as the 9th Circuit Court of Appeals.
Ruling in the Tussey case this past March, the 8th Circuit Court:
- Upheld a federal district court judge's ruling that ABB had violated its fiduciary duties by, among other things, failing to control record-keeping costs. The district court ordered ABB to pay $13.4 million to the plaintiffs.
- Reversed the district court judge's ruling that Fidelity Investments breached its fiduciary duty by improperly managing float income — money earned from interest-bearing accounts used temporarily by 401(k) plans before plan assets are disbursed when participants move assets among investment options. The reversal removed the $1.7 million penalty assessed by the district court judge.
- Vacated the district court judge's ruling, and a $21.8 million judgment against ABB, that criticized ABB for mapping one investment in the 401(k) plans' menu — Vanguard's Wellington Fund — to the Fidelity Freedom Funds target-date series. The appeals court panel sent this matter back to the lower court for further consideration.
In March 2013, the appellate court for the 9th Circuit found that Edison International breached its fiduciary responsibilities by selecting retail-class shares in an investment fund, instead of lower-cost institutional-class shares. Mr. Schlichter is the lead counsel for the Tibble case plaintiffs.
In March 2014, the U.S. Supreme Court asked the attorneys for the U.S. Labor Department and Justice Department to submit comments about the Tibble case, a strong indication the court is interested in reviewing it.
