The Supreme Court signaled its interest in taking a case questioning whether fiduciaries bear the burden of proof and whether they can be liable for monetary damages.
In orders issued Monday, the Supreme Court asked for the solicitor general's opinion before deciding whether to grant the petition for review.
The petition, filed by RJR Pension Investment Committee et al. on Dec. 1, seeks to overturn an Aug. 4 decision by the 4th U.S. Circuit Court of Appeals in Richmond, Va. The circuit court ruled 2-1 that a defendant has the burden of proof if there is a breach of duty, and that a fiduciary can be held liable for damages even for a prudent decision. Five other circuit courts have ruled differently, keeping the burden of proving loss causation on the plaintiffs.
In an amicus brief supporting RJR, the U.S. Chamber of Commerce called the 4th Circuit decision that defendants must disprove loss causation “unworkable in practice.” Until the high court steps in, the chamber said, “fiduciaries and plan sponsors that operate in multiple states will face multiple different rules about their own liability for money damages.”
The “reverse stock-drop” case involves decisions made by fiduciaries of a 401(k) plan that included company stock. After RJR Nabisco Inc. spun off its tobacco business and plan investments were reset, the fiduciaries were sued for selling the company stock in the 401(k) plan too soon.