The third time could be the charm for the U.S. Supreme Court to rule on the potentially explosive legal principle of loss causation that affects the management of and litigation against defined contribution plans.
On Jan. 11, Putnam Investments LLC asked the high court to settle the conflicting rulings among federal appeals courts over whether plaintiffs or defendants have the responsibility to prove losses in fiduciary breaches of the Employee Retirement Income Security Act.
Six appellate courts place the burden of proof on plaintiffs suing DC plan fiduciaries, while four appeals courts ruled the defendant sponsors must disprove any loss was linked to a fiduciary breach, said the petition in the case of Putnam Investments LLC et al. vs. Brotherston et al.
"This case offers a near-perfect opportunity to resolve a deep divide" among appeals courts, said Putnam's petition to the Supreme Court. "The continued split undermines ERISA's goal of uniformity. Nationwide uniformity is at the very heart of ERISA's purpose."
In June 2015, the Supreme Court declined to hear a loss-causation case, a month after then-U.S. Solicitor General Donald B. Verrilli Jr. recommended the court reject the petition in RJR Pension Investment Committee et al. vs. Tatum et al.
Asking the solicitor general's office for an opinion is common in high-profile ERISA cases, and the court again asked for an opinion in March 2018, following another loss-causation case petition in August 2017 for Pioneer Centres Holding Company Stock Ownership Plan et al. vs. Alerus Financial.
However, the court did not receive a response. In September 2018, the parties settled their differences and the Supreme Court dismissed the petition.
The Putnam case already has attracted considerable attention from interest groups, which filed amicus briefs as the case worked its way from U.S. District Court in Boston to a federal appeals court.
Putnam Investments was sued in November 2015 by participants in the company's 401(k) plan. They alleged Putnam favored proprietary products in the plan's investment menu without adequately considering cheaper, similar alternatives.