"The district court incorrectly placed the burden of proof on the participants to show loss causation, when it should have applied a burden-shifting framework, adopted from trust law, that places the burden to disprove loss causation on the fiduciary after a plaintiff demonstrates a fiduciary breach and a related loss," said the Labor Department's filing of an amicus brief Feb. 10 with the 11th U.S. Circuit Court of Appeals in Atlanta.
DOL amicus briefs in ERISA cases below the Supreme Court level are rare. Different appeals courts have issued different rulings on whether a plaintiff must prove a loss in an ERISA fiduciary breach case or whether the defendant must disprove that a loss occurred.
The DOL document said five U.S. appeals courts have ruled that the burden belongs to the defendant once plaintiffs have proven a breach of fiduciary duty and a related loss to a retirement plan. One appeals court said the burden is on the plaintiffs. The 11th Circuit hasn't issued an opinion on loss causation in ERISA cases.
"Because ERISA is silent on who bears the burden of proving loss causation in fiduciary breach cases, the majority of courts to consider the question have adopted the trust-law rule that once a plaintiff proves a fiduciary breach and a related loss, the burden shifts to the breaching ERISA fiduciary to disprove loss causation," the DOL wrote .
The U.S. Supreme Court was asked to address the causation, but it declined in January 2020 — without giving a reason — to hear a petition by Putnam Investments seeking to overturn an appeals court ruling that supported a plaintiff's allegations in a 401(k) lawsuit.
The plaintiffs filed an initial lawsuit in April 2018 — and later amended it — accusing Home Depot and plan fiduciaries of charging excessive fees, failing to remove poor-performing investments from the plan lineup and failing to "prudently monitor" investment advisory fees.
U.S. District Court Judge Steven D. Grimberg, Atlanta, wrote Sept. 30 that he was granting summary judgment for Home Depot.
"Plaintiffs have failed to adduce evidence to show why the plan's fees for professional management, expressed in basis points or per capita, were imprudent or imprudently bargained, let alone a result of anything other than the plan's unique characteristics," Mr. Grimberg wrote
A motion for summary judgment is usually filed after the parties have completed discovery, giving a judge the opportunity to review details of a case. A motion to dismiss, usually requested soon after a complaint is filed, argues that the plaintiff has failed to state a claim.
"There is no evidence that Home Depot defendants' actions or inactions caused the plan a loss," Mr. Grimberg wrote.
The DOL argued that Mr. Grimberg "deviated from the weight of circuit authority and the law of trusts and instead placed the burden of loss causation solely on plaintiffs."
By reversing the lower court decision, the appeals court "would promote uniformity in the governance of ERISA's plans by aligning with its sister circuits" that place the onus on defendants rather than plaintiffs, the DOL wrote.
The Home Depot FutureBuilder, Atlanta, had $12.8 billion in assets as of Dec. 30, 2021, according to the latest 11-K statement.