Seeking to defeat ERISA complaints, some defined contribution sponsors are using a 13-month-old, pro-sponsor ruling by the U.S. Supreme Court that addressed defined benefits plans.
However, at the federal District Court level so far, most judges have rejected this DC legal defense, citing the Supreme Court's 5-4 ruling as making a distinction between DC and DB.
The key issue was whether DB participants had standing to sue if they weren't hurt by a sponsor's plan management. Because the DB plan was overfunded in the case of Thole et al. vs. U.S. Bank, NA, the Supreme Court said plaintiffs weren't harmed and thus lacked standing.
If DC sponsors could successfully use this "no harm, no foul" ruling, then they could persuade judges to dismiss complaints, thus reducing the costs of going to trial.
Since the Thole decision, at least a baker's dozen of federal court judges have said what's good for a sponsor's DB defense isn't acceptable in a DC setting. "Standing is the first rung on the ladder," said Nancy Ross, a Chicago-based partner for Mayer Brown LLP who represents some DC sponsors that have attempted to use the Thole decision as part of their defense. Like others interviewed for this article, she declined to discuss clients' cases.
"There is no quicker or easier way to knock out a case than with standing," Ms. Ross said. "If they don't have standing, it's done."
Just as plaintiffs' attorneys often file multiple allegations, sponsors' attorneys erect multiple defenses. The Thole strategy "is an additional way to make the argument," said Jerome Schlichter, founding and managing partner of Schlichter Bogard & Denton LP, St. Louis. He represents plaintiffs in ERISA cases, including some in which sponsors cited the Thole decision to claim participants lack standing to sue.