Conservative shift of court likely to mean much change

The suspense of which party will control the White House and the U.S. Senate in 2021 is compounded by the prospect of major changes at the Supreme Court as it prepares to consider cases dealing with retirement plan stock losses, securities class actions and multiemployer pension liability.

Those issues and many more in the years to come could be viewed through a more conservative lens, following the death of Justice Ruth Bader Ginsburg, one of the court's more liberal voices.

President Donald Trump on Sept. 26 nominated Judge Amy Coney Barrett of the 7th Circuit Court of Appeals in Chicago to fill Ms. Ginsburg's vacancy.

Ms. Barrett was nominated to the appellate court position by Mr. Trump in May 2017 and confirmed with bipartisan support in the Senate. If Ms. Barrett is confirmed to the Supreme Court, conservatives would hold a 6-3 majority compared with the current balance of 5-3 following Ms. Ginsburg's death.

Ms. Barrett, a former Notre Dame Law School professor who clerked for the late Supreme Court Justice Antonin Scalia, has been on the bench just three years, making it difficult to read much into her legal opinions beyond her stated preference for "flexible" interpretation of the legal principle honoring Supreme Court precedents.

Solidifying the court's conservative majority could lead to more legal precedents being overturned, which also can have a ripple effect on lower courts and even state legislatures that often take their cues from Supreme Court decisions.

Ms. Barrett said in a Rose Garden event announcing her appointment that the judicial philosophy of the outspokenly conservative Mr. Scalia "is mine."

During his tenure, Mr. Scalia was considered open to reversing prior Supreme Court precedent, which at times upended actions by federal regulators, including the Environmental Protection Agency.

Both Mr. Scalia and Ms. Barrett are considered originalists when it comes to interpreting the Constitution. Writing in a 2017 Notre Dame Law Review, Ms. Barrett said, "Originalism maintains both that constitutional text means what it did at the time it was ratified and that this original public meaning is authoritative. This theory stands in contrast to those that treat the Constitution's meaning as susceptible to evolution over time."

Her conservative credentials promise some heated attention when controversial cases come before the court. Less certain is how a more conservative court would address other issues up in the 2020-2021 term that begins Oct. 5.

Ms. Barrett could begin hearing cases as soon as she is confirmed.

On Dec. 9, the justices will hear arguments in Collins vs. Mnuchin to decide whether shareholders in Fannie Mae and Freddie Mac can challenge an agreement between the Federal Housing Finance Agency and the Treasury Department relating to the federal government's rescue of Fannie Mae and Freddie Mac during the global financial crisis.

Before then, the justices will have to decide whether to grant numerous petitions to take cases this term.

One petition, Hughes vs. Northwestern University, comes from participants in two defined contribution plans, seeking to reverse a 7th Circuit ruling dismissing their fiduciary breach case over alleged excessive record keeping and investment management fees. While the participants claim the court needs to resolve circuit splits, university officials disagree, arguing that it is a poor candidate for review because it is about the mix of available investment options, not losses.

Other petitions seek to reopen cases that were recently decided.

Fiduciaries of an IBM 401(k) plan have again asked the U.S. Supreme Court to overturn a pro-plaintiff ruling in June by a New York federal appeals court in a stock-drop case. In the case of Retirement Plans Committee of IBM et al. vs. Larry W. Jander et al., the IBM fiduciaries want the justices to resolve differing lower courts' interpretations of Supreme Court rulings on stock-drop cases brought by plan participants seeking to have sponsors cover the losses.

Goldman Sachs Group Inc. officials want the court to address what their petition calls "the most important securities case to come before the court" since a 2014 decision in Halliburton Co. vs. Erica P. John Fund Inc. The Halliburton decision was a significant victory for institutional investors in pursing securities class-action lawsuits, with the court unanimously refusing to overturn a presumption of reliance on a securities issuer's alleged misrepresentations as grounds for class-action certification.

The $15.3 billion Arkansas Teacher Retirement System, Little Rock, is the lead respondent in Goldman Sachs' petition questioning what it takes to challenge class certification assumptions.

In June, the Supreme Court unanimously upheld the authority of the Financial Oversight and Management Board overseeing Puerto Rico's bankruptcy and fiscal recovery plans, rejecting a challenge by bondholder Aurelius Investment LLC and a labor union representing electric utility employees. In the latest challenge, bondholder Andalusian Global Designated Activity Co. wants the court to decide if employer contributions to the Employees Retirement System of Puerto Rico can be claimed as collateral for the pension bonds, despite the oversight board's opposition.

Two multiemployer cases could also come before the Supreme Court this term.

In August, the New England Teamsters & Trucking Industry Pension Fund, Burlington, Mass., asked the court to revisit a long-running legal battle over whether private equity firms could be liable for pension liabilities of portfolio companies. As of Sept. 30, 2018, the fund listed assets of $4.3 billion.

The case involves an appeals court ruling favorable to private equity firm Sun Capital Partners, reversing an earlier court ruling that it was liable to the pension fund for withdrawal liability because two of its funds were actively engaged as a trade or business in a now-bankrupt portfolio company, Scott Brass Inc., rather than merely being passive investors. The Supreme Court rejected a petition to hear the case in 2014, dismissing without comment a petition from Sun Capital and an amicus brief from what was then called the Private Equity Growth Capital Council, after a lower court sided with the pension fund.

A second case questions whether and when multiemployer pension plan trustees can change actuarial assumptions for calculating a withdrawing employer's liability.

In an amicus brief filed in National Retirement Fund vs. Metz Culinary Management Inc., the $1.5 billion New York State Teamsters Conference Pension and Retirement Fund, which is involved in pending withdrawal liability arbitration with Metz, said the issue "comes at the worst possible time" for multiemployer plans and for the Pension Benefit Guaranty Corp., and should be resolved immediately. As of Oct. 1, the court had not made a decision on accepting the petition.