That same year, 2016, the court found itself with a 4-4 split due to the passing of Justice Scalia in two major cases, Friedrichs v. California Teachers Association and United States v. Texas. In both of those cases, the court deadlocked. This means the underlying court’s decision was questioned (and therefore couldn’t be relied upon by other courts as guidance) and yet no new law of the land resulted.
2020 was set to be a busy year at the U.S. Supreme Court on ERISA topics. Potentially game changing opinions, like with the Thole v. US Bank which curtailed who could bring cases seeking relief, were waiting in the wings. Some plan sponsors may have been readying themselves for a surprise. Unfortunately the surprise may be the passing of Justice Bader Ginsburg leaving the Court to start its October session with an even number of Justices. Here is a quick look at how a split court could impact ERISA decisions this Fall. As always, we recommend that plan sponsors consult with their attorneys, tax advisors and human resources personnel on this topic.
The Thole case, mentioned above, was a 5-4 decision which shows how closely divided the Court may have been on ERISA and benefits law as recently as June of 2020. By way of reminder, Thole involved whether a plan participant under a defined benefit plan could sue the company and its directors for breach of fiduciary duty for investment decisions. As well summarized by Mark E. Schmidtke, the Court ruled: “ participants in a defined benefit pension plan lack standing under Article III of the Constitution to seek injunctive relief. The participants’ claim for relief was based on alleged fiduciary breaches involving investment of the plan’s assets when there has been no financial harm to the participants and no showing that their benefit payments would be affected by the outcome of the case. Under those circumstances, the Court ruled, the Thole plaintiffs did not have a concrete stake in the lawsuit, and therefore did not have Article III standing..”[1] In summary, plan participants cannot sue the plan sponsors solely because they don’t agree with various decisions. Instead, they must wait until those decisions have an actual or tangible result.
Thole was a close decision, with newly appointed Justice Kavanaugh writing the majority opinion for the Court, and Chief Justice Roberts, Justices Thomas, Alito and Gorsuch joining. Justices Sotomayor, Ginsburg, Breyer and Kagan dissented. In other words, the Justices lined up fairly closely to their alleged political persuasions (the majority being conservative, the minority being liberal). One would think an eight justice panel of judges, rather than nine, would result in Court splits that were five to three, not four to four. However, take note that Justice Thomas, who is the most prolific of the Justices on the topic of ERISA and employee benefits cases (prior to the bench, he was the chair of the EEOC). In Thole, however, he wrote a separate concurring opinion.
This may sound like dinner party chatter among lawyers, about concurring and dissenting opinions, but it has real impact on what the actual law of the land is. There are decisions where the Justices cannot all agree. A tied decision means there is no decision. Splitting the baby does not result in two babies: instead it results in some vague guidance but no actual impact. It’s a bit like your grandma telling you to “be good, and if you can’t be good, then name them after me.”
Normally, the Supreme Court will only find itself with an even number of Justices when one has to recuse themselves due to a potential conflict of interest. Justices must recuse themselves when they have a financial interest in the outcome of the case or where they may have other interests, such as in the 2016 case of Fisher v. University of Texas, in 2016 where Justice Kagan recused herself as she was heavily involved in the preparation of the case when she was solicitor general.[2]
That same year, 2016, the court found itself with a 4-4 split due to the passing of Justice Scalia in two major cases, Friedrichs v. California Teachers Association and United States v. Texas. In both of those cases, the court deadlocked. This means the underlying court’s decision was questioned (and therefore couldn’t be relied upon by other courts as guidance) and yet no new law of the land resulted.
According to Oyez, the only ERISA-related case that is scheduled to be heard in the October 2020 session is Rutledge v. Pharmaceutical Care Management Association, which involves Arkansas law regulating pharmacy benefits.[3] Another potentially related case could be Salinas v. Railroad Retirement Board, which involves the Board’s denial of a request to reopen a prior benefits determination. There, the court may determine a similar question of standing as in Thole.
Also pending before the Court are two petitions for review (petitions for certoriari) in the cases of National Retirement Fund v. Metz Culinary Management Inc. and Hughes v. Northwestern University. National Retirement Fund involves the question of “whether the Employee Retirement Income Security Act prohibits multiemployer pension plan actuaries from selecting actuarial assumptions to calculate withdrawal liability after the measurement date – the last day of the plan year immediately prior to the year in which an employer withdrew – even when such assumptions are based on their ‘best estimate of anticipated experience under the plan’ and professional standards governing actuaries.”[4] Hughes involves “whether allegations that a defined-contribution retirement plan paid or charged its participants fees that substantially exceeded fees for alternative available investment products or services are sufficient to state a claim against plan fiduciaries for breach of the duty of prudence under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1104(a)(1)(B).”
The lack of a liberal justice on the Court could impact whether the Supreme Court grants the petition for review in the National Retirement Fund or Hughes cases. It is worth keeping on eye on both the petitions for review and upcoming Rutledge decision and speaking with your advisors.
[1] For the entire article on this case, please see:
https://www.natlawreview.com/article/retirement-plan-participants-and-standing-supreme-court-s-new-no-harm-no-foul-ruling
[2] For more on the impact of Justice Kagan’s recusal, please see:
https://constitutioncenter.org/blog/when-do-supreme-court-justices-recuse-themselves-from-cases
[3] For a full list of pending cases, please see
https://www.oyez.org/cases/2020 or https://en.wikipedia.org/wiki/List_of_pending_United_States_Supreme_Court_cases
[4] For further information on this petition, please see:
https://www.scotusblog.com/case-files/cases/national-retirement-fund-v-metz-culinary-management-inc
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
Before leaping into the unknown, we recommend a thorough examination of your plan. Because we are experts in the field, we know the marketplace and know what your existing vendor is capable of offering. Through this examination, we can help you optimize the service you receive.
get xpress proposal
