Granting cert means courts of appeal are ruling differently in different regions on the same issue. In one case, the Ninth Circuit ruled differently than the Sixth Circuit. This means a defendant, like Intel or Owens Corning, can have two totally different outcomes on the same theory depending only on where the plaintiffs filed their complaint.
While many may be watching the market for the next signs of recession, it may be smart to also keep an eye on the courts. This Fall, the U.S. Supreme Court has a busy schedule including several cases that could impact retirement planning. Here is a quick overview of what to keep in mind from the highest court.
Not every issue that could be heard before the Supreme Court actually gets argued. Instead, the highest court will only give permission (grant a petition of certiorari) to hear an appeal in certain circumstances. Granting cert means there may have been an error below, courts of appeal are ruling differently in different regions on the same issue, the facts that underlay a long standing opinion have changed (e.g., technological changes or better scientific understanding) or it could mean that an issue has more nuance and therefore needs more understanding.
One case that involves a call for more information on a nuanced topic that will be heard this Fall is Thole v. U.S. Bank, No. 17-1712. That case involves how loss can be shown. In Thole, the Court will dive into whether a plaintiff is harmed by a fiduciary’s action if the fund is overfunded. This case could raise issues of how fiduciaries behaved, even if that behavior didn’t necessarily financially harm the plaintiffs.
The other three cases involve a split among courts. The first case involves the “actual knowledge” standard used to show when a claimant’s time to bring a claim began to run (called the statute of limitations). In Intel Corp. Investment Policy Committee v. Sulyma, No. 18-1116 the court granted cert to a the company who was sued by a proposed class of investors who alleged that Intel’s fiduciaries breached their duties to the investors by making risky investments, among other claims. Intel countered by saying the class’s claims were barred by ERISA’s statute of limitations. The trial court ruled that the class missed their deadline. The Ninth Circuit Court of Appeals disagreed, holding that the class didn’t have actual knowledge of the alleged breach until after it occurred (moving the clock back to when they knew, like moving the chains in a football game for a penalty). The Ninth Circuit ruled differently than the Sixth Circuit has (see the Brown v. Owens Corning Investment Review Committee opinion). This means a defendant, like Intel or Owens Corning, can have two totally different outcomes on the same theory (the plaintiffs were too late in bringing their case) depending on where the plaintiffs file their complaint. Actual knowledge is an important issue on fiduciary issues and one financial advisors should monitor. This is especially true in the Intel case because there, according to Intel’s brief to the Court “all the relevant information was disclosed to the plaintiff by the defendants more than three years before the plaintiff filed the complaint, but the plaintiff chose not to read or could not recall having read the information.” The plaintiffs dispute whether all of the knowledge to make a call about the imprudence of the investments was, in fact, disclosed. This case could raise issues of how much and how information is given to investors.
Retirement Plans Committee of IBM v. Jander, No. 18-1165 is another case where the Court granted certiorari based on a Circuit Split (where two Courts of Appeal rule in diametrically different ways, as discussed above). That case involves the split in how high a bar a plaintiff has to reach in pleading about employer stock disclosure information. This too involves how much and how information is given to investors.
Putnam Investments, LLC v. Brotherston, No. 18-926 the Court will hear arguments on which party has to how loss was caused. In this case, unlike the others, the difference among the Circuits covers more than just one or two courts, but a near even split among all of them with only the Third Circuit (involving the mid-Atlantic area and, important for corporate law, Delaware) being silent on the issue. Causation is usually an issue reserved for products liability and consumer protection. Hearing a case on causation in the financial realm could be highly interesting.
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.
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