A lawsuit filed against Minneapolis-based U.S. Bank is headed to the U.S. Supreme Court in a case that could affect millions of pension plan owners across the country.
The lawsuit started in September 2013 in U.S. District Court in Minnesota, after participants in a U.S. Bank pension plan sued the company. The bank had a risky investment strategy of putting money solely into stocks, causing the plan to drop more than $1 billion in 2008, according to the complaints filed in the lawsuit.
Some of that money was invested in U.S. Bank-owned mutual funds.
After a class of current and former U.S. Bank employees sued, the company put several hundred million dollars back into the plan and overfunded it, ensuring that participants wouldn't lose their benefits.
That prompted U.S. District Judge Joan Ericksen to dismiss the case as moot.
"Because the plan is overfunded, plaintiffs no longer have a concrete interest in any monetary relief that might be awarded to the plan if they prevailed on the merits," Ericksen wrote in her decision.
The plaintiffs appealed, but the 8th Circuit Court of Appeals upheld Ericksen's ruling.
"Thus far, the plaintiffs have received all payments under the Plan to which they are entitled," wrote Lavenski R. Smith, the chief judge for that court.
The U.S. Bank employees took the case to the U.S. Supreme Court, arguing that because the plan had been mismanaged at one point, they should have the right to decide who should manage the plan in the future.
"Just because you can pay rent for a month doesn't mean you're in good condition for the long haul," said Michelle Yau, a Washington, D.C.,-based attorney who is part of a legal team representing the plaintiffs in the case.
The attorneys representing U.S. Bank referred questions to a company spokeswoman, who declined to comment citing pending litigation.
In legal filings, U.S. Bank has repeatedly urged the courts to dismiss the case because the pension is now overfunded.
"Two Eighth Circuit decisions ... hold that participants in 'overfunded' defined benefit plans lack standing to sue the Plan's fiduciaries for losses to the Plan," Andrew Holly, an attorney with Minneapolis-based Dorsey & Whitney wrote in a petition.
After getting the Supreme Court petition, the justices asked the U.S. Solicitor General to weigh in on the case. The solicitor general advised that the Supreme Court take it up, saying other appellate courts have had mixed rulings on similar lawsuits.
"Most lower courts have decided the issue incorrectly," wrote Solicitor General Noel Francisco.
The Supreme Court agreed to take up on the case on June 26 and will review it in the fall.
If the plaintiffs in the case succeed, it could open the door for participants in other pension plans to sue the plan managers if they feel the money is being mismanaged.
"There have been plenty of pension plans that have folded without the money to pay beneficiaries, and then the government is on the hook," Yau said.
The plaintiffs' attorney who will be making the argument to the Supreme Court, Peter Stris, has presented eight other cases to the high court.
"The circuit courts, including the 8th Circuit here, have wrongly denied participants in defined benefit plans their right to hold fiduciaries accountable for even the most egregious misconduct," Stris said in a statement.