Continuing a theme this week of followups to older posts, back in February the U.S. Supreme Court, in Larue v. DeWolff, ruled that the Employee Retirement Income Security Act (ERISA) allows an employee to sue his employer because of a fiduciary breach that resulted in individual losses to his 401(k) plan.
Some predicted that the "Court’s ruling will result in a slew of meritless litigation from employees whose 401(k) plans aren’t doing as well in a shaky economy."
Count me in the group as "not yet convinced" and still puzzled whether this will truly impact 401(k) administration.
Why? Because while the court did open the door to more lawsuits — probably on a breach of fiduciary duty claim — on an individual basis, the standard for proving such lawsuits remains the same and still high. Without being too technical, a participant in a breach of fiduciary duty case needs to show, for example, that the plan did not discharge its duties with the same "care, skill, prudence, and diligence" that a prudent person would use under similar circumstances.
So what’s happened since then? The Workplace Law Prof blog reports that there hasn’t been a rush of new cases. Even the named plaintiff, Mr. Larue, decided to drop his case after determining it was not "financially feasible" to proceed:
You may recall that after the Supreme Court in LaRue v. DeWolff, Boberg, and Associates found that individuals could bring breach of fiduciary claims against their plans for mismanagement of their 401(k) accounts, there were many who predicted that such 401(k) suits would overwhelm the courts and generally spell disaster for the judiciary of this country (I didn’t predict that, but I thought the principle of the holding was an important one).
Now, that coming avalanche of litigation might still happen in some world where the sky is green, but interestingly I just received word from DeWolff, Boberg’s Supreme Court advocate, Tom Gies of Crowell and Moring, that Mr. LaRue has voluntary dismissed his claim in the action recognizing that it was too expensive to proceed. Yup, that’s right. These claims are now so easy that Mr. LaRue decided he couldn’t proceed.
So, perhaps the next time you hear prognosticators predict that a Supreme Court decision will have a massive impact, view it with a healthy bit of skepticism. Sometimes, it takes some time to determine the real impact of a Supreme Court decision.