Supreme Court Ruling on Non-ERISA Case Has ERISA Implications

A recent Supreme Court case that didn’t have anything to do with ERISA is already having an impact on ERISA litigation — and could have more in the years to come.

At issue is what kind of harm must be alleged in order to have standing/sue — and the Supreme Court’s decision in Spokeo Inc. vs. Robins seems to have moved that bar in a way that could make it harder to claim standing in ERISA litigation.

Spokeo Background

The original 6-2 Supreme Court ruling dealt with an individual who had a beef with a “people search engine,” who he claimed had gotten information about him wrong, but didn’t allege any actual specific damages as a result. The district court rejected the claim finding no injury had occurred, and thus there was no standing to sue. The U.S. Court of Appeals for the Ninth Circuit reversed, holding that the “violation of a statutory right is usually a sufficient injury in fact to confer standing” and that “a plaintiff can suffer a violation of the statutory right without suffering actual damages.”

In considering the case, the Supreme Court said that plaintiffs must show “an invasion of a legally protected interest” that is particularized and concrete — it “must actually exist.” The Supreme Court went on to outline what a claim needs to allege to be “concrete” enough to be heard by a federal judge, and — according to an analysis by Mark Casciari of Seyfarth Shaw LLP:

• The alleged injury must “actually exist”; it must be “real.”

• The alleged injury can be tangible or intangible.

• The alleged injury can be a “risk” of real harm that is difficult to measure. For example, the Court said, a failure to obtain information that Congress decided must be make public can (but not necessarily will) be a concrete injury.

That said, SCOTUS concluded that the Ninth Circuit addressed only “particularization,” but not “concreteness,” which requires a plaintiff to allege a “real” and not “abstract” injury — and remanded the case for the appellate court to determine if the plaintiff had adequately alleged an injury in fact.

ERISA Implications

Which brings us to the first — but likely not the last — application to an ERISA case: the recent Supreme Court decision to give a group of Verizon Communications Inc. retirees another chance to challenge a $7.5 billion pension buyout annuity deal. The retirees had charged that transferring the pension obligations to Prudential would basically move them out from under the protections of the Pension Benefit Guaranty Corp. (PBGC) violated ERISA.

The district court dismissed their case because the class did not prove individual harm and, therefore, lacked standing to sue, and the Fifth U.S. Circuit Court of Appeals affirmed dismissal. The retirees petitioned the Supreme Court to reverse that, citing “circuit disarray” over the question of standing, with five circuits disagreeing over when plan participants can sue.

However, the U.S. Supreme Court found this decision flawed, and, with an eye toward its ruling in Spokeo, remanded the case to the appellate court to decide whether standing could be due a “…plaintiff who suffers no concrete harm other than the violation of a private right conferred by a federal statute.”

What it Means

The Supreme Court has basically articulated a standard that a plaintiff must suffer “concrete” harm, though just how high of a hurdle this proves to be in practice remains to be seen. An analysis by Seyfarth Shaw explains that If the Supreme Court finds that private plaintiffs cannot sue to enforce statutory obligations when they have not yet been harmed, “…that would mean that an ERISA plan participant would have no access to the federal courts to enforce the myriad of ERISA reporting, disclosure, vesting and funding rules.” The analysis cites the example of a participant who fails to receive a compliant summary plan description, but could not sue unless she could show that the failure caused her concrete injury. The Seyfarth Shaw analysis also suggests that things like ERISA funding rules also may become harder to enforce.

That said, there is a sense that even if the ruling reduces the number of private ERISA lawsuits, the Department of Labor or the PBGC might step up their efforts.

So, stay tuned.