ERISA sets forth complex reporting, disclosure, vesting and funding rules for most private sector employee benefit plans. It also provides a private claim upon which relief may be granted in federal court for violations of these rules. For example, if a covered plan fails to provide participants with a proper summary plan description, under current law, a participant can sue, perhaps as a class representative, and ask a court to order the plan fiduciary to comply with disclosure rules. That participant could then seek an award of up to $110 per day in penalties, plus substantial attorney’s fees.
On April 20, 2015, over the objection of the Solicitor General, the Supreme Court agreed to decide, in Spokeo, Inc. v. Robbins, No. 13-1339, whether Article III of the Constitution allows Congress to permit lawsuits over a statutory violation where the violation does not necessarily result in a plausible claim of concrete injury. Our sister blog has described the case [here], and, to be sure, it arises under the Fair Credit Reporting Act, not ERISA. But the Constitutional question presented to the Supreme Court has equal applicability to ERISA claims.
If the Supreme Court finds that private plaintiffs cannot sue to enforce statutory obligations when they have not yet been harmed by violations of those obligations, 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 participant who fails to receive a compliant summary plan description, for example, could not sue unless she could show that the failure caused her concrete injury. Alleging a possible injury down the road, or merely alleging that no fiduciary should be able to flout ERISA rules, would not suffice. The participant would need to allege that the statutory violation caused her to suffer real harm, such as purchasing a house in reliance on a false representation of benefit amounts. That type of allegation is not an easy one to make in good faith, as is required by Rule 11 of the Federal Rules of Civil Procedure. Any plaintiff lawyer contemplating a lawsuit pays close attention to Rule 11 in order to avoid sanctions for violation of the rule.
What’s more, if the Supreme Court eliminates the right to sue for enforcement of statutory rights, it might curtail a relatively new decision from the Court thought to allow more ERISA remedies. In Cigna Corp. v. Amara, the Court stated that a participant could sue a fiduciary for an ERISA disclosure violation without having to allege detrimental reliance injury. It would be tougher to make a non-reliance-based Amara fiduciary claim of “actual harm” if the Court finds that a desire to vindicate statutory rights is not Constitutionally sufficient to allow access to the federal courts.
ERISA funding rules also may become harder to enforce. Underfunding in violation of statutory rules would not provide access to the federal courts even if the plan is closing in on insolvency, as long as there are sufficient funds now to pay vested benefits. A Supreme Court decision requiring concrete injury may strengthen the cases of the defendants in the ongoing church plan litigation.
While it would surely cut back on private ERISA lawsuits, a Supreme Court ruling against a claim to vindicate statutory rights absent an allegation of plausible concrete injury could lead to more ERISA lawsuits by the Department of Labor or the Pension Benefit Guaranty Corporation to make up the shortfall. In a time of limited government funds, however, increased government litigation may not be in the cards.
We or our sister blogs certainly will advise you of developments in Spokeo, including the oral argument in the case, which probably will take place in the Fall of 2015.