Latest Ruling Splits Minn. District on Former Employee Standing

A ruling by a federal judge in the U.S. District Court for the District of Minnesota splits the district on the issue of whether cashed-out retirement plan participants have standing to sue for Employee Retirement Income Security Act (ERISA) fiduciary breaches.

U.S. District Judge Patrick J. Schiltz said he believed the U.S. Supreme Court decision in LaRue v. DeWolff, Boberg & Associates Co. court had made a definitive ruling that former employees who cash out of their plans have standing if they can prove a colorable claim to benefits. As in a recent District of New Jersey decision against Merck (see “Merck Loses Challenge to Company Stock Fiduciary Claims), Schiltz said that to overcome the presumption of prudence attached to plans that invest in company stock, the former employees need not allege that MoneyGram was on the “verge of collapse.”

The court determined that the former employees’ evidence did point to excessive risk, however, and allowed their claims to move forward.

Shiltz’ decision that the cashed-out participants have standing to pursue their claims is in opposition to a ruling earlier in the month by his colleague U.S. District Court Judge Paul A. Magnuson. Magnuson said he was not convinced that the footnote in the Supreme Court’s decision means all former participants have standing to bring ERISA fiduciary breach claims, and decided the court was governed only by the 8th Circuit which ruled in a 1995 case that cashed-out former participants do not have standing to pursue ERISA claims (see “Court Rules Former Participant Has No Standing for ERISA Claims).

A federal court in New Jersey also recently ruled that a former participant who cashed-out pension benefits had no standing to sue for more (see “Former Kodak Employee Cannot Pursue More Pension Benefits).

The latest ruling is in Morrison v. MoneyGram International Inc., D. Minn., No. 08-CV-1121 (PJS/JJG).