Participants Must Prove Harm to Sue

A federal district court has ruled that in a case involving allegations of harm to retirement benefits, plaintiffs lack standing to sue if they cannot substantiate the allegations.

In the case of Fox v. McCormick (civil action number 12-1869 (RMC)), the U.S. District Court for the District of Columbia ruled that while the plaintiff may have had standing under the Employee Retirement Income Security Act (ERISA) to bring the lawsuit, they do not have standing under Article III of the U.S. Constitution.

The court cites that under Article III, federal courts have limited jurisdiction, specifically over cases involving a federal statute and where there is controversy over the interpretation of that statute. Citing the cases of Warth v. Seldin and Baker v. Carr, the court further says that under Article III, plaintiffs are required to have a “personal stake in the outcome of the controversy as to warrant invocation of federal court jurisdiction.”

The Fox lawsuit was brought by participants of the Central Pension Fund of the International Union of Operating Engineers and Participating Employers. These plaintiffs allege that 21 current and former trustees of this pension plan did not collect contributions from long-delinquent employers—ABM Industries Inc. and Able Engineering Services. These contributions, the plaintiffs contend, would have “increased the assets of the plan, induced the trustees to raise benefit rates upon retirement, and ultimately enlarged participants’ monthly pension benefits.”

In the suit, the plaintiffs cite Sprint Communications v. APCC Servicesas giving them the standing to sue fiduciaries under allegations of the violation of ERISA. However, the court feels that language from Sprintthat is cited by the plaintiffs is “taken out of context” and was “not persuaded that Sprint represents a broadening of the traditional factors that govern Article III standing in this case.”

To further support the plaintiffs’ lack of standing, the court cites New Orleans ILA Pensioners Association v. Board of Trustees of New Orleans Empr’s International Longshoremen’s Association AFL-CIO Pension Fund, which says, “Participants do not have the standing to sue on behalf of their plan losses caused by fiduciary breach, unless the participants can establish that the remaining pool of assets will be inadequate to pay for the plan’s outstanding liabilities.”

The court concluded that “without a factual allegation that the trustees’ failure to collect contributions from ABM and Able deprived the Central Pension Fund of funds so that the [Pension] Fund’s risk of default has materially increased, plaintiffs lack Article III standing” and therefore the plaintiffs cannot sue the plan trustees to recover losses that are alleged and not substantiated.

The full text of the court’s decision can be found here.