Putnam Investments has asked, and the 1st U.S. Circuit Court of Appeals has approved, a stay in a case alleging that the investment firm engaged in self-dealing by including high-expense, underperforming proprietary funds in its own 401(k) plan.

In its motion, Putnam asked the Appellate Court to stay the case pending the filing and disposition of a petition for a writ of certiorari to the United States Supreme Court. The question for the Supreme Court is whether the plaintiff or the defendant bears the burden of proof on loss causation under Employee Retirement Income Security Act (ERISA) Section 409(a).

The Circuit courts are split on the issue of whether when a plaintiff shows a fiduciary’s breach of duty led to plan losses, the burden shifts to the fiduciary to prove that the loss was not caused by its breach or the burden is on the plaintiff to prove that the fiduciary’s imprudence resulted in the loss. The question was set to go to the Supreme Court in a different case, but the parties in the case settled before the high court had a chance to weigh in.

In the Putnam case, the U.S. District Court for the District of Massachusetts, last year, ruled for Putnam. However, “finding several errors of law in the district court’s rulings,” the 1st Circuit vacated the District Court’s judgment in part and remanded the case for further proceedings. In its opinion, the Appellate Court said “we align ourselves with the Fourth, Fifth, and Eighth Circuits and hold that once an ERISA plaintiff has shown a breach of fiduciary duty and loss to the plan, the burden shifts to the fiduciary to prove that such loss was not caused by its breach, that is, to prove that the resulting investment decision was objectively prudent.”

In its approval of Putnam’s motion to stay, the 1st Circuit agreed to a 90-day stay and said “if within that period a timely petition for certiorari is filed, the stay of mandate shall continue until final disposition by the United States Supreme Court.”