The plaintiffs in an Employee Retirement Income Security Act (ERISA) lawsuit against Chevron Corporation and its defined contribution (DC) plan committee have filed a petition with the U.S. Supreme Court.
Specifically, the petition for writ of certiorari asks the Supreme Court to answer the question: “In pleading a breach of fiduciary duty under ERISA, is it sufficient for a plaintiff to allege a deficient decision-making process indirectly through inferences from the facts known to her?”
The lawsuit alleges that Chevron and its DC plan committee breached their fiduciary duties of loyalty and prudence by, among other things, offering a money market fund rather than a stable value fund as a capital preservation option and paying excessive administrative fees. Agreeing with a federal district court that the plaintiffs did not allege sufficient facts to support a plausible claim, the 9th U.S. Circuit Court of Appeals in December said the complaint must allege “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged,” and where there are “two possible explanations, only one of which can be true and only one of which results in liability, plaintiff cannot offer allegations that are ‘merely consistent with’ [its] favored explanation but are also consistent with the alternative explanation.”
The petitioners—participants in Chevron’s DC plan—say the 9th Circuit applied unnecessarily high pleading standards, “precluding petitioners from pursuing claims that have been recognized as sufficiently plead in other circuits.” They note that the 8th U.S. Circuit Court of Appeals in Braden v. Wal-Mart Stores recognized that ERISA plan participants do not have access to the details of how their fiduciaries discharged their duties and thus cannot plead directly how the fiduciaries’ decision-making process was deficient. “The Eighth Circuit recognized that requiring a participant to plead facts that tend systemically to be in the sole possession of the defendant-fiduciaries would undermine ERISA’s remedial scheme of enforcement through participant-led actions. Therefore, the Eighth Circuit established that an ERISA plan participant can state claim of breach by pleading facts that show only indirectly that it is plausible the fiduciary acted imprudently,” the petition says.
The petitioners note that is a standard that has been accepted in the 2nd, 5th, and 7th Circuits, and that even the 9th Circuit has agreed with the principles underlying Braden. “Petitioners’ allegations would survive dismissal under the Braden standard, as many district courts have concluded when considering complaints far less detailed than the complaint in this case,” the petition suggests.The plaintiffs in the lawsuit say the Supreme Court should grant their petition because “The standard by which a participant can plead a claim of breach of ERISA’s fiduciary duties is an issue of national importance because of the national scope of the statute and because the Secretary of Labor opposes heightened pleading requirements for such actions.”