SUPREME COURT OF THE UNITED STATES
JAMES J. THOLE, et al., PETITIONERS v.
U. S. BANK N. A., et al.
on writ of certiorari to the united states court of appeals for the eighth circuit
[June 1, 2020]
Justice Sotomayor, with whom Justice Ginsburg, Justice Breyer, and Justice Kagan join, dissenting.
The Court holds that the Constitution prevents millions of pensioners from enforcing their rights to prudent and loyal management of their retirement trusts. Indeed, the Court determines that pensioners may not bring a federal lawsuit to stop or cure retirement-plan mismanagement until their pensions are on the verge of default. This conclusion conflicts with common sense and longstanding precedent.
] protects “the interests of participants in employee benefit plans and their beneficiaries.”
29 U. S. C. §1001(b). Chief among these safeguards is that “all assets of an employee benefit plan” must “be held in trust by one or more trustees” for “the exclusive purposes of providing benefits to participants in the plan and their beneficiaries.” §§1103(a), (c)(1). A retirement plan’s assets “shall never inure to the benefit of any employer.” §1103(c)(1).
Because ERISA requires that retirement-plan assets be held in trust, it imposes on the trustees and other plan managers “ ‘strict standards’ ” of conduct “ ‘derived from the common law of trusts.’ ” Fifth Third Bancorp
573 U.S. 409
, 416 (2014) (quoting Central States, Southeast & Southwest Areas Pension Fund
v. Central Transport, Inc.
472 U.S. 559
, 570 (1985)). These “fiduciary duties” obligate the trustees and managers to act prudently and loyally, looking out solely for the best interest of the plan’s participants and beneficiaries—typically, the employees who sacrifice wages today to secure their retirements tomorrow. §§1104, 1106. Not surprisingly, ERISA fiduciaries owe duties not only to the plan they manage, but also “to the beneficiaries” and participants for whom they manage it. Harris Trust and Sav. Bank
v. Salomon Smith Barney Inc.
530 U.S. 238
, 241–242, 250 (2000).
If a fiduciary flouts these stringent standards, ERISA provides a cause of action and makes the fiduciary personally liable. §§1109, 1132. The United States Secretary of Labor, a plan participant or beneficiary, or another fiduciary may sue for “appropriate relief under section 1109.” §1132(a)(2); see also §1132(a)(3) (permitting participants, beneficiaries, or fiduciaries to bring suit “to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan”). Section 1109’s remedies include restoration of lost assets, disgorgement of ill-gained profits, and removal of the offending fiduciaries. §1109(a).
Petitioners allege that, as of 2007, respondents breached their fiduciary duty of loyalty by investing pension-plan assets in respondents’ own mutual funds and by paying themselves excessive management fees. (Petitioners further contend that this self-dealing persists today.) According to the complaint, the fiduciaries also made imprudent investments that allowed them to manipulate accounting rules, boost their reported incomes, inflate their stock prices, and exercise lucrative stock options to their own (and their shareholders’) benefit.
Then came the Great Recession. In 2008, the retirement plan lost $1.1 billion, allegedly $748 million more than a properly managed plan would have lost. So some of the plan’s participants sued under
29 U. S. C. §1132(a) for the relief Congress contemplated: restoration of losses, disgorgement of respondents’ ill-gotten profits and fees, removal of the disloyal fiduciaries, and an injunction to stop the ongoing breaches. Faced with this lawsuit, respondents returned to the plan about $311 million (less than half of what the plan had lost) and none of the profits respondents had unlawfully gained. See 873 F.3d 617, 630–631 (CA8 2018).
In the Court’s words, the question here is whether petitioners have alleged a “concrete” injury to support their constitutional standing to sue. Ante
, at 3. They have for at least three independent reasons.
First, petitioners have an interest in their retirement plan’s financial integrity, exactly like private trust beneficiaries have in protecting their trust. By alleging a $750 million injury to that interest, petitioners have established their standing.
This Court typically recognizes an “injury in fact” where the alleged harm “has a close relationship to” one “that has traditionally been regarded as providing a basis for a lawsuit in English or American courts.” Spokeo, Inc.
, 578 U. S. ___, ___ (2016) (slip op., at 9). Thus, the Court acknowledges that “private trust” beneficiaries have standing to protect the assets in which they have an “equitable” interest. Ante
, at 3–4. The critical question, then, is whether petitioners have an equitable interest in their retirement plan’s assets even though their pension payments are fixed.
They do. ERISA expressly required the creation of a trust in which petitioners are the beneficiaries: “[A]ll assets” of the plan “shall be held in trust” for petitioners’ “exclusive” benefit. 29 U. S. C. §§1103(a), (c)(1); see also §1104(a)(1).[2
] These requirements exist regardless whether the employer establishes a defined-benefit or defined-contribution plan. §1101(a). Similarly, the Plan Document governing petitioners’ defined-benefit plan states that, at “ ‘all times,’ ” all plan assets “ ‘shall’ ” be in a “ ‘trust fund’ ” managed for the participants’ and beneficiaries’ “ ‘exclusive benefit.’ ” App. 60–61. The Plan Document also gives petitioners a residual interest in the trust fund’s assets: It instructs that, “[u]pon termination of the Plan, each Participant [and] Beneficiary” shall look to “the assets of the [trust f ]und” to “provide the benefits otherwise apparently promised in this Plan.” Record in No. 13–cv–2687 (D Minn.), Doc. 107–1, p. 75. This arrangement confers on the “participants [and] beneficiaries” of a defined-benefit plan an equitable stake, or a “common interest,” in “the financial integrity of the plan.” Massachusetts Mut. Life Ins. Co.
473 U.S. 134
, 142, n. 9 (1985).
Petitioners’ equitable interest finds ample support in traditional trust law. “The creation of a trust,” like the one here, provides beneficiaries “an equitable interest in the subject matter of the trust.” Restatement (Second) of Trusts §74, Comment a
, p. 192 (1957); see Blair
300 U.S. 5
, 13 (1937). Courts have long recognized that this equitable interest gives beneficiaries a basis to “have a breach of trust enjoined and . . . redress[ed].” Ibid.
; see also Spokeo
, 578 U. S., at ___ (slip op., at 9). That is, a beneficiary’s equitable interest allows her to “maintain a suit” to “compel the trustee to perform his duties,” to “enjoin the trustee from committing a breach of trust,” to “compel the trustee to redress a breach of trust,” and to “remove the trustee.” Restatement (Second) of Trusts §199; see also id
., §205 (beneficiary may require a trustee to restore “any loss or depreciation in value of the trust estate” and “any profit made by [the trustee] through the breach of trust”).[3
So too here. Because respondents’ alleged mismanagement lost the pension fund hundreds of millions of dollars, petitioners have stated an injury to their equitable property interest in that trust.
The Court, by contrast, holds that participants and beneficiaries in a defined-benefit plan have no stake in their plan’s assets. Ante
, at 4. In other words, the Court treats beneficiaries as mere bystanders to their own pensions.
That is wrong on several scores. For starters, it creates a paradox: In one breath, the Court determines that petitioners have “no equitable or property interest” in their plan’s assets, ante
, at 4; in another, the Court concedes that petitioners have an enforceable interest in receiving their “monthly pension benefits,” ante
, at 2. Benefits paid from where? The plan’s assets, obviously. Precisely because petitioners have an interest in payments from their trust fund, they have an interest in the integrity of the assets from which those payments come. See Russell
, 473 U. S., at 142, n. 9.
The Court’s contrary conclusion is unrecognizable in the fundamental trust law that both ERISA and the Plan Document expressly incorporated. If the participants and beneficiaries in a defined-benefit plan did not have equitable title to the plan’s assets, then no one would. Yet that would mean that no “trust” exists, contrary to the plain terms of both ERISA and the Plan Document. See
29 U. S. C. §1103(a); App. 60; see also n. 2, supra
, 300 U. S., at 13; Bogert & Bogert §1; Restatement (Second) of Trusts §74, Comment a
, at 192.
Recognizing this problem, the Court asserts that, despite our case law, ERISA’s text, and petitioners’ Plan Document, trust law is not relevant at all. The Court announces that all “plaintiffs who allege mismanagement of a defined-benefit plan,” regardless of their plan terms, cannot invoke a “trust-law analogy” to “support Article III standing.” Ante
, at 4.
That categorical conclusion has no basis in logic or law. Logically, the Court’s reasoning relies on tautology. To distinguish an ERISA trust fund from a private trust fund, the Court observes that petitioners’ payments have not “fluctuate[d] with the value of the plan or because of the plan fiduciaries’ good or bad investment decisions” in the past, ante,
at 1, so petitioners will necessarily continue to receive full payments “for the rest of their lives,” no matter the outcome of this suit, ante
, at 3. But that is circular: Petitioners will receive benefits indefinitely because they receive benefits now? The Court does not explain how the pension could satisfy its monthly obligation if, as petitioners allege, the plan fiduciaries drain the pool from which petitioners’ fixed income streams flow.
Legally, the Court’s analysis lists distinctions without a difference. First, the Court writes that a trust promising fixed payments is not a trust because the promise “will not change, regardless of how well or poorly the [trust] is managed.” Ante,
at 4. That does not follow (a promise of payment differs from an actual payment) and it does not disprove a trust. Trusts vary in their terms, to be sure. See Bogert & Bogert §181 (“The settlor has great freedom in the selection of the beneficiaries and their interests”). But regardless whether a trust creates a “present interest” in “immediate enjoyment” of the trust property or “a future interest” in “receiv[ing] trust assets or benefits at a later time,” the beneficiary “always” has an “equitable” stake. Ibid.
Second, the Court states that “the employer, not plan participants, receives any surplus left over after all of the benefits are paid” and “the employer, not plan participants, is on the hook for plan shortfalls.” Ante,
at 4; see also ante,
at 7 (noting that “the federal Pension Benefit Guaranty Corporation is required by law to pay” some benefits if a plan fails). But that does not distinguish ERISA from standard trust law, either. It does not matter that other parties besides beneficiaries may have a residual stake in trust assets; a beneficiary with a life-estate interest in payments from a trust still has an equitable interest. See Bogert & Bogert §706. Even life-beneficiaries may “requir[e]” the trustee “to pay the trust the amount necessary to place the trust account in the position in which it would have been, had the [trustee’s fiduciary] duty been performed.” Ibid.
If anything, petitioners’ equitable interests are stronger than those of their common-law counterparts; the Plan Document provides petitioners a residual interest in the pension fund’s assets even after the trust terminates. See Record in No. 13–cv–2687, Doc. 107–1, at 75.
Nor is it relevant whether additional parties (including an insurance carrier) are “on the hook” for plan shortfalls after a loss occurs. Cf. ante,
at 4, 6, 7, 8, n. 2. The Court appears to conclude that insurance (or other protections to remedy trust losses) would deprive beneficiaries of their equitable interests in their trusts. See ibid.
But the Court cites nothing supporting that proposition. To the contrary, it is well settled that beneficiaries retain equitable interests in trust assets even when those assets are insured or replenished. See Bogert & Bogert §599. Some States and trusts require that the “property of a trust . . . be insured” or similarly protected; indeed, some jurisdictions impose on trustees a fiduciary “duty to insure.” Ibid.
(collecting authorities). None of those authorities suggests that beneficiaries lose their equitable interests as a result, and none suggests that the law excuses a fiduciary’s malfeasance simply because other sources may help provide relief. The Court’s opposing view—that employer liability and insurance pardon a trustee’s wrongdoing from a beneficiary’s suit—has no support in law.
Third, the Court draws a line between a trust and a contract, ante,
at 4, but this too is insignificant here. The Court declares that petitioners’ pension plan “is more in the nature of a contract,” ibid.
¸ but then overlooks that the so-called contract creates a trust. The Plan Document expressly requires that petitioners’ pension funds be held in a “trust” exclusively for petitioners’ benefit. App. 60–61. The Court’s statement that “the employer, not plan participants, receives any surplus left over after all of the benefits are paid,” cf. ante,
at 4, actually proves that a trust exists. The reason the employer does not receive any residual until “after all of the benefits are paid,” ibid.
, is because the Plan Document provides petitioners an enforceable residual interest, Record in No. 13–cv–2687, Doc. 107–1, at 75. It is telling that the Court does not cite, let alone analyze, the “contract” governing petitioners’ trust fund.
Last, the Court cites inapposite case law. It asserts that “this Court has stated” that “plan participants possess no equitable or property interest in the plan.” Ante
, at 4 (citing Hughes Aircraft Co.
525 U.S. 432
(1999), and LaRue
v. DeWolff, Boberg & Associates, Inc.
552 U.S. 248
(2008)). But precedent has said no such thing. Quite the opposite: Russell
explained that defined-benefit-plan beneficiaries have a “common interest” in the “financial integrity” of their defined-benefit plan. 473 U. S., at 142, n. 9.
suggests otherwise. Hughes
explained that a defined-benefit-plan beneficiary does not have “a claim to any particular asset that composes a part of the plan’s general asset pool.” 525 U. S., at 440. But that statement concerned whether the beneficiaries had a legal right to extra payments after the plan’s assets grew. Id.
, at 436–437. Whether a beneficiary has a legal claim to payment when a plan gains money says nothing about whether a beneficiary has an equitable interest to restore assets when a plan loses money. Hughes
, in fact, invited a suit like petitioners’: The Court suggested that the plaintiffs could have prevailed had they “allege[d] that [the employer] used any of the assets for a purpose other than to pay its obligations to the Plan’s beneficiaries.” Id.
, at 442–443. Equally telling is that Hughes
resolved the beneficiaries’ breach-of-fiduciary claims on the merits without doubting whether the plaintiffs had standing to assert them. See id.
, at 443–446; Steel Co.
v. Citizens for Better Environment
523 U.S. 83
, 94–95 (1998) (explaining this Court’s independent duty to assure itself of Article III standing).
is even less helpful to today’s Court. That case involved a defined-contribution plan, not a defined-benefit plan. 552 U. S., at 250. It was about remedies, not rights. See id.,
at 256. And it stated that although “individual injuries” may occur from ERISA plan mismanagement, the statutory provision at issue required that the remedy go to the plan. Ibid.
29 U. S. C. §1132(a)(2)). LaRue
said nothing about standing and nothing about ERISA’s other statutory remedies.[4
] In fact, LaRue
confirmed that ERISA beneficiaries like petitioners may sue fiduciaries for “ ‘any profit which would have accrued to the [plan] if there had been no breach of trust,’ ” 552 U. S., at 254, n. 4, or where “fiduciary breaches . . . impair the value of plan assets,” id.
, at 256. Because petitioners bring those kinds of claims, LaRue
supports their standing.
Second, petitioners have standing because a breach of fiduciary duty is a cognizable injury, regardless whether that breach caused financial harm or increased a risk of nonpayment.
A beneficiary has a concrete interest in a fiduciary’s loyalty and prudence. For over a century, trust law has provided that breach of “a fiduciary or trust relation” makes the trustee “suable in equity.” Clews
182 U.S. 461
, 480–481 (1901). That is because beneficiaries have an enforceable “right that the trustee shall perform the trust in accordance with the directions of the trust instrument and the rules of equity.” Bogert & Bogert §861; see also Restatement (Second) of Trusts §199 (trust beneficiary may “maintain a suit” for breach of fiduciary duty).
That interest is concrete regardless whether the beneficiary suffers personal financial loss. A beneficiary may sue a trustee for restitution or disgorgement, remedies that recognize the relevant harm as the trustee’s wrongful gain. Through restitution law, trustees are “subject to liability” if they are unjustly enriched by a “ ‘violation of [a beneficiary]’s legally protected rights,’ ” like a breach of fiduciary duty. Restatement (Third) of Restitution and Unjust Enrichment §1, and Comment a
p. 3 (2010). Similarly, disgorgement allows a beneficiary to “stri[p]” the trustee of “a wrongful gain.” Id.
, §3, Comment a
, at 22. Our Court drew on these principles almost 200 years ago when it stated that a trustee’s breach of loyalty supports a cause of action “without any further inquiry” into gain or loss to a trust or its beneficiaries. Michoud
, 4 How. 503, 553 (1846); see also, e.g.
, at 556–557 (noting this rule’s roots in “English courts of chancery from an early day”); see also Magruder
235 U.S. 106
, 120 (1914) (under “the principles governing the duty of a trustee,” it “makes no difference that the [trust] estate was not a loser in the transaction”); Bogert & Bogert §543 (similar). Put another way, “traditional remedies” like “unjust enrichment . . . are not contingent on a plaintiff ’s allegation of damages beyond the violation of his private legal right.” Spokeo
, 578 U. S., at ___–___ (Thomas, J., concurring) (slip op., at 2–3).
Nor does it matter whether the beneficiaries receive the remedy themselves. A beneficiary may require a trustee to “restore” assets directly “to the trust fund.” Bogert & Bogert §861; see also Restatement (Second) of Trusts §205. In fact, because fiduciary duties are so paramount, the remedy need not involve money at all. A beneficiary may sue to “enjoin the trustee from committing a breach of trust” and to “remove the trustee.” Id
Congress built on this tradition by making plan fiduciaries expressly liable to restore to the plan wrongful profits and any losses their breach caused, and by providing for injunctive relief to stop the misconduct and remove the wrongdoers. See 29 U. S. C. §§1109, 1132(a)(2), (3). In doing so, Congress rejected the Court’s statement that a “trust-law analogy . . . does not” apply to “plaintiffs who allege mismanagement of a defined-benefit plan.” Cf. ante,
at 4. To the contrary, ERISA imposes “trust-like fiduciary standards,” Varity Corp.
516 U.S. 489
, 497 (1996), to “[r]espon[d] to deficiencies in prior law regulating [retirement] plan fiduciaries” and to provide even greater protections for defined-benefit-plan beneficiaries, Harris Trust
, 530 U. S., at 241–242; see also Spokeo
, 578 U. S., at ___ (slip op., at 9) (historical and congressionally recognized injuries often support standing).
Given all that history and ERISA’s text, this Court itself has noted, in the defined-benefit-plan context, “that when a trustee” breaches “his fiduciary duty to the beneficiaries,” the “beneficiaries may then maintain an action for restitution . . . or disgorgement.” Harris Trust
530 U. S., at 250. Harris Trust
confirms that ERISA incorporated “[t]he common law of trusts” to allow defined-benefit-plan beneficiaries to seek relief from fiduciary breaches. Ibid.
; see also id.
, at 241–242 (noting that certain ERISA provisions “supplemen[t] the fiduciary’s general duty of loyalty to the plan’s beneficiaries”).[5
The Court offers no reply to all the historical and statutory evidence showing petitioners’ concrete interest in prudent and loyal fiduciaries.
Instead, the Court insists again that “participants in a defined-benefit plan are not similarly situated to the beneficiaries of a private trust,” ante,
at 4, and that the “complaint did not plausibly and clearly claim that the alleged mismanagement of the plan substantially increased the risk that the plan and the employer would fail and be unable to pay the plaintiffs’ future pension benefits,” ante
, at 7.
The first observation is incorrect for the reasons stated above. But even were the Court correct that petitioners’ rights do not sound in trust law, petitioners would still have standing. The Court reasons that petitioners have an enforceable right to “monthly payments for the rest of their lives” because their plan confers a “contractua[l] entitle[ment].” Ante
, at 2. Under that view, the plan also confers contractual rights to loyal and prudent plan management. See App. 60–61; 29 U. S. C. §§1104, 1109.
Thus, for the same reason petitioners could bring suit if they did not receive payments from their plan, they could bring suit if they did not receive loyalty and prudence from their fiduciaries. After all, it is well settled that breach of “a contract to act diligently and skil[l]fully” provides a “groun[d] of action” in federal court. Wilcox
v. Executors of Plummer
, 4 Pet. 172, 181–182 (1830). It is also undisputed that “[a] breach of contract always creates a right of action,” even when no financial “harm was caused.” Restatement (First) of Contracts §328, and Comment a
, pp. 502–503 (1932); see also Spokeo
, 578 U. S., at ___–___ (Thomas, J., concurring) (slip op., at 2–3) (“[C]ourts historically presumed that the plaintiff suffered a de facto
injury merely from having his personal, legal rights invaded” even without any “allegation of damages”). Petitioners would thus have standing even were they to accept the Court’s flawed premise.
The Court’s second statement, that petitioners have not alleged a substantial risk of missed payments, ante,
at 7, is orthogonal to the issues at hand. A breach-of-fiduciary-duty claim exists regardless of the beneficiary’s personal gain, loss, or recovery. In rejecting petitioners’ standing and maintaining that “this suit would not change [petitioners’] monthly pension benefits,” ante
, at 8, the Court fails to distinguish the different rights on which pension-plan beneficiaries may sue. They have a right not just to their pension benefits, but also to loyal and prudent fiduciaries. See Warth
422 U.S. 490
, 500 (1975) (the standing inquiry “turns on the nature and source of the claim asserted”). Petitioners seek relief tailored to the second category, including restitution, disgorgement, and injunctive remedies. Cf. Great-West Life & Annuity Ins. Co.
534 U.S. 204
, 215–216 (2002) (explaining the various historical bases for ERISA’s remedies). The Court does not even try to explain ERISA’s (or the Plan Document’s) text imposing fiduciary duties, let alone this Court’s decision in Harris Trust
supporting petitioners’ standing. And even though the Court briefly mentions that petitioners seek “injunctive relief, including replacement of the plan’s fiduciaries,” ante,
at 2, it offers no analysis on that issue. Put differently, the Court denies petitioners standing to sue without analyzing all their claims to relief.
With its focus on fiscal harm, the Court seems to suggest that pecuniary injury is the sine qua non
of standing. The Court emphasizes that petitioners themselves have not “sustained any monetary injury” apart from their trust fund’s losses. Ante,
at 2; see also ante
, at 4.
But injury to a plaintiff ’s wallet is not, and has never been, a prerequisite for standing. The Constitution permits federal courts to hear disputes over nonfinancial injuries like the harms alleged here. Spokeo
, 578 U. S., at ___ (slip op., at 9); see also, e.g.
, at ___–___ (Thomas, J., concurring) (slip op., at 2–3); Tennessee Elec. Power Co.
306 U.S. 118
, 137–138 (1939).[6
] In Heckler
, 465 U.S. 728
(1984), for instance, this Court recognized a plaintiff ’s standing to assert a “noneconomic” injury for discriminatory distribution of his Social Security benefits, even though he did not have “a substantive right to any particular amount of benefits.” Id.
, at 737, 739. Petitioners’ standing here is even sturdier: They assert a noneconomic injury for unlawful management of their retirement plan and, unlike the plaintiff in Heckler
, petitioners do have a substantive right to a particular amount of benefits. Cf. ante
at 2 (acknowledging that petitioners’ benefits are “vested” and that payments are “legally and contractually” required).
None of this is disputed. In fact, the Court seems to concede all this reasoning in a footnote. See ante,
at 6, n. 1. The Court appears to acknowledge that an ERISA beneficiary’s noneconomic right to information from the fiduciaries would support standing. See ibid.
29 U. S. C. §1132(a)(1)(A)). Yet the Court offers no reason to think that a beneficiary’s noneconomic right to loyalty and prudence from the fiduciaries is meaningfully different.
For its part, the concurrence attempts to fill the Court’s gaps by adding that “[t]he fiduciary duties created by ERISA are owed to the plan, not petitioners.” Ante
, at 2 (opinion of Thomas, J.). But this Court has already rejected that view. Compare Varity Corp.
, 516 U. S., at 507 (“This argument fails”), with id.
, at 516 (Thomas, J., dissenting).
Nor is that argument persuasive on its own terms. The concurrence relies on a compound prepositional phrase taken out of context, collecting ERISA provisions saying that a fiduciary acts “with respect to” a plan. See ante
, at 2 (opinion of Thomas, J.). Of course a plan fiduciary performs her duties “with respect to a plan.”
29 U. S. C. §1104(a)(1). After all, she manages the plan. §1102(a). But she does so “solely in the interest” and “for the exclusive purposes” of the plan’s “participants and beneficiaries.” §§1103(a), (c)(1), 1104(a)(1).
In short, the concurrence gets it backwards. Congress did not enact ERISA to protect plans as artificial entities. It enacted ERISA (and required trusts in the first place) to protect the plan “participants” and “their beneficiaries.” §1001(b). Thus, ERISA fiduciary duties run where the statute says: to the participants and their beneficiaries.
Last, petitioners have standing to sue on their retirement plan’s behalf.
Even if petitioners had no suable interest in their plan’s financial integrity or its competent supervision, the plan itself would. There is no disputing at this stage that respondents’ “mismanagement” caused the plan “approximately $750 million in losses” still not fully reimbursed. Ante
, at 2 (majority opinion). And even under the concurrence’s view, respondents’ fiduciary duties “are owed to the plan.” Ante
, at 2 (opinion of Thomas, J.). The plan thus would have standing to sue under either theory discussed above.
The problem is that the plan is a legal fiction: Although ERISA provides that a retirement plan “may sue . . . as an entity,”
29 U. S. C. §1132(d)(1), someone must still do so on the plan’s behalf. Typically that is the fiduciary’s job. See §1102(a)(1) (fiduciaries have “authority to control and manage the operation and administration of the plan”). But imagine a case like this one, where the fiduciaries refuse to sue because they would be the defendants. Does the Constitution compel a pension plan to let a fox guard the henhouse?
Of course not. This Court’s representational standing doctrine permits petitioners to sue on their plan’s behalf. See Food and Commercial Workers
v. Brown Group, Inc.
517 U.S. 544
, 557 (1996). This doctrine “rests on the premise that in certain circumstances, particular relationships (recognized either by common-law tradition or by statute)
are sufficient to rebut the background presumption . . . that litigants may not assert the rights of absent third parties.” Ibid.
(footnotes omitted). This is especially so where, as here, there is “some sort of impediment” to the other party’s “effective assertion of their own rights.” R. Fallon, J. Manning, D. Meltzer, & D. Shapiro, Hart & Wechsler’s The Federal Courts and the Federal System 158 (6th ed. 2009); see also Powers
499 U.S. 400
, 410–411 (1991).
The common law has long regarded a beneficiary’s representational suit as a proper “basis for a lawsuit in English or American courts.” Spokeo
578 U. S., at ___ (slip op., at 9). When “the trustee cannot or will not” sue, a beneficiary may do so “as a temporary representative of the trust.” Bogert & Bogert §869. The common law also allows “the terms of a trust” to “confer upon others the power to enforce the trust,” giving that person “standing” to “bring suit against the trustee.” Restatement (Third) of Trusts §94, Comment d(1)
, at 7.
ERISA embraces this tradition. Sections 1132(a)(2) and (a)(3) authorize participants and beneficiaries to sue “in a representative capacity on behalf of the plan as a whole,” Russell
, 473 U. S., at 142, n. 9, so that any “recovery” arising from the action “inures to the benefit of the plan as a whole,” id.
, at 140. Perhaps for this reason, and adding to the incongruity in today’s outcome, some Members of this Court have insisted that lawsuits to enforce ERISA’s fiduciary duties “must” be brought “in a representative capacity.” Varity Corp.
, 516 U. S., at 516 (Thomas, J., dissenting) (internal quotation marks omitted).
Permitting beneficiaries to enforce their plan’s rights finds plenty of support in our constitutional case law. Take associational standing: An association may file suit “to redress its members’ injuries, even without a showing of injury to the association itself.” Food and Commercial Workers
, 517 U. S., at 552. All Article III requires is that a member “ ‘would otherwise have standing to sue in their own right’ ” and that “ ‘the interests [the association] seeks to protect are germane to the organization’s purpose.’ ” Id.
, at 553. Petitioners’ suit here is the other side of the same coin: The plan would have standing to sue in its own right, and petitioners’ interest is to disgorge wrongful profits and reimburse the trust for losses, thereby preserving trust assets held for their exclusive benefit.
Next-friend standing is another apt analog. Long “accepted [as a] basis for jurisdiction,” this doctrine allows a party to “appear in [federal] court on behalf of detained prisoners who are unable . . . to seek relief themselves.” Whitmore
495 U.S. 149
, 162 (1990) (tracing the doctrine’s roots to the 17th century). Here, of course, petitioners’ plan cannot access the courts itself because the parties the Court thinks should file suit (the fiduciaries) are the defendants. Like a “next friend,” moreover, petitioners are “dedicated to the best interests” of the party they seek to protect, id.
, at 163, because the plan’s interests are petitioners’ interests.[7
Congress was on well-established ground when it allowed pension participants and beneficiaries to sue on their retirement plan’s behalf.
The Court’s conflicting conclusion starts with inapposite cases. It invokes Hollingsworth
570 U.S. 693
, 708 (2013), reasoning that “to claim ‘the interests of others, the litigants themselves still must have suffered an injury in fact.’ ” Ante
, at 4. Perry
, a case about a California ballot initiative,
is a far cry from this one. Perry
found that “private parties” with no stake in the litigation “distinguishable from the general interest of every citizen” were not proper representatives of the State. 570 U. S., at 707, 710. If anything, Perry
supports petitioners here: This Court found “readily distinguishable” other representational-standing cases by underscoring their sound traditions. Id
., at 711 (distinguishing assignee and next-friend standing).[8
] A traditional beneficiary-versus-trustee claim like petitioners’ is exactly such a suit.
Next, the Court maintains that petitioners “have not been legally or contractually assigned” or “appointed” to represent the plan. Ante
, at 5. Although a formal assignment or appointment suffices for standing, it is not necessary. See, e.g.
, Food and Commercial Workers
, 517 U. S., at 552; Whitmore
, 495 U. S., at 162. Regardless, Congress expressly and thereby legally assigned pension-plan participants and beneficiaries the right to represent their plan, including in lawsuits where the other would-be representative is the defendant. 29 U. S. C. §§1132(a)(2), (3); see also, e.g.
, Restatement (Third) of Trusts §94, Comment d(1)
, at 7 (trust terms may confer standing to sue the trustee). ERISA was “primarily concerned with the possible misuse of plan assets, and with remedies that would protect the entire plan.” Russell
, 473 U. S., at 142; see also id.
, at 140–142, nn. 8–9.[9
] Far from “ ‘automatically’ ” conferring petitioners standing to sue or creating an injury from whole cloth, cf. ante,
at 5, ERISA assigns the right to sue on the plan’s unquestionably cognizable harm: here, fiduciary breaches causing wrongful gains and hundreds of millions of dollars in losses. So even under the Court’s framing, it does not matter whether petitioners “sustained any monetary injury,” ante
, at 2, because their pension plan did.
To support standing, a statute may (but need not) legally designate a party to sue on another’s behalf. Because ERISA does so here, petitioners should be permitted to sue for their pension plan’s sake.
The Court also notes that “[e]ven if a defined-benefit plan is mismanaged into plan termination, the federal [Pension Benefit Guaranty Corporation] by law acts as a backstop and covers the vested pension benefits up to a certain amount and often in full.” Ante,
at 8, n. 2. The Court then suggests that the only way beneficiaries of a mismanaged plan could sue is if their benefits were not “guaranteed in full by the PBGC.” Ibid.
Those statements underscore the problem in today’s decision. Whereas ERISA and petitioners’ Plan Document explicitly mandate that all plan assets be handled prudently and loyally for petitioners’ exclusive benefit, the Court suggests that beneficiaries should endure disloyalty, imprudence, and plan mismanagement so long as the Federal Government is there to pick up the bill when “the plan and the employer” “fail.” Ibid.
But the purpose of ERISA and fiduciary duties is to prevent retirement-plan failure in the first place.
29 U. S. C. §1001. In barely more than a decade, the country (indeed the world) has experienced two unexpected financial crises that have rocked the existence and stability of many employers once thought incapable of failing. ERISA deliberately provides protection regardless whether an employer is on sound financial footing one day because it may not be so stable the next. See ibid.
The Court’s references to Government insurance also overlook sobering truths about the PBGC. The Government Accountability Office recently relisted the PBGC as one of the “High Risk” Government programs most likely to become insolvent. See GAO, Report to Congressional Committees, High-Risk Series: Substantial Efforts Needed To Achieve Greater Progress on High-Risk Areas (GAO–19–157SP, 2019) (GAO High-Risk Report). Noting the insolvency of defined-benefit plans that the PBGC insures and the “significant financial risk and governance challenges that the PBGC faces,” the GAO High-Risk Report warns that “the retirement benefits of millions of American workers and retirees could be at risk of dramatic reductions” within four years. Id.
, at 56–57. At last count, the PBGC’s “net accumulated financial deficit” was “over $51 billion” and its “exposure to potential future losses for underfunded plans” was “nearly $185 billion.” Id.,
at 267. Notably, the GAO had issued these warnings before the current financial crisis struck. Exchanging ERISA’s fiduciary duties for Government insurance would only add to the PBGC’s plight and require taxpayers to bail out pension plans.
It is hard to overstate the harmful consequences of the Court’s conclusion. With ERISA, “the crucible of congressional concern was misuse and mismanagement of plan assets by plan administrators.” Russell
, 473 U. S., at 141, n. 8. In imposing fiduciary duties and providing a private right of action, Congress “designed” the statute “to prevent these abuses in the future.” Ibid.
Yet today’s outcome encourages the very mischief ERISA meant to end.
After today’s decision, about 35 million people with defined-benefit plans[11
] will be vulnerable to fiduciary misconduct. The Court’s reasoning allows fiduciaries to misuse pension funds so long as the employer has a strong enough balance sheet during (or, as alleged here, because of ) the misbehavior. Indeed, the Court holds that the Constitution forbids retirees to remedy or prevent fiduciary breaches in federal court until their retirement plan or employer is on the brink of financial ruin. See ante
, at 7–8. This is a remarkable result, and not only because this case is bookended by two financial crises. There is no denying that the Great Recession contributed to the plan’s massive losses and statutory underfunding, or that the present pandemic punctuates the perils of imprudent and disloyal financial management.
Today’s result also disrupts the purpose of ERISA and the trust funds it requires. Trusts have trustees and fiduciary duties to protect the assets and the beneficiaries from the vicissitudes of fortune. Fiduciary duties, especially loyalty, are potent prophylactic rules that restrain trustees “tempted to exploit [a] trust.” Bogert & Bogert §543. Congress thus recognized that one of the best ways to protect retirement plans was to codify the same fiduciary duties and beneficiary-enforcement powers that have existed for centuries. E.g.
29 U. S. C. §§1001(b), 1109, 1132. Along those lines, courts once held fiduciaries to a higher standard: “Not honesty alone, but the punctilio of an honor the most sensitive.” Meinhard
, 249 N.Y. 458, 464, 164 N.E. 545, 546 (1928) (Cardozo, C. J.). Not so today.
Nor can petitioners take comfort in the so-called “regulatory phalanx” guarding defined-benefit plans from mismanagement. Ante
, at 7. Having divested ERISA of enforceable fiduciary duties and beneficiaries of their right to sue, the Court lists “employers and their shareholders,” other fiduciaries, and the “Department of Labor” as parties on whom retirees should rely. Ante
, at 6–7.
But there are serious holes in the Court’s proffered line of defense.
The Court’s proposed solutions offer nothing in a case like this one. The employer, its shareholders, and the plan’s cofiduciaries here have no reason to bring suit because they either committed or profited from the misconduct. Recall the allegations: Respondents misused a pension plan’s assets to invest in their own mutual funds, pay themselves excessive fees, and swell the employer’s income and stock prices. Nor is the Court’s suggestion workable in the mine run of cases. The reason the Court gives for trusting employers and shareholders to look out for beneficiaries—“because the employers are entitled to the plan surplus and are often on the hook for plan shortfalls,” ante
, at 6—is what commentators call a conflict of interest.[12
Neither is the Federal Government’s enforcement power a palliative. “ERISA makes clear that Congress did not intend for Government enforcement powers to lessen the responsibilities of plan fiduciaries.” Central States
, 472 U. S., at 578. The Secretary of Labor, moreover, signed a brief (in support of petitioners) verifying that the Federal Government cannot “monitor every [ERISA] plan in the country.” Brief for United States as Amicus Curiae
26. Even when the Government can sue (in a representational capacity, of course), it cannot seek all the relief that a participant or beneficiary could. Compare
29 U. S. C. §1132(a)(2) with §1132(a)(3). At bottom, the Court rejects ERISA’s private-enforcement scheme and suggests a preference that taxpayers fund the monitoring (and perhaps the bailing out) of pension plans. See ante
, at 6–8, and n. 2.
Finally, in justifying today’s outcome, the Court discusses attorney’s fees. Twice the Court underlines that attorneys have a “$31 million” “stake” in this case. Ante
, at 2, 3. But no one in this litigation has suggested attorney’s fees as a basis for standing. As the Court appears to admit, its focus on fees is about optics, not law. See ante
, at 3 (acknowledging that attorney’s fees do not advance the standing inquiry).
The Court’s aside about attorneys is not only misplaced, it is also mistaken. Missing from the Court’s opinion is any recognition that Congress found private enforcement suits and fiduciary duties critical to policing retirement plans; that it was after this litigation was initiated that respondents restored $311 million to the plan in compliance with statutorily required funding levels; and that counsel justified their fee request as a below-market percentage of the $311 million employer infusion that this lawsuit allegedly precipitated.
* * *
The Constitution, the common law, and the Court’s cases confirm what common sense tells us: People may protect their pensions. “Courts,” the majority surmises, “sometimes make standing law more complicated than it needs to be.” Ante
, at 8. Indeed. Only by overruling, ignoring, or misstating centuries of law could the Court hold that the Constitution requires beneficiaries to watch idly as their supposed fiduciaries misappropriate their pension funds. I respectfully dissent.