U.S. Supreme Court

Court’s 401(k) Ruling Suggests a ‘Next Frontier’ of ERISA Litigation


Lawyers who defend pension plan administrators are buoyed by a concurrence by the chief justice in yesterday’s U.S. Supreme Court decision allowing lawsuits by individuals against their 401(k) plans.

The plaintiff, James LaRue, claims administrators twice ignored instructions to move his money to a more lucrative fund, costing him $150,000. The opinion by Justice John Paul Stevens said the Employee Retirement Income Security Act allows damage lawsuits by individuals alleging their accounts were mishandled in addition to suits regarding the health of a whole plan.

A concurrence by Chief Justice John G. Roberts Jr. said that the wording of the 401(k) plan may require LaRue to pursue a narrower “denial of benefits” remedy that would require him to exhaust administrative remedies before filing suit, Portfolio.com reports. His opinion was joined by Justice Anthony M. Kennedy.

Russell Hirschhorn of Proskauer Rose told Portfolio he was preparing a client alert about the decision. “Justice Roberts’ concurrence may provide a pleasant surprise from the defense perspective,” he said.

Whittier Law School professor Peter Stris, who represented LaRue, told Portfolio that companies are likely to craft legal arguments based on Roberts’ concurrence, creating “the next frontier” in ERISA litigation. But he told the Washington Post the ruling protected the savings of everyone with a 401(k).

The New York Times also noted the Roberts concurrence in its coverage and reported that Stevens also raised the issue in his majority opinion. Stevens said the suit returns to the lower courts, which may have to sort out whether LaRue should have followed administrative remedies or whether he gave proper instructions to plan administrators.

The Times wrote the unresolved issues indicate how difficult it is for courts to interpret the law governing retirement plans. “These warnings were reminders of the complexity of the Erisa statute, which during the last 34 years the court has not managed to simplify.”

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