For Whom the Bell Thole(s) – Supreme Court Holds that Fiduciaries Under ERISA-Covered Pension Plans May Be Constitutionally Shielded

June 10, 2020

Last week, the U.S. Supreme Court ruled on June 1, 2020 in Thole v. U.S. Bank that a participant in a defined benefit (“DB”) plan is constitutionally barred from bringing a fiduciary-breach (or similar) claim under the Employee Retirement Income Security Act of 1974 (“ERISA”) in the absence of individual financial harm to the participant. The Court indicated that the kind of financial harm that a participant would have to show must rise to the level of “mismanagement . . . so egregious that it substantially increased the risk that the plan and the employer would fail and be unable to pay the participants’ future pension benefits.” We previously discussed Thole while it was still pending in a previous OnPoint.

Legal Background

Under a DB plan, unlike a defined contribution (individual account) plan (e.g., a “401(k) plan”), a participant is promised a benefit determined under the plan. If the plan’s investments do well, the participant generally sees no increase in benefits. If the plan’s investments diminish in value, the participant generally sees no reduction in benefits (unless the plan is unable to pay benefits when due and Pension Benefit Guaranty Corporation insurance does not fully cover the lost benefits).

Generally, all ERISA-covered retirement plans, including DB plans for rank-and-file employees, are funded through a trust that is safe from the creditors of the employer that sponsors the plan. Sometimes, it will be alleged that a plan fiduciary breached the fiduciary’s duties or otherwise violated ERISA in connection with the investment of the plan’s assets.

Each plan participant is authorized by Section 501(a)(2) of ERISA to bring a suit against the fiduciary to restore losses and by Section 502(a)(3) to seek injunctive relief. However, under the case-or-controversy requirement of Article III of the U.S. Constitution, plaintiffs seeking judicial review in the federal courts must demonstrate that they have standing by showing that (i) the plaintiff suffered an injury in fact that is concrete, particularized and actual or imminent, (ii) the injury was caused by the defendant, and (iii) the injury would likely be redressed by the requested judicial relief. Thus, the question is presented whether a participant in an overfunded DB plan, or even a somewhat underfunded DB plan, has standing to bring an ERISA fiduciary claim.

This issue previously surfaced in Harley v. Minnesota Mining and Manufacturing Company,1 where the Eighth Circuit held that there were constitutional standing impediments to the bringing of a claim under ERISA for an overfunded defined benefit plan. In reaching this conclusion, the court in Harley held that “the limits on judicial power imposed by Article III counsel against permitting participants or beneficiaries who have suffered no injury in fact from suing to enforce ERISA fiduciary duties on behalf of the Plan.”2

It appeared that the question might effectively be addressed during the Court’s 2015-16 term by the case of Spokeo v. Robins, which, although a non-ERISA case, had the potential to bear on the constitutional standing issue.3 However, the manner in which Spokeo was decided ultimately avoided the underlying substantive issues, leaving for another day an opportunity for the Supreme Court to address the ERISA implications of these Article III issues. That day indeed came earlier this month with the Court’s decision in Thole.

The Thole Case

In Thole, plaintiffs had brought a putative class action lawsuit against an employer group in 2013 alleging various fiduciary violations in connection with the management of a DB plan. At the time of the lawsuit’s commencement, the plan was apparently underfunded (i.e., generally, the value of the plan’s liabilities exceeded the value of the plan’s assets).

In 2014, however, after the litigation was commenced, the plan became overfunded, causing the District Court for the District of Minnesota to dismiss the plaintiffs’ constitutional claims as moot. In particular, the District Court concluded that, because the plan currently had more than enough funding to meet its obligations to plan participants, the plaintiffs lacked a “concrete interest in any monetary relief that might be awarded to the [p]lan if [the plaintiffs] prevailed on the merits.” The Court of Appeals for the Eighth Circuit affirmed, but on statutory rather than Article III grounds.

The Supreme Court in Thole, unlike the Eighth Circuit (and unlike the Supreme Court in Spokeo), squarely addressed the constitutional standing issue. In a 5-4 decision,4 the Court concluded that plaintiffs lacked Article III standing, generally citing the fixed and unchanging nature of plaintiffs’ pension benefits; because “winning or losing this suit would not change the plaintiffs’ monthly pension benefits” and, therefore, plaintiffs therefore “had no concrete stake” in the dispute.

The Court did make clear that the plaintiffs would “of course have Article III standing to sue and a cause of action” if they had not actually received their vested pension benefits. In addition, the Court left open the possibility that plan participants could demonstrate standing on the theory that “mismanagement of the plan was so egregious that it substantially increased the risk that the plan and the employer would fail and be unable to pay the participants’ future pension benefits” - although the Court expressly clarified that “a bare allegation of plan underfunding does not itself demonstrate a substantially increased risk that the plan and the employer would both fail.”


Thole will unquestionably make it more difficult for participants in a wide variety of DB plans to demonstrate the standing required to bring an ERISA claim against plan fiduciaries. One may also wonder if the logic of the Thole decision may reverberate outside of the ERISA context, potentially adversely affecting, for example, class actions where the class representatives do not themselves have the kind of concrete harm that the Court required in Thole.

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If you would like to discuss Thole, or any other aspect of ERISA litigation, please contact any of the Dechert lawyers listed below or any Dechert lawyer with whom you regularly work.


1) 284 F.3d 901 (8th Cir. 2002). 
2) See Harley; see also Soehnlen v. Fleet Owners Ins. Fund, 844 F.3d 576 (6th Cir. 2016).
3) 136 S. Ct. 1540 (2016).
4) Earlier in this term, the Court in Intel Corp. Investment Policy Comm. v. Sulyma, No. 18-1116 (Feb. 26, 2020), gave us the rare treat in present day of a unanimous decision. (We discuss Sulyma in a recent OnPoint.) This moment of coming together under ERISA was short-lived, promptly ending with the fractured decision in Thole.

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