On June 25, 2015, the U.S. Supreme Court will decide whether to grant certiorari in Tatum v. RJR Pension Investment Committee, 761 F.3d 346 (4th Cir. 2014). As discussed in the September 29, 2014 edition of the ELU, Tatum concerns fiduciary claims arising out of the plan fiduciaries’ decision to eliminate employer stock from the plan. The district court held that the defendants were not liable because they met their burden of proof that the elimination of employer stock was a decision that a prudent fiduciary “could have” made after proper investigation. The Fourth Circuit reversed, holding that the defendants were required to show that a prudent fiduciary “would have” made the same decision.
The defendants seek a writ of certiorari from the Supreme Court concerning two questions: (i) whether a plaintiff bears the burden of proving loss causation throughout a fiduciary breach case, or whether that burden shifts to the defendant once a plaintiff establishes a breach of duty and loss to the plan; and (2) whether an ERISA defendant that has failed to prudently investigate before making an investment decision must be liable for loss to a plan unless a prudent fiduciary “would have” made the same investment decision. In support of the petition, the defendants argued that there is a circuit split about which party holds the burden of proof regarding loss causation, with five circuits holding that the burden remains with the plaintiffs throughout a fiduciary breach action, and three circuits (including the Fourth Circuit) holding that the burden shifts to the defendant once the plaintiff establishes a breach of duty and loss to the plan.
The defendants also argued that in interpreting the requirement that an ERISA fiduciary that conducted an imprudent investigation before making an investment decision may not be held liable for damages if the ultimate investment decision was “objectively prudent,” the Fourth Circuit created an unprecedented standard: that a majority of hypothetical prudent fiduciaries would have made the exact same investment decision. The defendants noted that, as discussed in a dissenting opinion to the Fourth Circuit decision, in any given investment situation there is generally a range of reasonable investment decisions and rarely a single “best” decision around which hypothetical prudent fiduciaries necessarily would have coalesced.
The Supreme Court invited the Solicitor General to weigh in, and the Solicitor’s amicus brief was filed on May 26, 2015. The Solicitor’s brief recommends that the Court deny the pending petition on the ground that the issues presented are not suitable for the Court’s resolution at this time. First, the Solicitor General denied that a circuit split exists with respect to the burden-shifting issue because, in his view, the circuit courts that have rejected a burden-shifting approach have not considered whether a shift is warranted in cases where the plaintiff has already proven a breach of fiduciary duty and related plan losses. Second, the Solicitor General argued that no circuit split exists as to the second question and that it is premature for the Court to consider the issue until others courts of appeals examine the extent to which there is really a difference between a “would have” and “could have” standard in proving or disproving loss causation.
What to Expect
The Court’s request for the Solicitor General’s views is a reliable indicator that the Court is seriously considering granting certiorari. And, while certiorari is almost always granted if the Solicitor General endorses a petition, it is not uncommon for the Court to grant certiorari even if the Solicitor General recommends denial. The Court’s decision on the petition is expected on Monday, June 29, 2015.