Key Takeaway: The defendant successfully argued that the plaintiffs lacked standing to challenge the plan fiduciaries’ decision to offer a demand deposit fund as a capital preservation option rather than a stable value fund, where the fiduciaries later added a stable value fund to the plan and the plaintiffs chose to not invest in the fund.
On July 19, 2021, the Fifth Circuit Court of Appeals affirmed the Northern District of Texas’s grant of summary judgment in favor of the defendant on the grounds that the plaintiffs lacked standing to pursue their claims. The plaintiffs primarily challenged the plan fiduciaries’ decision to offer a demand deposit fund as the plan’s capital preservation option rather than a stable value fund. The plaintiffs alleged that a stable value fund should have been included as a plan investment option because such a fund would have offered higher rates of return than did the demand deposit fund, which was equivalent to an interest-bearing checking account.
The Fifth Circuit Court of Appeals found that the plaintiffs lacked standing to pursue these claims because they elected not to invest in a stable value fund once one was added to the plan. In 2015, approximately five years into the putative class period, the plan’s fiduciaries added a stable value fund to the plan, but neither of the two named plaintiffs moved their plan account balances from the demand deposit fund to the stable value fund. Because of this, the Fifth Circuit found that the plaintiffs could not prove that any injury they suffered from not investing in the stable value fund was caused by the fiduciaries’ decision to not initially offer one, rather than by their own seeming preference for a demand deposit fund. This decision is notable because it is one of the strongest decisions in support of the principle that courts should look to the revealed preferences of the named plaintiffs or the plan participants as a whole in considering standing or merits issues.
The case is Ortiz v. American Airlines, Inc., No. 20-10817, in the U.S. Court of Appeals for the Fifth Circuit. The decision is available here.