James Thole v. U.S. Bank, National Assn. , 873 F.3d 617 ( 2017 )

United States Court of Appeals
For the Eighth Circuit
___________________________
No. 16-1928
___________________________
James J. Thole; Sherry Smith, individually and on behalf of all others similarly situated
lllllllllllllllllllll Plaintiffs - Appellants
v.
U.S. Bank, National Association, individually and as successor in interest to FAF
Advisors, Inc.; U.S. Bancorp
lllllllllllllllllllll Defendants - Appellees
Nuveen Asset Management, LLC, as successor in interest to FAF Advisors, Inc.
lllllllllllllllllllll Defendant
Richard K. Davis; Douglas M. Baker, Jr.; Y. Marc Belton; Peter H. Coors; Joel W.
Johnson; Olivia F. Kirtley; O’Dell M. Owens; Craig D. Schnuck; Arthur D.
Collins, Jr.; Victoria Buyniski Gluckman; Jerry W. Levin; David B. O’Maley;
Patrick T. Stokes; Richard G. Reiten; Warren R. Staley; John and Jane Doe 1-20
lllllllllllllllllllll Defendants - Appellees
------------------------------
AARP; AARP Foundation; R. Alexander Acosta, Secretary of the United States
Department of Labor
lllllllllllllllllllllAmici on Behalf of Appellant(s)
Chamber of Commerce of the United States of America
lllllllllllllllllllllAmicus on Behalf of Appellee(s)
____________
Appeal from United States District Court
for the District of Minnesota - Minneapolis
____________
Submitted: May 11, 2017
Filed: October 12, 2017
____________
Before SMITH, Chief Judge, COLLOTON and KELLY, Circuit Judges.
____________
SMITH, Chief Judge.
Named plaintiffs James Thole and Sherry Smith (collectively, “plaintiffs”)1
brought a putative class action against U.S. Bank, N.A. (“U.S. Bank”); U.S. Bancorp;
and multiple U.S. Bancorp directors (collectively, “defendants”),2 challenging the
defendants’ management of a defined benefit pension plan (“Plan” or “U.S. Bank
Pension Plan”) from September 30, 2007, to December 31, 2010. The plaintiffs
alleged that the defendants violated Sections 404, 405, and 406 of the Employee
Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1104–06, by
breaching their fiduciary obligations and causing the Plan to engage in prohibited
transactions with a U.S. Bank subsidiary, FAF Advisors, Inc. (FAF). The plaintiffs’
1
The district court dismissed named plaintiffs Adetayo Adedipe and Marlene
Jackson per the parties’ stipulation.
2
The district court dismissed defendant Nuveen Asset Management LLC
(“Nuveen”) on its motion.
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complaint asserts that these alleged ERISA violations caused significant losses to the
Plan’s assets in 2008 and resulted in the Plan being underfunded in 2008. The
plaintiffs sought to recover Plan losses, disgorgement of profits, injunctive relief, and
other remedial relief pursuant to ERISA Section 502(a)(2), 29 U.S.C. § 1132(a)(2),
and ERISA Section 409, 29 U.S.C. § 1109. They also sought equitable relief pursuant
to ERISA Section 502(a)(3), 29 U.S.C. § 1132(a)(3).
In response, the defendants moved to dismiss the plaintiffs’ consolidated
amended complaint with prejudice under Federal Rules of Civil Procedure 12(b)(1)
and 12(b)(6). Specifically, they argued that the plaintiffs lacked standing to bring the
suit, the ERISA claims were time-barred or had been released, and the pleading
otherwise failed to state a claim on which relief could be granted. Relevant to the
present appeal, the district court3 concluded that the plaintiffs’ claim challenging the
Plan’s strategy of investing 100 percent of its assets in equities was barred by
ERISA’s six-year statute of repose. The court, however, permitted the plaintiffs to
proceed with their claim that the defendants engaged in a prohibited transaction by
investing the Plan’s assets in mutual funds that FAF managed.
During the litigation, the factual backdrop of the case changed. In 2014, the
Plan became overfunded; in other words, there was more money in the Plan than was
needed to meet its obligations. The defendants, alleging that the plaintiffs had not
suffered any financial loss upon which to base a damages claim, moved to dismiss the
remainder of the action for lack of standing pursuant to Rule 12(b)(1). Although the
district court concluded that standing was the wrong doctrine to apply, it granted the
motion to dismiss for lack of Article III jurisdiction based on the doctrine of
mootness. The court concluded that because the Plan is now overfunded, the plaintiffs
3
The Honorable Joan N. Ericksen, United States District Judge for the District
of Minnesota.
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lack a concrete interest in any monetary relief that the court might award to the Plan
if the plaintiffs prevailed on the merits.4 The court later denied the plaintiffs’ motion
for attorneys’ fees, determining that the plaintiffs had achieved no success on the
merits. The court concluded that the plaintiffs failed to show that the litigation had
acted as a catalyst for any contributions that U.S. Bancorp made to the Plan resulting
in its overfunded status.
On appeal, the plaintiffs argue that the district court erred by (1) dismissing the
case as moot; (2) dismissing the Equities Strategy claim on statute-of-limitations and
pleading grounds; and (3) denying their motion for attorneys’ fees and costs. We
affirm.
I. Background5
A. Overview of the U.S. Bank Pension Plan—A Defined Benefit Plan
The plaintiffs, both retirees of U.S. Bank, are participants in the U.S. Bank
Pension Plan. U.S. Bancorp is the Plan’s sponsor, while U.S. Bank (a wholly-owned
subsidiary of U.S. Bancorp) is the Plan’s trustee. Pursuant to the Plan document, the
Compensation Committee and Investment Committee had authority to manage the
Plan’s assets. The Compensation Committee was composed of U.S. Bancorp directors
and officers. The Compensation Committee designated FAF as the Investment
Manager with full discretionary investment authority over the Plan’s assets. During
the relevant time period, U.S. Bank was the parent of FAF.6
4
As far as the record discloses, the Plan remains overfunded.
5
We “accept[] as true all factual allegations in the complaint and draw[] all
reasonable inferences in favor of the nonmoving party.” Wieland v. U.S. Dep’t of
Health & Human Servs., 793 F.3d 949, 953 (8th Cir. 2015).
6
Nuveen acquired FAF from U.S. Bank in November 2010.
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The Plan is a defined benefit plan regulated under ERISA. See 29 U.S.C. §§
1002(2)(A), 1002(35), 1003. “A defined benefit plan . . . consists of a general pool
of assets rather than individual dedicated accounts. Such a plan, ‘as its name implies,
is one where the employee, upon retirement, is entitled to a fixed periodic payment.’”
Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 439 (1999) (quoting Comm’r v.
Keystone Consol. Indus., Inc., 508 U.S. 152, 154 (1993)). According to the plaintiffs,
the Plan’s purpose “is to provide a monthly retirement income based on a U.S.
Bancorp employee’s pay and years of service.” In 2009, “Smith elected to receive her
Plan benefits in the form of a single life annuity in the amount of $42.26 per month,
and received a payment of the portion of her benefit accrued under a predecessor plan
. . . in the amount of $7,588.65.” In 2011, “Thole elected to receive his Plan benefits
in the form of a Estate Protection 50% Joint and Survivor Annuity in the amount of
$2,198.38 per month.” Under § 2.1.26 of the Plan, Smith and Thole are entitled to
receive their respective benefits for the rest of their lives. Thus far, the plaintiffs have
received all payments under the Plan to which they are entitled.
U.S. Bancorp and its subsidiaries make all Plan contributions. See Hughes, 525
U.S. at 439 (“The asset pool may be funded by employer or employee contributions,
or a combination of both.” (citing 29 U.S.C. § 1054(c))). Plan “members have a right
to a certain defined level of benefits, known as ‘accrued benefits.’” Id. at 440.
“Accrued benefit” for purposes of a defined benefit plan means “the individual’s
accrued benefit determined under the plan . . . expressed in the form of an annual
benefit commencing at normal retirement age.” 29 U.S.C. § 1002(23)(A).
A measurement called the Funding Target Attainment Percentage (FTAP)
determines whether a plan is on track to meet its benefit obligations to participants.
The FTAP is used to determine whether the plan sponsor must make a contribution
to the Plan in a particular year. See 29 U.S.C. § 1083(a), (d). A plan’s assets are less
than its liabilities if its FTAP is under 100 percent; if this occurs, then the plan
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sponsor must make a contribution. By contrast, if the FTAP is over 100 percent—i.e.,
the plan’s assets are greater than the liabilities—the plan sponsor is not required to
make a contribution. See 26 U.S.C. § 430(c).
Under the Plan (like all defined benefit plans), “the employer typically bears
the entire investment risk and—short of the consequences of plan termination—must
cover any underfunding as the result of a shortfall that may occur from the plan’s
investments.” Hughes, 525 U.S. at 439. But “if the defined benefit plan is overfunded,
the employer may reduce or suspend his contributions.” Id. at 440. The defined
benefit plan’s structure “reflects the risk borne by the employer.” Id. “Given the
employer’s obligation to make up any shortfall, no plan member has a claim to any
particular asset that composes a part of the plan’s general pool.” Id.
In summary, “[i]n a defined benefit plan, if plan assets are depleted but the
remaining pool of assets is more than adequate to pay all accrued or accumulated
benefits, then any loss is to plan surplus.” Harley v. Minn. Mining & Mfg. Co., 284
F.3d 901, 906 (8th Cir. 2002). “Plan beneficiaries have no claim or entitlement to its
surplus. If the Plan is overfunded, [the employer] may reduce or suspend its
contributions.” Id. Conversely, “[i]f the Plan’s surplus disappears, it is [the
employer]’s obligation to make up any underfunding with additional contributions.
If the Plan terminates with a surplus, the surplus may be distributed to [the
employer].” Id. “[T]he reality is that a relatively modest loss to Plan surplus is a loss
only to . . . the Plan’s sponsor.” Id.
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B. Complaint
In 2014, the plaintiffs filed the consolidated amended complaint7 setting forth
a putative class action against the defendants, challenging their management of the
Plan from September 30, 2007, to December 31, 2010. According to the plaintiffs, the
defendants violated ERISA Sections 404, 405, and 406, 29 U.S.C. §§ 1104–06.
The plaintiffs alleged that by 2007, FAF had invested the entire Plan portfolio
in equities—direct stock holdings or through mutual funds that FAF managed
(“Equities Strategy”). According to the plaintiffs, well-accepted principles of
diversification provide that a retirement portfolio should be invested in multiple asset
classes rather than in a single class. They alleged that diversification among the asset
classes reduces the risk of large losses and uncertainty because different asset classes
historically do not move up or down at the same time. The plaintiffs maintained that
because the Plan was significantly overfunded by 2007, it did not need to pursue such
a high-risk/high-reward investment strategy to meet its pension obligations. The
plaintiffs alleged that the defendants stood to benefit from the Equities Strategy;
specifically, they claimed that U.S. Bancorp and its Board members benefitted from
the Equities Strategy because it allowed U.S. Bancorp to increase its operating
income and avoid minimum employer contributions to the Plan. And they alleged that
the Equities Strategy benefitted the individual defendants holding stock options,
which were exercised and sold at a higher price because U.S. Bancorp’s reported
income (and resulting stock price) was increased by the excess pension income.
Because the defendants put all the Plan’s assets in a single higher-risk asset
class, the plaintiffs alleged, in 2008, the Plan suffered a loss of $1.1 billion. They
alleged that the Plan lost significantly more money in 2008 than it would have if the
defendants had properly diversified it. The $1.1 billion loss reduced the funding
7
The plaintiffs filed their original complaint in 2013.
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status of the Plan—it went from being significantly overfunded in 2007 to being 84
percent underfunded in 2008.
The plaintiffs claimed that the defendants failed to monitor the investment of
Plan assets and terminate the Equities Strategy. This failure, according to the
plaintiffs, (1) violated the defendants’ fiduciary duty of prudence under ERISA
because it exposed the Plan to unnecessary risk; (2) violated their fiduciary duty to
diversify plan assets under ERISA because investing an entire retirement portfolio in
a single asset class is non-diversified on its face; and (3) violated their fiduciary duty
of loyalty under ERISA because the Equities Strategy benefitted the defendants to the
detriment of the Plan and its participants.
The plaintiffs also alleged several violations of ERISA based on the purported
conflicts of interest associated with the Plan’s assets being heavily invested in U.S.
Bancorp’s own mutual funds (“FAF Funds”). By 2007, FAF had invested over 40
percent of the Plan’s assets in the FAF Funds despite their costing more than similar
alternative funds. By investing the Plan’s assets in U.S. Bancorp’s own propriety
mutual funds, the plaintiffs alleged, FAF and U.S. Bancorp received management fees
from the Plan, increased the total assets under management to $1.25 billion, and were
able to attract more investors. The plaintiffs claim that, as a result, the Plan paid too
much in management fees for the FAF Funds.
Allegedly, these ERISA violations caused significant losses to the Plan’s assets
in 2008 and resulted in the Plan’s underfunded status in 2008 through the
commencement of this suit in 2013. The plaintiffs sought to recover Plan losses,
disgorgement of profits, injunctive relief, and other remedial relief pursuant to ERISA
Section 502(a)(2), 29 U.S.C. § 1132(a)(2), and ERISA Section 409, 29 U.S.C. § 1109.
They also sought equitable relief pursuant to ERISA Section 502(a)(3), 29 U.S.C.
§ 1132(a)(3).
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C. Dismissal Orders
The defendants moved to dismiss the complaint on various grounds, including
that the plaintiffs lacked Article III standing, that their ERISA claims were time-
barred, and that their pleading failed to state a claim on which relief could be granted.
On November 21, 2014, the district court denied the motion to dismiss in part and
granted it in part.8 First, the district court determined that the plaintiffs had statutory
and Article III standing to pursue all their claims. Adedipe v. U.S. Bank, Nat’l Ass’n
(Adedipe I), 62 F. Supp. 3d 879, 887–96 (D. Minn. 2014). In determining that the
plaintiffs had Article III standing, the district court noted that the plaintiffs did “not
allege that their benefit levels have actually decreased as a result of the Defendants’
alleged misconduct,” id. at 891; therefore, they had “no ‘claim to any particular asset
that composes a part of the [P]lan’s general asset pool,’” id. at 890 (quoting Hughes,
525 U.S. at 440). But the plaintiffs did allege that the defendants’ conduct caused the
Plan to become underfunded in 2008, and the Plan remained in that status through the
lawsuit’s commencement. Id. at 891.
Based on the Plan’s underfunded status, the plaintiffs alleged that they were
“injured by the increased risk of default that arose when the Plan’s liabilities
exceeded its assets as a result of the significant losses caused by the Defendants’
ERISA violations.” Id. at 894. The court agreed. It found relevant “ERISA’s
minimum funding standards.” Id. Measured by these standards, the court stated, “the
Plan lacked a surplus large enough to absorb the losses at issue.” Id. at 895. “In other
words, Plaintiffs’ injury in fact was that Defendants’ actions caused an ‘alleged
increased risk of default’ and ‘the concomitant increase in the risk that the
participants will not receive the level of benefits they have been promised due to the
8
The district court granted summary judgment to the defendants on the
plaintiffs’ securities-lending claims and dismissed the claim that investing in FAF
funds violated the Plan document. The plaintiffs do not challenge these rulings on
appeal.
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Plan being inadequately funded at termination.’” Adedipe v. U.S. Bank, Nat’l Ass’n
(Adedipe II), No. CV 13-2687 (JNE/JJK), 2015 WL 11217175, at *3 (D. Minn. Dec.
29, 2015) (quoting Adedipe I, 62 F. Supp. 3d at 891). The court also determined that
the plaintiffs adequately alleged that the defendants’ ERISA violations caused the
increased risk of default and that the relief that the plaintiffs sought (“the restoration
to the Plan of the assets that were allegedly lost as a result of the Defendants’
misconduct”) would “remedy the underfunding that is at the root of their injury.” Id.
(quoting Adedipe I, 62 F. Supp. 3d at 896).
After concluding that the plaintiffs had standing, the court dismissed the
Equities Strategy claims on statute-of-limitations grounds, concluding that because
the Plan had become invested entirely in equities securities more than six years before
the commencement of the suit, the claims were time-barred under 29 U.S.C.
§ 1113(1)(A). Adedipe I, 62 F. Supp. 3d at 898–99. The court further determined that
the complaint did not plausibly allege a “significant” change in circumstances that
would “trigger an obligation for fiduciaries to investigate whether altering an
investment strategy previously decided upon would [be] in the best interests of the
plan.” Id. at 899. Finally, the court denied the defendants’ motion to dismiss the
plaintiffs’ FAF Funds claims based on the alleged conflicts of interest and prohibited
transactions. Id. at 900–02.
Thereafter, the defendants moved to dismiss the action for lack of standing,
renewing an argument raised in the previous motion to dismiss. Adedipe II, 2015 WL
11217175, at *1. The defendants based their motion “on the factual development that
the Plan is now overfunded.” Id. at *3. The district court concluded that standing was
the wrong doctrine to apply given the procedural posture of the case; instead, the
applicable doctrine was mootness. Id. The court identified the plaintiffs’ injury in fact
as “the increased risk of Plan default, or, put another way, the increased risk that Plan
beneficiaries will not receive the level of benefits they have been promised.” Id. at *4.
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The court concluded that because the Plan is now overfunded, the plaintiffs no longer
have a concrete interest in the monetary and equitable relief sought to remedy that
alleged injury. Id. at *5. The court dismissed the entire case as moot.
Shortly thereafter, the plaintiffs moved for attorneys’ fees and costs pursuant
to ERISA Section 502(g), 29 U.S.C. § 1132(g)(1). The plaintiffs argued that the
defendants’ voluntary contribution of millions of dollars to the Plan after the
commencement of the lawsuit constituted some success on the merits because the
contribution was motivated by the litigation. The defendants responded “that in 2014
they again made excess contributions in order to reduce the Plan’s insurance
premiums.” Adedipe v. U.S. Bank, Nat’l Ass’n (Adedipe III), No. CV 13-2687
(JNE/JJK), 2016 WL 7131574, at *3 (D. Minn. Mar. 18, 2016). The district court
denied the plaintiffs’ motion, finding “no evidence that Defendants’ 2014
contribution is an ‘outcome’ of the litigation, as opposed to an independent decision
that nonetheless affected the viability of Plaintiffs’ case.” Id. at *4.
II. Discussion
On appeal, the plaintiffs argue that the district court erred by (1) dismissing the
case as moot based on the Plan’s overfunded status; (2) dismissing the Equities
Strategy claim on statute-of-limitations and pleading grounds; and (3) denying their
motion for attorneys’ fees and costs.
A. Dismissal of ERISA Claims Based on Plan’s Overfunded Status
The plaintiffs argue that the district court erroneously conflated the doctrine
of mootness with the doctrine of standing in holding that the Plan’s overfunded status
mooted their case. The plaintiffs contend that Harley and its progeny provide that
whether a Plan is underfunded is a factual issue relevant only to the injury-in-fact
element of Article III standing. This issue, the plaintiffs contend, is determined at the
commencement of the lawsuit. Because the plaintiffs showed that the Plan was
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underfunded at the commencement of the suit, they maintain, they have satisfied the
Article III standing requirement and are not required to establish that standing again.
And, according to the plaintiffs, their case is not moot because they are capable of
receiving the various forms of relief sought in the complaint and authorized by
ERISA; that is, their lawsuit can remedy the Plan’s and their own injuries.
“We review de novo a district court’s grant of a motion to dismiss for lack of
jurisdiction.” Doe v. Nixon, 716 F.3d 1041, 1051 (8th Cir. 2013). “We may affirm ‘for
any reason supported by the record, even if different from the reasons given by the
district court.’” Robbins v. Becker, 794 F.3d 988, 992 (8th Cir. 2015) (quoting Bishop
v. Glazier, 723 F.3d 957, 961 (8th Cir. 2013)).
This case involves ERISA’s civil enforcement provision. We first address
29 U.S.C. § 1132(a)(2). Section 1132(a)(2) provides that a plan participant or
beneficiary may bring a civil action “for appropriate relief under section 1109 of this
title.” 29 U.S.C. § 1132(a)(2). Section 1109, in turn, provides:
(a) Any person who is a fiduciary with respect to a plan who breaches
any of the responsibilities, obligations, or duties imposed upon
fiduciaries by this subchapter shall be personally liable to make good to
such plan any losses to the plan resulting from each such breach, and to
restore to such plan any profits of such fiduciary which have been made
through use of assets of the plan by the fiduciary, and shall be subject to
such other equitable or remedial relief as the court may deem
appropriate, including removal of such fiduciary. A fiduciary may also
be removed for a violation of section 1111 of this title.
(b) No fiduciary shall be liable with respect to a breach of fiduciary duty
under this subchapter if such breach was committed before he became
a fiduciary or after he ceased to be a fiduciary.
29 U.S.C. § 1109.
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“In Harley, this court concluded that § 1132(a)(2) does not permit a participant
in a defined-benefit plan to bring suit claiming liability under § 1109 for alleged
breaches of fiduciary duties when the plan is overfunded.” McCullough v. AEGON
USA Inc., 585 F.3d 1082, 1084 (8th Cir. 2009) (citing Harley, 284 F.3d at 905–07).
The Harley plaintiffs alleged that the plan fiduciaries of the defined benefit plan in
which they participated breached their fiduciary duties by (1) inadequately
investigating and monitoring a $20 million investment in a hedge fund that resulted
in a total loss of the investment, and (2) permitting the plan to enter into a prohibited
transaction under 29 U.S.C. § 1106(b)(1) by paying a $1.17 million fee to the hedge
fund’s investment advisor. Harley, 284 F.3d at 903–04, 908.
On appeal, we affirmed the district court’s grant of summary judgment
dismissing the plaintiffs’ failure-to-investigate and monitor claims. Id. at 907. Our
“focus [was] on whether plaintiffs ha[d] standing to bring an action under
§ 1132(a)(2) to seek relief under § 1109 for this particular breach of duty, given the
unique features of a defined benefit plan.” Id. at 905–06. We held that § 1132(a)(2)
did not authorize the plaintiffs to bring suit because “the Plan’s surplus was
sufficiently large that the . . . investment loss did not cause actual injury to plaintiffs’
interests in the Plan.” Id. at 907. We explained that “a contrary construction [of
§ 1132(a)(2)] would raise serious Article III case or controversy concerns” given 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.” Id. at 906 (first and second emphases
added).
But “[t]he statutory holding of Harley did not rest solely on constitutional
avoidance.” McCullough, 585 F.3d at 1087. Another critical consideration for the
court was ERISA’s primary purpose—“the protection of individual pension rights.”
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Harley, 284 F.3d at 907 (quoting H.R. Rep. No. 93-533, at 1 (1974), as reprinted in
1974 U.S.C.C.A.N. 4639, 4639). We reasoned that the plan participants’ and
beneficiaries’ individual pension rights were fully protected; in fact, their “rights
would if anything be adversely affected by subjecting the Plan and its fiduciaries to
costly litigation brought by parties who have suffered no injury from a relatively
modest but allegedly imprudent investment.” Id.9 “[T]he purposes underlying
ERISA’s imposition of strict fiduciary duties,” we reasoned, “are not furthered by
granting plaintiffs standing to pursue these claims.” Id. “In addition to the Article III
constitutional limitations,” we also noted that “prudential principles bear on the
question of standing. One of those principles is to require that ‘plaintiff’s complaint
fall within the zone of interests to be protected or regulated by the statute . . . in
question.’” Id. (ellipsis in original) (quoting Valley Forge Christian Coll. v. Ams.
United for Separation of Church & State, Inc., 454 U.S. 464, 475 (1982)).
In Harley, we determined “that a breach of a fiduciary duty causes no harm to
a participant when the plan is overfunded, and that allowing costly litigation would
run counter to ERISA’s purpose of protecting individual pension rights. That logic
applies whether an action alleges a single breach or a series of breaches.”
McCullough, 585 F.3d at 1087. Additionally, even though Harley “addressed only
claims for monetary relief,” “[g]iven Harley’s holding that a participant suffers no
injury as long as the plan is substantially overfunded . . . we [have found] no basis to
construe § 1132(a)(2) to authorize an action against fiduciaries of an overfunded plan
for injunctive relief, but not for the monetary relief sought in Harley.” Id.
9
“Although the court did not identify the precise text of § 1132(a)(2) that it
was construing, we presume the court determined that the suit would not be one ‘for
appropriate relief’ under the circumstances.” McCullough, 585 F.3d at 1084–85.
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“Harley was decided on statutory grounds,” not on Article III standing. Id. at
1085 (emphasis added). We acknowledge that some references in Harley to standing
may have caused some confusion for both the parties and the district court. “The
Supreme Court has recently commented that it has observed confusion about the
concept of standing and has suggested that the use of that term in conjunction with
anything other than the ‘irreducible constitutional minimum of standing’ provided by
Article III should be disfavored.” Tovar v. Essentia Health, 857 F.3d 771, 774 (8th
Cir. 2017) (quoting Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct.
1377, 1386 (2014)). We have acknowledged the confusion that the “the term
‘statutory standing’” causes; nonetheless, “its purpose is clear: a plaintiff who seeks
relief for violation of a statute must ‘fall[] within the class of plaintiffs whom
Congress has authorized to sue’ under that statute.” Id. (alteration in original)
(quoting Lexmark, 134 S. Ct. at 1387). “Determining whether this requirement is
satisfied is ‘a straightforward question of statutory interpretation.’” Id. (quoting
Lexmark, 134 S. Ct. at 1388).
In summary, a careful reading of Harley shows that the issue it addressed was
whether the plaintiffs in that case fell within the class of plaintiffs whom Congress
has authorized under § 1132(a)(2) to bring suit claiming liability under § 1109 for
alleged breaches of fiduciary duties given that the plan was overfunded. McCullough,
585 F.3d at 1084 (citing Harley, 284 F.3d at 905–07). That issue was resolved on
statutory grounds, not Article III grounds, such as standing or mootness. Harley holds
(and McCullough affirms) that when a plan is overfunded, a participant in a defined
benefit plan no longer falls within the class of plaintiffs authorized under
§ 1132(a)(2) to bring suit claiming liability under § 1109 for alleged breaches of
fiduciary duties. Here, the Plan is overfunded; therefore, Harley is applicable, and the
plaintiffs no longer fall within the class of plaintiffs authorized to bring suit.
Therefore, although the district court dismissed the case on mootness, the dismissal
(as far as it concerns relief under § 1132(a)(2)) was nonetheless proper, as we may
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affirm the dismissal for any reason supported by the record. See Robbins, 794 F.3d
at 992.10
We did not address whether “a plan participant may seek injunctive relief under
§ 1132(a)(3)” in either Harley or McCullough. McCullough, 585 F.3d at 1087.
“[C]ases from other circuits [have] conclud[ed] that a plan participant may seek
injunctive relief under § 1132(a)(3) [against fiduciaries of an overfunded plan].” Id.
(citing Loren v. Blue Cross & Blue Shield of Mich., 505 F.3d 598, 607–10 (6th Cir.
2007); Horvath v. Keystone Health Plan E., Inc., 333 F.3d 450, 455–56 (3d Cir.
2003)).
Section 1132(a)(3) provides that a plan participant or beneficiary may bring a
civil action “(A) to enjoin any act or practice which violates any provision of this
subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief
(I) to redress such violations or (ii) to enforce any provisions of this subchapter or the
terms of the plan.” 29 U.S.C. § 1132(a)(3). Section “1132(a)(3) is a ‘catch-all’
10
The plaintiffs also argue that if we hold that Harley and its progeny require
that the Plan be underfunded at the commencement of the lawsuit and at every
moment throughout the litigation, we must reconsider Harley in light of the Supreme
Court’s recent standing decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1549
(2016) (“In determining whether an intangible harm constitutes injury in fact, both
history and the judgment of Congress play important roles. Because the doctrine of
standing derives from the case-or-controversy requirement, and because that
requirement in turn is grounded in historical practice, it is instructive to consider
whether an alleged intangible harm has a close relationship to a harm that has
traditionally been regarded as providing a basis for a lawsuit in English or American
courts.”). As we have explained, however, “Harley was decided on statutory
grounds,” not on Article III standing. McCullough, 585 F.3d at 1085. Furthermore,
“[t]he statutory holding of Harley did not rest solely on constitutional avoidance” but
also on “advanc[ing] ERISA’s primary purpose of protecting individual pension
rights.” Id. at 1087.
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provision that ‘act[s] as a safety net, offering appropriate equitable relief for injuries
caused by violations that [§ 1132] does not elsewhere adequately remedy.’” Soehnlen
v. Fleet Owners Ins. Fund, 844 F.3d 576, 583 (6th Cir. 2016) (alterations in original)
(quoting Varity Corp. v. Howe, 516 U.S. 489, 512 (1996)). Here, in addition to relief
under § 1132(a)(2), the plaintiffs sought “any injunctive relief that the Court deems
appropriate” pursuant to § 1132(a)(3). The Sixth Circuit recently rejected plan
participants’ argument that “they need not show individual injury to obtain injunctive
relief for a breach of fiduciary duty” pursuant to § 1132(a)(3). Soehnlen, 844 F.3d at
584. In doing so, the Sixth Circuit examined its prior opinion in Loren and then
observed:
We recognize that misconduct by the administrators of a benefit plan
can create an injury if “it creates or enhances a risk of default by the
entire plan.” LaRue v. DeWolff, Boberg & Associates, Inc., 552 U.S.
248, 255, 128 S. Ct. 1020, 169 L. Ed. 2d 847 (2008). But Plaintiffs make
no showing of actual or imminent injury to the Plan itself. Plaintiffs
concede this point by pleading that the actions of the fiduciaries expose
the Plan to prospective liability in the amount of $15,000,000. To the
extent that Plaintiffs argue that the risk of an enforcement action is itself
sufficient to constitute an injury, we find in the absence of any evidence
that penalties have been levied, paid, or even contemplated that “these
risk-based theories of standing [are] unpersuasive, not least because they
rest on a highly speculative foundation lacking any discernible limiting
principle.” David v. Alphin, 704 F.3d 327, 338 (4th Cir. 2013). We
therefore affirm the district court’s finding that Plaintiffs[] lack standing
to bring this claim.
Id. at 585 (first emphasis added) (first alteration in original).
While Soehnlen is phrased in terms of Article III standing, the Sixth Circuit’s
recognition that the plaintiffs must “make [a] showing of actual or imminent injury
to the Plan itself,” id. (emphasis added), under § 1132(a)(3) is similar to our holding
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in Harley that § 1132(a)(2) does not authorize plaintiffs to bring suit when “the Plan’s
surplus [is] sufficiently large that the . . . investment loss did not cause actual injury
to plaintiffs’ interests in the Plan,” Harley, 284 F.3d at 907 (emphasis added).
Under both § 1132(a)(2) and (a)(3), the plaintiffs must show actual injury—to
the plaintiffs’ interest in the Plan under (a)(2) and to the Plan itself under (a)(3)—to
fall within the class of plaintiffs whom Congress has authorized to sue under the
statute. Given that the Plan is overfunded, there is no “actual or imminent injury to
the Plan itself” that caused injury to the plaintiffs’ interests in the Plan. Soehnlen, 844
F.3d at 585. For that reason, as in Harley and McCullough, the plaintiffs’ suit is not one for
appropriate relief, and we hold that dismissal of the plaintiffs’ claims for relief under
§ 1132(a)(3) was also proper.11
B. Attorneys’ Fees and Costs
The plaintiffs next argue that if we affirm the district court’s dismissal of their
claims based on the Plan’s overfunded status, then they are entitled to fees pursuant
to ERISA Section 502(g)(1), which permits “the court in its discretion [to] allow a
reasonable attorney’s fee and costs of action to either party.” 29 U.S.C. § 1132(g)(1).
We review for an abuse of discretion a district court’s denial of an award for
attorneys’ fees and costs. McDowell v. Price, 731 F.3d 775, 783–84 (8th Cir. 2013).
But, as a threshold matter, “a fees claimant must show ‘some degree of success on the
merits’ before a court may award attorney’s fees under § 1132(g)(1).” Hardt v.
Reliance Standard Life Ins. Co., 560 U.S. 242, 255 (2010) (quoting Ruckelshaus v.
Sierra Club, 463 U.S. 680, 694 (1983)). This standard is not satisfied “by achieving
‘trivial success on the merits’ or a ‘purely procedural victor[y].’” Id. (alteration in
11
Because we conclude that all of the plaintiffs’ claims were properly dismissed
based on the Plan’s overfunded status, we need not address whether the district court
erred in dismissing the Equities Strategy claim on statute-of-limitations and pleading
grounds.
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original) (quoting Ruckelshaus, 463 U.S. at 688 n.9). But the standard is satisfied “if
the court can fairly call the outcome of the litigation some success on the merits
without conducting a ‘lengthy inquir[y] into the question whether a particular party’s
success was ‘substantial’ or occurred on a ‘central issue.’” Id. (alteration in original)
(quoting Ruckelshaus, 463 U.S. at 688 n.9).
Before the district court, the plaintiffs argued that they had achieved some
success on the merits because after they filed suit, the defendants, in 2014, made $311
million in voluntary excess contributions to the Plan. Adedipe III, 2016 WL 7131574,
at *4. According to the plaintiffs, “their litigation served as a catalyst for Defendants’
$311 million contribution.” Id. The district court found this a flawed argument
because no evidence existed that the defendants’ 2014 contribution was “an
‘outcome’ of the litigation, as opposed to an independent decision that nonetheless
affected the viability of Plaintiffs’ case.” Id. According to the defendants, they made
the 2014 contribution “to reduce the Plan’s insurance premiums.” Id. at *3. The
district court found the defendants’ explanation for this excess contribution “to be
supported by the record” and recounted the record evidence as follows:
In 2012, Defendants voluntarily made a $35 million contribution.
Hansen Decl. ¶ 6, Dkt. No. 264; see also Dkt. No. 108–1, Ex. E at 2–1
(showing September 11, 2012 contribution of $35 million). As
explained in a sworn declaration by U.S. Bancorp’s Senior Vice
President of Benefits Design, David Hansen, the contribution was made
in order to reduce the expensive variable insurance premiums the Plan
would otherwise have been required to pay for Plan Year 2011. Hansen
Decl. ¶ 6. In 2013, before Plaintiffs filed suit, Defendants made $163
million of the total of $290 million in voluntary excess contributions
that year, again to reduce premiums, as well as for other reasons
unrelated to the litigation. Id. ¶¶ 7–8. Defendants explain that in 2014
they again made excess contributions in order to reduce the Plan’s
insurance premiums. Id. ¶ 9. They note that the excess contributions in
2013 and 2014 brought the Plan’s “PBGC ratio,” which is used to
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calculate the required insurance premiums, almost exactly to the ratio
that would minimize premium costs, thus corroborating this explanation
for Defendants’ decisions to make the contributions. Id. ¶¶ 8–9.
Id. (footnote omitted). According to the court, the plaintiffs offered no evidence
beyond mere speculation that the “litigation caused the contributions to the Plan.” Id.
Additionally, the district court noted that “no court order spurred Defendants’
actions, nor did [the district] [c]ourt ever state that it was likely to grant summary
judgment to Plaintiffs.” Id. at *4; cf. Hardt, 560 U.S. at 256 (holding that plaintiff,
whose claim for benefits was denied by insurer, achieved some success on the merits
of her ERISA claim when, although the plaintiff “failed to win summary judgment on
her benefits claim, the [d]istrict [c]ourt nevertheless found ‘compelling evidence’”
that supported her case and stated that it was inclined to grant her summary judgment
but first ordered the insurer to reconsider her claim and the insurer, during its “court-
ordered review,” awarded the plaintiff the claimed benefits). In fact, the “case was
still in the pleadings stage when the [c]ourt dismissed it.” Adedipe III, 2016 WL
7131574, at *4.
“Courts within the Eighth Circuit and elsewhere have found that an award of
attorney’s fees in an ERISA case may be proper when a plaintiff’s suit operated as a
catalyst to bring about a voluntary change in the defendant’s conduct.” Greater St.
Louis Constr. Laborers Welfare Fund v. X–L Contracting, Inc., No.
4:14-CV-946-SPM, 2016 WL 6432768, at *11 (E.D. Mo. Oct. 31, 2016) (citing Boyle
v. Int’l Bhd. of Teamsters Local 863 Welfare Fund, 579 F. App’x 72, 77–78 (3d Cir.
2014) (determining that the plaintiffs had achieved some success on the merits and
could receive an award of attorneys’ fees under the catalyst theory where the
defendants voluntarily reinstated the plaintiffs’ benefits but did so only after the
plaintiffs filed suit); Broadbent v. Citigroup Long Term Disability Plan, No. CIV
13–4081–LLP, 2015 WL 1189565, at *4–5 (D.S.D. Mar. 16, 2015) (determining that
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the plaintiff had achieved some degree of success on the merits where the lawsuit
“served as a catalyst to cause [the defendant] to provide her with substantially all of
the relief she sought in her complaint”); Greenwald v. Liberty Life Assurance Co.,
No. 4:12–CV–3034, 2013 WL 3716416, at *3 (D. Neb. July 12, 2013) (determining
that a plaintiff can obtain fees under ERISA pursuant to the catalyst theory even
though the litigation did not result in a favorable judgment, if “the pressure of the
lawsuit was a material contributing factor in bringing about extrajudicial relief,” and
explaining that “an award of attorney fees under § 1132(g) does not require the fee
claimant to achieve prevailing party status” and that “ERISA is remedial legislation,
and should be interpreted to advance Congress’ goals of protecting employee rights
and securing effective access to federal courts” (internal quotation marks omitted)).
Here, the record supports the district court’s conclusion that the plaintiffs failed
to produce evidence that their lawsuit was a material contributing factor in the
defendants’ making the 2014 contribution resulting in the Plan’s overfunded status
and any relief that the plaintiffs sought in their complaint. Accordingly, we hold that
the district court did not abuse its discretion in denying the plaintiffs’ motion for
attorneys’ fees and costs.
III. Conclusion
Accordingly, we affirm the judgment of the district court.
KELLY, Circuit Judge, concurring in part and dissenting in part.
I agree with the court’s conclusion that—under Harley and McCullough—the
plaintiffs lack authorization to sue under 29 U.S.C. § 1132(a)(2). However, I
respectfully dissent from the court’s holding that the plaintiffs lack authority to bring
their claims for injunctive relief under 29 U.S.C. § 1132(a)(3). As relevant,
§ 1132(a)(3) authorizes civil actions “by a participant, beneficiary, or fiduciary (A)
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to enjoin any act or practice which violates any provision of [29 U.S.C.
§§ 1104–1106], or (B) to obtain other appropriate equitable relief (i) to redress such
violations or (ii) to enforce [§§ 1104–1106].” In light of this unambiguous statutory
text and in the absence of any dispute that the plaintiffs are participants in and
beneficiaries of the Plan, I believe that the plaintiffs’ complaint—which seeks to
enjoin the defendants from breaching their fiduciary duties under §§ 1104–1106 in
relation to their management of the Plan—falls within “the zone of interests to be
protected or regulated” by ERISA. See Harley, 284 F.3d at 907 (quoting Valley
Forge, 454 U.S. at 475).
I also believe that—accepting as true all factual allegations in the plaintiffs’
complaint and drawing all reasonable inferences in their favor, as we must—the
plaintiffs have shown an actual or imminent injury. Cf. Soehnlen, 844 F.3d at 585
(concluding plaintiffs who made “no showing of actual or imminent injury to the Plan
itself” lacked standing). More specifically, the plaintiffs allege that the defendants
invested the entirety of the Plan’s assets in high-risk/high-reward equities, in
violation of their fiduciary duties under §§ 1104–1106, and that as a result, the Plan
suffered a loss of $1.1 billion, causing the Plan to fall from being significantly
overfunded in 2007 to being 84 percent underfunded in 2008. See Harley, 284 F.3d
at 905 (recognizing that investment losses were cognizable losses to the ERISA plan
because they reduced the pool of plan assets). The relief sought is not monetary, but
injunctive, and the injury alleged is not speculative. Moreover, the complaint alleges
that at least some of the defendants continue to serve as Plan fiduciaries and remain
positioned to resume their alleged ERISA violations. Cf. Soehnlen, 844 F.3d at 585
(finding risk of a potential enforcement action too speculative to satisfy requirement
of actual or imminent injury “in the absence of any evidence that penalties had been
levied, paid, or even contemplated”). Finally, I do not believe that Harley or
McCullough controls our decision in this case as to whether plaintiffs have authority
under § 1132(a)(3) to sue for injunctive relief. See McCullough, 585 F.3d at 1087
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(applying Harley as controlling circuit precedent on the plaintiff’s claim for
injunctive relief under § 1132(a)(2), and specifically noting that the plaintiff had not
relied on § 1132(a)(3)).
For these reasons, I believe that the plaintiffs are authorized to sue for
injunctive relief under § 1132(a)(3). I would therefore affirm the district court’s
dismissal of the plaintiffs’ claims under § 1132(a)(2), reverse the dismissal of their
claims for injunctive relief under § 1132(a)(3), and remand this matter to the district
court for further proceedings, including reconsideration of the issue of attorney’s fees
and costs upon final resolution of the case.
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