Bank of America Wins Suit Over Affiliated Fund Use

The 4^th U.S. Circuit Court of Appeals affirmed a district court’s dismissal of claims regarding the bank’s defined benefit (DB) plan for lack of constitutional standing because the plaintiffs failed to plead any cognizable injury-in-fact likely to be redressed by a favorable outcome in the litigation. The court noted that the plaintiffs “neither allege that they have been denied benefits, nor that their receipt of future benefits … is in jeopardy.”  

The appellate court reiterated in its opinion the lower court’s belief that standing would result in a subset of plan participants being able to cause the entire plan to incur the considerable costs of litigating an alleged fiduciary breach claim even when those alleged harms did not result in any cognizable injury to the plan. “Such a suit would certainly be adverse to the interests of the plan. Where there is no actual injury, we see little to be gained from an abstract challenge to alleged fiduciary misconduct at the cost of the plan and those participants who did not bring (and may not approve of) the suit,”  the opinion said.  

The court also disagreed with amicus filings from the Pension Benefit Guaranty Corporation (PBGC) and the Department of Labor (DOL) asking it to reverse the district court ruling. The appellate court noted that the Supreme Court has held that a participant in a defined benefit pension plan has an interest in his fixed future payments only, not the assets of the pension fund. It concluded that whether an Article III injury-in-fact results from the possibility that a pension plan will terminate in an underfunded state and the PBGC will not pay full benefits is a question that has not been decided by the Supreme Court and the present case does not afford the opportunity for such a pronouncement. The 4^th Circuit found the alleged risk to be insufficiently “concrete and particularized” to constitute an injury-in-fact for Article III standing purposes.  

The appellate court also dismissed the claims relating to Bank of America’s 401(k) plan as time-barred. It disagreed with the plaintiffs’ contention that the fiduciary breach occurred each time the plan committee met and did not choose to eliminate the bank-affiliated funds as plan investment options. The 4^th Circuit said the challenge can only be to the initial selection of the funds for the plan, which occurred in 1999, more than six years prior to the lawsuit being filed in 2006.