U.S. Supreme Court accepts Minnesota pension case.

Byline: Kevin Featherly

The U.S. Supreme Court will hear a Minnesota case that could determine whether negligent private pension-fund fiduciaries can be held to account in civil court for plan shortages even if they somehow scramble to maneuver plans back into the black in mid-litigation.

The lawsuit, Thole v. U.S. Bank, is a class action filed by a group of retired U.S. Bank employees. It accuses their former company of drastically mismanaging their pension portfolio between 2007 and 2010, needlessly deploying a high-risk/high-reward investment strategy that at one point drained the fund of almost $750 million.

The Supreme Court will hear their appeal of a 2017 U.S. 8th Circuit Court of Appeals opinion, which went against them. That ruling characterized U.S. Bank's pension-fund mess as the result of "a relatively modest but allegedly imprudent investment."

The retirees have backing from the Trump administration. In May, Solicitor General Noel Francisco filed an amicus brief urging the U.S. Supreme Court to take up the case.

Francisco described it as an important case that involves a question "that arises with some frequency." His brief asserts that the litigants had standing to file both under Article III of the U.S. Constitution which the 8th Circuit did not consider and under ERISA laws.

The Court of Appeals was wrong, the solicitor general wrote, to rule that plaintiffs lacked statutory standing to sue under the Employee Retirement Income Security Act of 1974.

If you're taken aback to hear the solidly pro-business Trump administration siding with a group defined-benefit pensioners suing a major financial institution, plaintiff's attorneys do not share your sense of surprise.

"I think basically it was such an egregious example of pension mismanagement that it was hard for any administration to endorse the 8th Circuit's ruling," said Michelle Yau, a partner at Washington, D.C.-based law firm Cohen Milstein, one of the firms representing plaintiffs.

The U.S. Supreme Court agreed on June 28 to review the case. Oral arguments are not yet scheduled.

Equities strategy

Plaintiffs say U.S. Bank's fiduciaries invested all their pension assets into equitieslargely stockswith no hint of portfolio diversification. About 40 percent of the assets went into a mutual fund that, at the time, was controlled by parent company U.S. Bancorp.

That move allowed the company both to profit from the fund through artificially generated fund-management fees and to...