No. 16-1928

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

JAMES THOLE,

Plaintiffs-Appellants,

v.

U.S. BANK, NATIONAL ASSOCIATION,

Defendants-Appellees.

On Appeal from the United States District Court

for the District of Minnesota (No. 13-cv-2687 (JNE/JJK))

Secretary of Labor's

Amicus Curiae Brief in Support of Appellant

M. PATRICIA SMITH THOMAS TSO

Solicitor of Labor Counsel for Appellate and Special

Litigation

G. WILLIAM SCOTT MELISSA MOORE

Associate Solicitor for Attorney

Plan Benefits Security U.S. Department of Labor

Plan Benefits Security Division

200 Constitution Ave., N.W., N-4611

Washington, DC 20210

(202) 693-5281
TABLE OF CONTENTS

ISSUE PRESENTED................................................................................................. 1

INTEREST OF THE SECRETARY.......................................................................... 1

STATEMENT OF THE CASE.................................................................................. 2

A. Factual Background.................................................................................. 2 

B. Procedural History.................................................................................... 5 

SUMMARY OF THE ARGUMENT ........................................................................ 7

ARGUMENT............................................................................................................. 8

Plaintiffs Have Article III Standing Based on the Injury to the Plan and its

Participants Which Depleted the Plan's Assets Below the Minimum Funding

Requirements ........................................................................................................ 8 

1. Under Harley's framework, participants in underfunded plans have

standing to sue when their plan suffers losses due to a fiduciary

breach...................................................................................................11

2. In the defined-benefit context, injury in fact results from the

diminished value of the promise to pay benefits caused by the plan

losses, which resulted in the plan's underfunding ...............................17

CONCLUSION........................................................................................................28

CERTIFICATE OF COMPLIANCE .......................................................................29

CERTIFICATE OF SERVICE ................................................................................30
ii

TABLE OF AUTHORITIES

Federal Cases:

Alessi v. Raybestos-Manhattan, Inc.,

 451 U.S. 504 (1981) ..............................................................................................19,

Braden v. Wal-Mart Stores, Inc.,

588 F.3d 585 (8th Cir. 2009) ................................................................13, 14, 20, 25

Braitberg v. Charter Commc'ns, Inc.,

_F.3d _, 2016 WL 4698283 (8th Cir. Sept. 8, 2016)..............................................24

Carlsen v. GameStop, Inc.,

No. 15-2453, -- F.3d. -- 2016 WL 4363162 (8th Cir. Aug. 16, 2016)..............22, 23

Cent. Laborers' Pension Fund v. Heinz,

541 U.S. 739 (2004)..........................................................................................21, 23

Clapper v. Amnesty Int'l USA,

133 S. Ct. 1138 (2013).......................................................................9-11, 18, 23, 24

Connolly v. Pension Ben. Guar. Corp.,

 475 U.S. 211 (1986) (O'Connor, J., concurring) ....................................................11

Gastronomical Workers Union Local 610 & Metro. Hotel Ass'n Pension Fund v.

 Dorado Beach Hotel Corp.,et al.,

 617 F.3d 54 (1st Cir. 2010)...............................................................................19, 22

Gibbs ex rel. Estate of Gibbs v. CIGNA Corp.,

 440 F.3d 571 (2d Cir. 2006) ...................................................................................20

Harley v. Minn. Mining and Mfg. Co.,

 284 F.3d 901 (8th Cir.2002) (Bye, J., dissenting)............................................passim

Harley v. Zoesch,

 413 F.3d 866 (8th Cir. 2005) (Bye, J., concurring) ..............................13, 14 n.1, 18

Hawkeye Nat'l Life Ins. v. AVIS Indus. Corp.,

 122 F.3d 490 (8th Cir. 1997)...................................................................................15
3

Federal Cases (cont.):

Hughes Aircraft Co. v. Jacobson,

525 U.S. 432 (1999)...............................................................................................20

Johnson v. Allsteel, Inc.,

 259 F.3d 885 (7th Cir. 2001) .................................................................................20

LaRue v. DeWolff, Boberg & Assocs., Inc.,

 552 U.S. 248 (2008)...............................................................................................18

Lee v. Verizon Commc'ns,

 No. 14-10553, -- F.3d. --, 2016 WL 4926159 (5th Cir. Sept. 15, 2016)..................9

Lockheed Corp. v. Spink,

 517 U.S. 882 (1996)...............................................................................................22

McCullough v. AEGEON USA, Inc.,

 585 F.3d 1082 (8th Cir. 2009)............................................................ 6, 8, 13, 14 n.2

Mead Corp. v. Tilley,

 490 U.S. 714 (1989)...............................................................................................14

Nachman Corp. v. Pension Ben. Guar. Corp.,

 446 U.S. 359 (1980) ................................................................................... 10, 18, 27

Pension Ben. Guar. Corp. v. LTV Corp.,

 496 U.S. 633 (1990)...............................................................................................16

Perelman v. Perelman,

 793 F.3d 368 (3d Cir. 2015)...................................................................................13

Prudential Ins. Co. of Am. v. Nat'l Park Med. Ctr., Inc.,

 413 F.3d 897 (8th Cir. 2005)..................................................................................23

Sec'y of Labor v. Fitzsimmons,

 805 F.2d 682 (7th Cir. 1986)(en banc).....................................................................1

Shea v. Esensten,

 208 F.3d 712 (8th Cir. 2000)....................................................................................1
4

Federal Cases (cont.):

Spokeo, Inc. v. Robins,

 136 S. Ct. 1540 (2016)...........................................................................................24

Stearns v. NCR Corp.,

 297 F.3d 706 (8th Cir. 2002) .................................................................................22

United States v. Eleven Million Seventy-One Thousand One Hundred & Eighty-

 Eight Dollars & Sixty-Four Cents ($11,071,188.64) in U.S. Currency,

 825 F.3d 365 (8th Cir. 2016) ............................................................................16, 17

US Airways v. McCutchen,

 133 S.Ct. 1537 (2013)............................................................................................22

Varity v. Howe,

 516 U.S. 489 (1996).................................................................................................4

Federal Statutes:

Employee Retirement Income Security Act of 1974 (Title I),

as amended, 29 U.S.C. 1001 et seq.:

Section 2, 29 U.S.C. § 1001 ...............................................................................1

Section 2(a), 29 U.S.C. § 1001(a)............................................................... 18, 27

Section 2(b), 29 U.S.C. § 1001(b)....................................................................19

Section 2(c), 29 U.S.C. § 1001(c) ....................................................................19

Section 302, 29 U.S.C. § 1082 ..........................................................................11

Section 403, 29 U.S.C. § 1103 .........................................................................24

Section 403(c)(1), 29 U.S.C. § 1103(c)(1).......................................................15

Section 404, 29 U.S.C. § 1104 ...........................................................................2

Section 405, 29 U.S.C. § 1105 ...........................................................................2
5

Section 406(a)(1)(D), 29 U.S.C. § 1106(a)(1)(D)..............................................2

Section 406(b)(1), 29 U.S.C. § 1106(b)(1) ........................................................2

Section 406(b)(2), 29 U.S.C. § 1106(b)(2) ........................................................2

Section 409(a), 29 U.S.C. § 1109(a).............................................................4, 25

Section 502(a)(2), 29 U.S.C. § 1132(a)(2)..............................................3, 10, 12

Section 502(a)(3), 29 U.S.C. § 1132(a)(3)....................................................4, 10

Section 4041, 29 U.S.C. § 1341.......................................................................15

Section 4062, 29 U.S.C. § 1362.......................................................................15

Miscellaneous:

Brief of the Secretary of Labor as Amicus Curiae in Support of Appellants' Petition

for Rehearing in En Banc, McCullough v. AEGON USA Inc., No.08-1952 (8th

Cir.) (filed Dec. 4, 2009)............................................................................14 n. 2

Brief of the Secretary of Labor as Amicus Curiae in Support of Appellants' Petition

for Rehearing and Rehearing in En Banc, Harley v. Minn. Mining and Mfg.,

Nos.00-2214, 01-1213 (8th Cir.) (filed May 22, 2002) ..............................14 n.2

2015 PBGC ANN. REP.....................................................................................16 n. 3

S. Rep. 93-127, 93d Cong., 1st Sess. (1973) reprinted in U.S. Code Cong. & 

Admin. News 1974 ......................................................................................19, 27
ISSUEPRESENTED

The Secretary will only address this following issue raised in the brief of the

defendants-appellees, at 30-31:

Whether plaintiffs have a cognizable "injury in fact" for purposes of Article

III standing in an action to recover losses to their underfunded definedbenefit plan caused by their fiduciaries' violations of the Employee

Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001, et. seq.

INTEREST OF THE SECRETARY

The Secretary of Labor has primary enforcement authority for Title I of

ERISA. Shea v. Esensten, 208 F.3d 712, 714 n.1 (8th Cir. 2000). The Secretary's

interests include promoting uniformity of law, protecting beneficiaries, enforcing

fiduciary standards, and ensuring the financial stability of employee benefit plan

assets. Secretary of Labor v. Fitzsimmons, 805 F.2d 682 (7th Cir. 1986) (en banc).

Defendants argue, as an alternative basis for affirmance, that the plaintiffparticipants in an underfunded defined-benefit pension plan do not have standing to

bring suit for a breach of fiduciary duty until the plan is at imminent risk of default. 

If these arguments are accepted, such participants would not fulfill their statutory

role in enforcing standards imposed by ERISA to protect their own plans' ability 

to fund their retirement benefits. Id. This result will create a significant

burden for the Secretary, as the only person with standing, to bring suits to monitor
2

and protect the many underfunded defined-benefit pension plans. See Appellees'

Br., 8 n.15 (noting that 79% of single-employer defined-benefit plans are

underfunded).

STATEMENT OF THE CASE

A. FactualBackground

The named plaintiffs in this case – James Thole, Marlene Jackson and Sherry

Smith – are former employees and vested participants in the defined-benefit

pension plan sponsored by their former employer, U.S. Bank. See Plaintiffs'

Appendix ("App.") 40-41 (¶¶ 24-27). They brought suit on their own behalf and on

behalf of a class of similarly-situated participants in the Plan against three interrelated corporate defendants and a number of individuals at the corporation. 1 App.

41-45 (¶¶ 28-52). They allege that all of the defendants are plan fiduciaries, with

the exception of U.S. Bancorp which they allege is a party-in-interest. App. 48, 95

(¶¶ 68, 283).

Plaintiffs allege that the Plan fiduciaries violated their duties of loyalty and

1 The three corporate defendants are U.S. Bancorp, the Plan sponsor; U.S. Bank, a

wholly-owned subsidiary of U.S. Bancorp and trustee; and Nuveen Management,

successor-in-interest to FAF Advisors, Inc., the investment advisor and a subsidiary

of U.S. Bank. App. 41-42 (¶¶ 29-30). The individual defendants are the nine

members of the U.S. Bancorp Board of Directors, members of the U.S. Bancorp

Compensation Committee, and members of the U.S. Bancorp Investment

Committee during the class period. App. 42-45 (¶¶ 32-40; 43-51). Both

Committees are named fiduciaries, while the Board has the authority to appoint the

members of the Committees. App. 42, 43, 45 (¶¶ 31, 42, 51).
3

prudence; failed to prudently diversify plan assets; and failed to follow plan

documents, all as required by ERISA section 404, 29 U.S.C. § 1104. App. 82-94

(¶¶ 228-281). Additionally, plaintiffs allege that defendants violated co-fiduciary

duties set forth in section 405, 29 U.S.C. § 1105, and engaged in prohibited

transactions in violation of sections 406(a)(1)(D), 406(b)(1) and 406(b)(2), 29

U.S.C. §§ 1106(a)(1)(D), (b)(1), (b)(2). App. 94-104 (¶¶ 282-317). U.S. Bancorp

is alleged to have knowingly participated in these breaches and prohibited

transactions. App. 104-106 (¶¶ 318-327).

The claims challenge an investment strategy under which virtually all of the

Plan's assets were invested in a portfolio of equity stocks managed by defendant

FAF Advisors. App. 33 (¶ 4). This strategy, plaintiffs claim, was imprudent and

disloyal and led to an undiversified portfolio that was unreasonably risky and out

of line with the investment strategy normally applied by defined-benefit plans

(which average only 59% in equities). App. 33 (¶ 3). Moreover, according to the

complaint, this strategy was designed to, and benefitted, the Plan sponsor by

allowing it to report a higher assumed rate of return on the Plan's investments,

which reduced to zero the amount that U.S. Bancorp was required to contribute to

the Plan while also inflating U.S. Bancorp's stock price. App. 98 (¶ 229). In

addition to benefitting the company, the 100% equity investment strategy also

allegedly benefited FAF Advisors by enabling FAF Advisors to generate fees for
4

itself by investing the majority of the Plan assets in its own mutual funds and by

drawing other investors to FAF Advisors as a result of its increased assets under

management. App. 61 (¶ 140). Plaintiffs also allege that FAF Advisors engaged in

an impermissible, deceptive and risky lending arrangement with the Plan. App.

71-75 (¶¶ 174-198). Defendants' fiduciary misconduct allegedly led to a $1.1

billion loss to the Plan in 2008, causing the Plan to become significantly

underfunded at that time. App. 33 (¶ 4). In other words, "'the value of the plan

assets dropped below the plan liabilities,'" which included the obligation to pay

promised benefits. App. 70 (¶ 170).

Plaintiffs sued under ERISA section 502(a)(2), 29 U.S.C. § 1132(a)(2),

which, together with section 409(a), 29 U.S.C. § 1109(a), allows plan participants

to sue fiduciaries whose breaches have harmed their plan and to recover any losses

to the plan or to obtain other equitable and remedial relief for the plan. App. 107

(¶ 329). Plaintiffs also sued under ERISA section 502(a)(3), 29 U.S.C. §

1132(a)(3), see App. 107, which allows plan participants to sue fiduciaries and

others for injunctions and "other appropriate equitable relief," and which has been

interpreted to encompass relief running to plan participants themselves. See Varity

v. Howe, 516 U.S. 489, 513-15 (1996). Plaintiffs request declaratory relief, the

recovery of Plan losses from the breaching fiduciaries, disgorgement of any profits

made through the use of Plan assets, and other equitable relief, including injunctive
5

relief, a court-appointed fiduciary, and, as available under applicable law, a

constructive trust and restitution. App. 108-109. The Plan was still underfunded

when plaintiffs filed their amended complaint on March 20, 2014. App. 71 (¶

173).

B. Procedural History

After plaintiffs filed an amended complaint, defendants filed a motion to

dismiss for lack of constitutional standing. Defendants argued that even though the

Plan was underfunded, plaintiffs had not been injured in a constitutional sense by

the Plan's loss because plaintiffs' benefit levels were not reduced and U.S. Bancorp,

as the plan sponsor, was in a financial position to fully fund the plan's benefits. 

App. 123. On November 21, 2014, the district court denied the defendants' 

motion to dismiss. App. 110-156. The district court rejected defendants' 

reliance on U.S. Bancorp's financial status and the availability of PBGC 

insurance, finding that by the "relevant measures" set forth in this Court's decision

in Harley v. Minnesota Min. and Mfg. Co., 284 F.3d 901 (8th Cir. 2002),

plaintiffs "adequately alleged that the Plan lacked a surplus large enough to absorb

the losses at issue," and, on that basis, concluded that the plaintiffs "satisfied their

burden of alleging that they have suffered a personal injury in fact." App. 130.

The court also concluded that plaintiffs adequately alleged that the violations

caused a $748 million loss, resulting in an increased risk of default as a result of
6

the Plan's underfunding, see id. at 131, and that these harms could be fairly

redressed, at a minimum, by the restoration of Plan losses that plaintiffs sought

from the breaching fiduciaries. Id. The district court dismissed some of plaintiffs'

claims on other grounds, but let many of the claims go forward. App. 140.

On December 29, 2015, the district court dismissed the remaining claims on

mootness grounds, concluding that the claims had become moot when, earlier in

2015, U.S. Bancorp contributed enough to the Plan for it to become overfunded.

App. 178. The court noted that a case becomes moot when the parties lose any

"legally cognizable interest in the outcome," and "it becomes impossible for a

court to grant any effectual relief whatever to the prevailing party." App. 175

(internal quotations and citations omitted). The court reasoned that under this

Court's decisions in McCullough v. AEGEON USA, Inc., 585 F.3d 1082, 1084

(8th Cir. 2009), and Harley, 284 F.3d at 907, once the Plan became overfunded,

the participants no longer had a concrete interest in any monetary relief that might

be awarded to the Plan because any such award would simply add to the Plan's

surplus, which may revert to the plan sponsor upon the Plan's termination. App.

178. The Court also determined that neither plaintiffs' request for various forms

of relief under section 502(a)(3) nor their claims for invasion of their statutory

rights could save the case from mootness. App. 180-183.

Plaintiffs appealed and filed their opening brief on July 12, 2016.
7

Defendants filed their response brief on September 12, 2016. In their response

brief, in addition to arguing that this Court should affirm the district court’s

dismissal based on mootness, defendants also argue that this Court could affirm the

dismissal on the alternative ground that plaintiffs did not have Article III standing

when the complaint was filed. Appellee's Br., 30. In doing so, defendants assert

that plaintiffs' allegations that the Plan was underfunded and that the underfunding

was caused by defendants' misconduct are insufficient to establish an injury in fact;

instead, they argue, plaintiffs had to assert that "the alleged fiduciary breaches

created an 'impending' or 'imminent' risk that the Plan would default." Id. at 31.

SUMMARY OF THE ARGUMENT

ERISA imposes a specific framework for defined-benefit plans. Employees

work to accrue and vest at a promised level of pension benefits upon retirement,

and fiduciaries must abide by stringent statutory duties designed to protect the pool

of assets necessary to fund those promised benefits. ERISA expressly grants

participants statutory rights to enforce those requirements, including ERISA's

requirements that plan fiduciaries manage the plan in a prudent and loyal manner,

diversify plan assets, refrain from engaging in conflicted and self-serving

transactions and protect the pool of assets so that it can fully fund the promised

benefits.

In this case, plaintiffs allege plan fiduciaries breached these duties to their
8

defined-benefit plan and, in so doing, depleted the plan's assets to such an extent

that it could no longer fully fund the participants' promised benefits. Plaintiffs then

sued the fiduciaries under ERISA to recover the plan's losses on behalf of the plan.

This Court has held that participants in defined-benefit pension plans have no

standing to recover losses on behalf of their plan if, at the time of suit, the plan has

a surplus of plan assets sufficient to absorb plan losses that have occurred and still

pay all promised benefits. As the district court correctly held in this case, under this

precedent, participants have standing to sue when, as here, no surplus exists to

absorb the loss, and the participants bear the harm of underfunding caused by the

plan's losses. When their promised benefits are no longer fully backed by plan

assets, each participant's promise of benefits is less secure and devalued. This harm

is an Article III "injury in fact." Because, at the time they brought suit, plaintiffs

alleged a loss to their plan and no surplus to absorb the loss, the district court

correctly held that plaintiffs had standing to sue to recover this loss to the plan. 

This result is consistent with ERISA's design, with this Court's precedent, and 

with Article III jurisprudence.

ARGUMENT

Plaintiffs Have Article III Standing Based on the Injury to the Plan and its

Participants, Which Depleted the Plan's Assets Below ERISA's Minimum

Funding Requirements

In their response brief, defendants argue that, even if the mootness doctrine
9

does not support dismissal, this Court can affirm the district court's dismissal of the

case on an alternative ground that plaintiffs did not have Article III standing to

initiate the case. Appellees' Br., 30 n.41. Defendants present two arguments.

First, defendants argue that "[a]lthough Harley and McCullough both involved

'overfunded' defined benefit plans, nothing in these decisions suggests that

participants [here] in 'underfunded' defined benefit plans necessarily have

standing." Appellees' Br., 30. Second, defendants urge the court to adopt a test

for Article III standing that requires plaintiffs to plead facts demonstrating that the

"alleged fiduciary breaches created an 'impending' or 'imminent' risk that the Plan

would default." Id. at 31. In arguing for an "impending" or "imminent" risk

requirement, defendants are proposing that this Court import into the definedbenefit context the Supreme Court's approach to standing in Clapper v. Amnesty

International USA, 133 S. Ct. 1138, 1147 (2013).

In Clapper, the Supreme Court ruled that private plaintiffs, fearful that

amendments to the Foreign Intelligence Surveillance Act creating a framework for

surveillance would harm their dealings with individuals living abroad, did not have

statutory standing to sue because they did not suffer any current injury and any

future injury was not imminent or impending. 133 S. Ct. at 1155. Defendants rely

on the Fifth Circuit's recent decision in Lee v. Verizon Communications, No. 14-

10553, -- F.3d. --, 2016 WL 4926159 (5th Cir. Sept. 15, 2016), which applied the
10

Clapper standard to an underfunded defined-benefit plan to find that the alleged

underfunding caused by fiduciary misconduct was an "injury too speculative to

support standing" where the participants do "not allege a plan termination, [or] an

inability by [the employer] to address a shortfall in the event of a termination." Id.

at *14-*15 & n. 89.

Both of defendants’ arguments are incorrect. First, as discussed in greater

detail below, the framework for standing described in Harley and subsequent

decisions support a conclusion that participants have constitutional standing to sue

on behalf of their underfunded defined-benefit pension plans for losses caused by

fiduciary breach. Defendants identify no error in the district court's analysis of

Harley and its progeny when the district court found plaintiffs had standing to sue

under the Harley framework.

Second, defendants and the Fifth Circuit are simply wrong that the Clapper

standard applies to the defined-benefit context. Unlike in Clapper and similar

cases where the plaintiffs did not suffer any injury at the time of filing suit but

instead based their case on the possibility of future injury, the participants in the

defined-benefit plan at issue here have suffered a current injury when their plans

suffered losses that caused the plans to become underfunded. The injury implicates

the plan fiduciaries' promise to plan participantsto protect the pension plan,

including the promise of sufficient funding for the employees' promised benefits. In
11

this context, the participants have been harmed because they are entitled to a

properly-managed and a sufficiently-funded plan to ensure that they will receive

their promised benefits. See Nachman Corp. v. Pension Ben. Guar. Corp., 446 U.S.

359, 374–75 (1980); Connolly v. Pension Ben. Guar. Corp., 475 U.S. 211, 232

(1986) (O'Connor,J., concurring). ERISA empowers participantsto enforce these

promises on behalf of the plan and themselves. 29 U.S.C. §§ 1132(a)(2), (3). Thus,

the conclusion in Clapper that plaintiffs who suffer no current injury must show

that a future injury is "imminent" or "impending" has no relevance to a claim by a

plan participant that fiduciary breaches that caused losses to a defined benefit plan

resulted in that plan becoming underfunded. As discussed below in further detail,

this Court should reject defendants' alternative argument for affirmance based on

standing.

1. Under Harley's framework, participants in underfunded plans have

standing to sue when their plan suffers losses due to a fiduciary breach

In its decision concluding that plaintiffs had standing to sue, the district

court correctly recognized that, in this Circuit, the participants' injury for standing

purposes in the defined-benefit context turns on whether or not the plan is fully

funded with a surplus. App. 125 (recognizing "the centrality of surplus—or the

lack thereof—to Harley's injury-in-fact analysis"). The district court found that

plaintiffs "adequately alleged that the Plan lacked a surplus large enough to absorb

the losses at issue," and, on that basis, concluded that the plaintiffs here "satisfied
12

their burden of alleging that they have suffered a personal injury in fact." Id.

The district court's understanding of Harley and its progeny is accurate.

Harley concerned a defined-benefit plan's imprudent investment that depleted $20

million dollars in plan assets, but the remaining pool of assets was "more than

adequate to pay all accrued or accumulated benefits" promised to participants,

because the plan sponsor contributed to the plan beyond its minimum funding

requirements to meet all benefit obligations. 284 F.3d at 906-08 (describing the

plan's "surplus" beyond the minimum funding requirement as "[t]he actuarial value

of the Plan's assets exceeded its actuarial accrued liabilities"); see generally 29

U.S.C. § 1082 ("A plan to which this part applies shall satisfy the minimum

funding standard applicable to the plan for any plan year").

This Court acknowledged that the defined-benefit plan itself was harmed by

the fiduciary breaches, even though the plan was overfunded at the time that the

suit was brought. Id. at 905 ("This loss [caused by the fiduciary breach] reduced

the pool of [p]lan assets," and the fiduciary inflicted "cognizable harm" on the

plan.). Harley also acknowledged that subsequent contributions from the employer

to fund the plan do not offset or eliminate this harm to the plan caused by the

reduction in the pool of plan assets. Id.

Harley then addressed whether the participants had "statutory standing" to

sue for the plan losses on behalf of the plan pursuant to ERISA section 502(a)(2),
13

29 U.S.C. § 1132(a)(2). This Court concluded they did not because "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" not to individual

participants. 284 F.3d at 906. The Court concluded that the participants were not

injured by a loss to their overfunded plan because any recovery of losses would

only add to the plan's surplus, which reverts to the employer upon plan termination,

and would not directly benefit them in any way. Id. The participants, therefore,

had no statutory standing to recover those losses. Id. In reaching this conclusion,

this Court relied on principles of constitutional avoidance. Harley, 284 F.3d at 906

(noting that "a contrary construction [of § 1132(a)(2)] would raise serious Article

III case or controversy concerns," because it would "permit[ ] participants or

beneficiaries who have suffered no injury in fact" to bring an action to enforce

ERISA fiduciary duties on behalf of the Plan); see also Braden v. Wal-Mart Stores,

Inc., 588 F.3d 585, 593 (8th Cir. 2009).

In a subsequent Harley decision, this Court recognized that "if market

conditions had been different when Participants brought suit, or if a different

valuation method had been used, they might have met their burden of proof for

standing." Harley v. Zoesch, 413 F.3d 866, 872 (8th Cir. 2005). Thus, in this

Circuit, "absence of adequate surplus is an element of plaintiffs' standing under [29

U.S.C.] § 1132(a)(2) — proof they are suing to redress a loss to the Plan that is an
14

actual injury to themselves." Harley, 284 F.3d at 908. See also Braden, 588 F.3d

at 593 (same); McCullough, at 585 F.3d 1084 (same); Perelman v. Perelman, 793

F.3d 368, 375 (3d Cir. 2015). Because the plan participants here established an

"absence of adequate surplus," they established standing to sue to redress a loss to

the Plan under this binding precedent.2

Even if this were not the holding of Harley, Harley's rationale counsels this

result. There, the Court reasoned that if a plan is overfunded, any loss to the plan

only reduces the surplus; therefore, any recovery of those losses will only affect

the employer or plan sponsor because the plan sponsor has the "reversionary

interest" in the surplus upon plan termination, whereas "Plan beneficiaries have no

claim or entitlement to its surplus." 284 F.3d at 906, 908 & n.1. Under this logic,

2 In prior amicus curiae briefs, the Secretary noted his disagreement with Harley's

framework, which hinges standing for participants who sue on behalf of their

defined-benefit plans on an arbitrary snapshot of a plan's funding status at the

moment the suit is filed. See Brief of the Secretary of Labor as Amicus Curiae in

Support of Appellant's Petition Rehearing En Banc, 2009 WL 4831925,

McCullough v. AEGON USA Inc., No. 08-1952 (8th Cir.) (filed Dec. 4, 2009);

Brief of the Secretary of Labor as Amicus Curiae in Support of Appellants' Petition

for Rehearing and Rehearing En Banc, Harley v. Minnesota Mining and

Manufacturing, Nos. 00-2214, 01-1213 (8th Cir.) (filed May 22, 2002). Agreeing

with our position, Judge Bye, in Harley and in subsequent related cases, noted that

standing "should be tied to whether the plan had a loss, period, not whether the plan

participants arguably suffered a loss at any particular snapshot in time [i.e., when 

a plan is funded or not], based on fluctuations in the stock market." Harley 

v. Zoesch, 413 F.3d at 872-73 (Bye, J., concurring); see also Harley, 284 F.3d at

909-910 (Bye, J., dissenting). In this brief, we assume that Harley and its progeny

bind this panel, despite our continued disagreement with these decisions and where

they draw the "injury in fact" line.
15

in an underfunded plan, the participants, not the plan sponsor, are injured by the

plan's loss because any recovered assets will not simply add to a surplus but will

directly advance their interest in a plan that is fully funded and that has sufficient

assets to pay all benefits upon the plan termination.

As this Court, in Hawkeye National Life Insurance v. AVIS Indus. Corp.,

122 F.3d 490, 497-98 (8th Cir. 1997), recognized, while a plan surplus "may" be

distributed to an employer or plan sponsor upon termination once all benefits are

paid, the plan's assets otherwise "shall never inure to the benefit of any employer

and shall be held for the exclusive purposes of providing benefits to participants in

the plan and their beneficiaries and defraying reasonable expenses of administering

the plan." (quoting 29 U.S.C. § 1103(c)(1)) (emphasis added). In short, upon

termination, plan assets are first used to pay benefits to participants; only residual

assets or the "surplus" may be reverted to an employer or plan sponsor. Id. If the

Plan terminates as an underfunded plan in a "distress termination," plan assets are

distributed to pay benefits to participants. See id.; see also Mead Corp. v. Tilley,

490 U.S. 714, 718 (1989); see generally 29 U.S.C. § 1341 (single employer plan

can only terminate voluntarily if it has sufficient assets to pay all benefit liabilities

(standard termination) or meets criteria for a distress termination); 29 U.S.C. §

1362 (in a distress termination, any person who is a contributing sponsor of the

plan or a member of such sponsor's controlled group is liable for unfunded benefit
16

liabilities). Outside of the narrow surplus context discussed in Harley and its

progeny, participants and beneficiaries clearly have the "exclusive" interest in the

plan's assets and in protecting against a depletion of those assets. They are injured

by the depletion of those assets, which must be used to pay them their benefits and

must not benefit the employer. This injury clearly suffices for standing just as an

entity with a "reversionary interest" in the plan's surplus is injured by a depletion

of that surplus. Compare Harley, 284 F.3d at 908 n.5 ("any party with a

reversionary interest in the plan's surplus ha[s] standing to sue under 29 U.S.C. §

1132(a)(2)").

Moreover, in a distress termination of an underfunded plan, some

participants will receive only that portion of their benefits covered by insurance

from the Pension Benefit Guaranty Corporation (PBGC), thus forcing some

participants to absorb the deficit themselves.3 See generally Pension Ben. Guar.

Corp. v. LTV Corp., 496 U.S. 633, 638–39 (1990). The economic reality is that

the alleged billion-dollar loss to the Plan caused by fiduciary breaches in this case

creates a tangible economic harm to participants, because the loss decreases the

pool of Plan assets available to them and held for their exclusive benefit while

increasing the significant risk that they won't receive the full amount of promised

benefits. In this underfunded context, the harm and increased risk can be tied

3 The PBGC's single employer program currently is severely underfunded. See

2015 PBGC ANN. REP.
17

directly to the Plan's losses and any recovery will directly alleviate that harm and

risk instead of simply padding a surplus, as Harley would have it. Unlike in

Harley, a breach and resultant loss directly hurt participants, because, to the extent

that there are not adequate plan assets to pay for promised benefits, participants,

not the employer, most directly bear the effect of the plan losses.

Under Harley's binding framework, plan participants in an underfunded

plan, therefore, have a colorable interest in the recovery of losses to the pooled

assets in their defined-benefit plan caused by fiduciary breaches. See United States

v. Eleven Million Seventy-One Thousand One Hundred & Eighty-Eight Dollars &

Sixty-Four Cents ($11,071,188.64) in United States Currency, 825 F.3d 365, 371

(8th Cir. 2016) ("The claimant [a sole shareholder] need only show a colorable

interest in the [corporation's] property, redressable, at least in part, by a return of

the property."). Accordingly, the district court was correct in interpreting Harley

as establishing a rule that when a defined-benefit plan incurs losses caused by a

fiduciary breach and the plan fails to meet ERISA's statutory minimum funding

requirements and lacks a surplus to absorb that loss, the plan's losses constitute

injury in fact sufficient to confer standing on participants to sue on behalf of the

plan. Plaintiffs here satisfied that rule; they had standing to sue.

2. In the defined-benefit context, injury in fact results from the diminished

value of the promise to pay benefits caused by the plan losses, which, in

this case, resulted in the Plan's underfunding
18

Before the district court and on appeal, defendants have argued that

plaintiffs cannot show injury in fact because the plan is an "'ongoing plan, with a

financially sound settlor responsible for making up any future underfunding, and

there was no evidence that the plan would terminate in the foreseeable future.'"

App. 124; Appellees' Br., 32. Instead, according to defendants, participants in a

defined-benefit plan are only harmed by the "creat[ion] of an 'impending' or

'imminent' risk that the Plan would default." Appellees' Br., 31 (citing Clapper, 133

S. Ct. at 1146 (emphasis added)). As we have discussed above, a rule that the risk

of harm to defined-benefit plans is measured by the plan sponsor's financial

resources and whether a plan is at imminent risk of default is inconsistent with

Harley and its progeny. As the district court correctly noted, "none of [this

Court's] discussions suggest that the analysis of participants' injuries in this context

is to turn on the financial health of the plan sponsor[.]" App. 126. Instead, this

Court has repeatedly tied the participants' standing solely to the pension plan's

funding status at the time of suit. See, e.g., Harley v. Zoesch, 413 F.3d at 872.

Defendants' arguments thus incorrectly frame the injury inquiry as tied to the

employer's financial wherewithal. ERISA, which was expressly and primarily

enacted to protect against plan mismanagement in the defined-benefit context,

established minimum funding requirements precisely to protect against the "default

risk." See LaRue v. DeWolff, Boberg & Assocs., Inc., 552 U.S. 248, 255 (2008)
19

("It was that default risk that prompted Congress to require defined benefit plans . .

. to satisfy complex minimum funding requirements."). Indeed, one of ERISA's

"central purposes" is to ensure the "soundness and stability of plans with respect to

adequate funds to pay promised benefits." Nachman Corp. v. Pension Ben. Guar.

Corp., 446 U.S. 359, 374–75 (1980) (quoting ERISA § 2(a), 29 U.S.C. § 1001(a)).

Congress wanted to "mak[e] sure that if a worker has been promised a defined

pension benefit upon retirement – and if he has fulfilled whatever conditions are

required to obtain a vested benefit – he actually will receive it." Id. "To ensure

that employee pension expectations are not defeated, [ERISA] establishes

minimum rules for employee participation, §§ 1051-1061; funding standards to

increase solvency of pension plans, §§ 1081-1085; fiduciary standards for plan

managers, §§ 1101-1114; and an insurance program in case of plan termination, §§

1341-1348." Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 511 n.5 (1981)

(emphasis added).

Congress imposed these rules establishing fiduciary standards and

"minimum standards of funding" to protect the "interests of participants" in plans

to ensure the delivery of promised benefits to participants, see 29 U.S.C. §

1001(b)-(c). See S. Rep. 93-127 at *4846 ("The Promise and commitment of a

pension can be fulfilled only when funds are available to pay the employee

participant what is owed to him. Without adequate funding, a promise of a pension
20

which may be illusory and empty.”) And the statute gives plan participants "ready

access" to the courts to enforce these obligations and vindicate their interests. 29

U.S.C. § 1001(b). See, e.g., Gastronomical Workers Union Local 610 & Metro.

Hotel Ass’n Pension Fund v. Dorado Beach Hotel Corp., 617 F.3d 54, 60 (1st Cir.

2010) (enforcing minimum funding obligations using 29 U.S.C. § 1132); Braden,

588 F.3d at 593 (enforcing fiduciary breach obligations using 29 U.S.C. § 1132).

Consequently, under ERISA, a defined-benefit plan promises individual

participants not only a fixed pension benefit but a benefit protected by both

fiduciary standards in plan management and the employer's obligation to maintain

the plan's minimum solvency. Thus, ERISA's funding rules and the funding status

of a plan are clearly tied to the statutory goal of protecting employees from harm

by ensuring that employers provide the benefits they have promised. Hughes

Aircraft Co. v. Jacobson, 525 U.S. 432, 440 (1999). Even without depleted

funding, the statute deems critical the participants' right and standing to sue and

recover plan losses caused by fiduciary mismanagement in order to protect their

plan's solvency and safeguard participants' benefits.

Given these statutory concerns, participants clearly have suffered an injury

when the default risk is shifted directly from the employer to them as a result of

plan losses that cause or contribute to underfunding (as here), combined with the

employer's failure to maintain required minimum funding. Compare Johnson v.
21

Allsteel, Inc., 259 F.3d 885, 888 (7th Cir. 2001) (granting greater discretion to the

plan administrator in denying benefits shifts the risk to participants causing an

"injury in fact"); see also Gibbs ex rel. Estate of Gibbs v. CIGNA Corp., 440 F.3d

571, 577 (2d Cir. 2006). In this situation, participants' promised rights to payment

from an underfunded plan are simply less valuable (i.e., someone would pay less

for it) than similar rights to payment from a fully-funded or overfunded plan. To

remedy this injury, plaintiff-participants brought suit seeking to recover losses for

the Plan from those who have breached their fiduciary duties and caused the Plan’s

underfunding, and through this recovery, alleviate the increased risk of default

improperly imposed on them.

Consequently, a participant's promise of defined benefits, backed by

fiduciary standards and minimum funding provisions, lose their value when these

promises of minimum funding and fiduciary standards are broken. This loss of

value is a tangible, economic harm. The Supreme Court acknowledged just this

kind of harm when it found that retroactively eliminating promises associated with

a participant's pension benefits, such as retroactively adding new bases to suspend

retirement benefits, made those benefits less "valuable," even if benefits were not

lost. See Cent. Laborers' Pension Fund v. Heinz, 541 U.S. 739, 746 (2004) ("In a

given case, the new condition may or may not be invoked to justify an actual

suspension of benefits, but at the moment the new condition is imposed, the
22

accrued benefit becomes less valuable, irrespective of any actual suspension.")

(emphasis added). Likewise, promised benefits in an underfunded plan are worth

less than those in a fully-funded plan, and benefits in a poorly managed and

underfunded plan, as here, are less valuable still.

In Carlsen v. GameStop, Inc., No. 15-2453, -- F.3d. -- 2016 WL 4363162

(8th Cir. Aug. 16, 2016), this Court likewise recognized that the devaluation of a

previously agreed-upon benefit or arrangement can result in a tangible harm. In

Carlsen, the plaintiff subscribed to the "print and online materials published by

GameStop, including Game Informer Magazine." Id. at *1. As part of the

subscription, the plaintiff became a "party to a binding contract—the terms of

service, which included the Game Informer privacy policy—with GameStop." Id.

at *3. The plaintiff alleged Gamestop violated this privacy policy by

systematically disclosing his personally identifiable information. Id. The Court

found the breach of contract itself was sufficient "injury in fact," and "additionally"

the plaintiff suffered "damages as a result of GameStop's breach in the form of

devaluation of his . . . subscription in an amount equal to the difference between the

value of the subscription that he paid for and the value of the subscription that he

received, i.e., a subscription with compromised privacy protection." Id. at *3.

Gamestop is relevant here because ERISA plans are often treated like

contracts or an exchange of promises, see US Airways v. McCutchen, 133 S. Ct.
23

1537 (2013), made within a statutory framework, including minimum funding and

trust requirements. See, e.g., Gastronomical Workers, 617 F.3d at 62 ("statutory

mandates operate in tandem with contractually imposed duties"); see also

Lockheed Corp. v. Spink, 517 U.S. 882, 887, 894 (1996); Stearns v. NCR Corp.,

297 F.3d 706, 710 (8th Cir. 2002). When covered by ERISA, the plans' terms

include ERISA's requirements. See Heinz, 541 U.S. at 742, 750 (ERISA's

prohibition on forfeitures proves "a global directive that regulates the substantive

content of pension plans" and "adds a mandatory term to all retirement packages

that a company might offer"). The losses to an underfunded plan caused by a

fiduciary breach injure individual participants because participants continue to

work, contribute and accrue pension benefits without the benefit of two valuable

components of an ERISA plan: the protections of prudent fiduciary management

and adequate minimum funding. Their benefits are now devalued because the plan

sponsor has not fulfilled its fundamental promise to meet the minimum funding

standards, regardless of whether the company is in fact capable of doing so.

The Gamestop and underfunded plan scenarios are therefore distinguishable

from Clapper insofar as Clapper did not involve a diminution in the value of a

promised benefit integral to a preexisting relationship or contract, such as the

relationships comprehensively defined by ERISA. See Prudential Ins. Co. of Am.

v. Nat'l Park Med. Ctr., Inc., 413 F.3d 897, 906 (8th Cir. 2005). For this reason,
24

defendants can find no help in Clapper, which merely stands for the principle that,

outside any preexisting relationship, a plaintiff who suffered no current injury can

establish Article III standing only where they can show that a possible future injury

is "imminent." 133 S.Ct. at 1143.

This Court's decision in Braitberg v. Charter Communications, Inc., F.3d

, 2016 WL 4698283 (8th Cir. Sept. 8, 2016), is likewise distinguishable. In

Braitberg, a plaintiff claimed that the company's retention of her personally

identifiable information was in "bare procedural" violation of his rights under the

Cable Act, but failed to allege that the use of the information benefited the

company or hurt him. Id. at *3-*5. Unlike Gamestop and the instant case,

Braitberg therefore did not allege that he suffered any economic harm or risk of

harm nor, as in Gamestop and here, that the company shifted any risk or harm to

him, by breaking a promise to protect against that risk. Id. at *5.

Defendants likewise are not helped by the Supreme Court's recent decision

in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016). In Spokeo, the Supreme Court

remanded to the circuit court to reconsider its prior holding that an individual had

standing to bring suit against a company because it published incorrect information

online about that individual even though the individual could not show that he had

been harmed by the release of the information. Like the plaintiff in Clapper and

Braitberg, the Spokeo plaintiff also had no preexisting relationship or contract for
25

which defendants promised actions protecting him from any risks of the alleged

harm. Spokeo, 136 S. Ct. at 1550 (construing his claims as alleging "violation of a

procedural right granted by statute"). In fact, if anything, by recognizing that

injuries need not be "tangible," Spokeo reinforces that plaintiffs in this case had

established sufficient injury in fact, because they plainly asserted a tangible and

economic harm they suffered in the form of devalued benefits; they need not assert

an "imminent" loss of their benefits. 136 S. Ct. at 1549-50 (noting, for example,

"the law has long permitted recovery by certain tort victims even if their harms

may be difficult to prove or measure").

Plaintiffs' benefits here were devalued at the time they filed suit because

there was no surplus to absorb the losses caused by the alleged fiduciary breaches

and, consequently, any recovery of those losses would increase the value of those

benefits by increasing the likelihood of a full pay-out as promised. Unlike the

Harley plaintiffs,"[the plaintiffs here] ha[ve] a personal stake in the litigation."

Braden, 588 F.3d at 593. Given that Congress imposed the statutory funding

requirements as a minimum protection against the risk of default, "absence of an

adequate surplus" ought to be sufficient in this Circuit to establish injury in fact to

a plan participant from a plan loss caused by a fiduciary breach. See Harley, 284

F.3d at 908.

For these same reasons, this Court should also reject the Fifth Circuit's
26

recent holding in Lee, 2016 WL 4926159, at *15. Fundamentally, the Fifth Circuit

and defendants misunderstand the alleged injury. As Harley recognized, the injury

is the fiduciary breach that depleted the pool of plan assets. 284 F.3d at 905 ("the

district court's conclusion that there was no loss to the Plan seems contrary to the

plain meaning of [29 U.S.C.] § 1109(a)"). The loss of assets sufficient to pay for

the benefits is a harm, a harm that devalues the promises of fully-funded benefits,

and the participants now seek to remedy that harm by suing those responsible – the

fiduciaries that allegedly breached their duties and depleted the plan's assets. The

participants merely seek to restore the assets held in trust for their exclusive benefit

(29 U.S.C. § 1103). This is a right and a remedy guaranteed by ERISA. 29 U.S.C.

§ 1132(a)(2), (3). The loss of these plan assets constitutes a direct injury and harm

to participants sufficient to confer standing to vindicate their interests.

The injury here is not contingent on the plan sponsor or employer's failure or

ability to fund the plan and absorb any loss. See Lee, 2016 WL 4926159, at *14

("the injury to participants . . . is attenuated as, prior to default under the plan, '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'") (citation omitted). To be sure, Harley

recognized that the harm to the plan may be borne by a third party, an employer or

plan sponsor, who absorbed the fiduciaries' harm to the plan after creating a
27

surplus in plan assets. 284 F.3d at 906. But, as the district court recognized,

Harley focused solely on the plan's funding status at time of suit, rejecting

consideration of a plan sponsor's financial status or the availability of PBGC

insurance in measuring the risk of harm to participants. App. 126.

Moreover, the reality, as defendants concede, is that employers routinely

underfund their pension plans, see Appellees' Br., 8 n.15, a harmful and dangerous

circumstance that existed at the time of ERISA's enactment and which ERISA was

enacted to counteract. See Nachman Corp., 446 U.S. at 374–75 & n.22 (describing

legislative history and ERISA's purposes); see also S. Rep. 93-127 (1973) at *4857

("actuarially sound funding procedures are indispensable to effective

implementation of the purposes of the Act. If employers never went out of business

or terminated pension plans before they were completely funded, there would, 

no doubt, be no persuasive justification for funding standards aside from whatever

tax considerations might be applicable. Nevertheless, employers do experience

financial or economic difficulties or they undergo varying degrees of corporate

reorganization, all of which can lead to premature termination of underfunded

plans."). The fact that such problems still exist today counsels the Court 

to permit participants to bring suit to recover plan losses from breaching fiduciaries

when it can still do some good: before their plans are on the verge of collapse 

and the loss of their benefits is "imminent." Otherwise, ERISA's promises
28

remain unfulfilled leaving the participants at the mercy of their employers and

fiduciaries until their plans are beyond repair. See Nachman Corp., 446 U.S. at

374–75 & n.22; 29 U.S.C. § 1001(a) (imposing enforceable standards on

employers and fiduciaries to protect participants).

CONCLUSION

Based on the foregoing, the Secretary respectfully requests that this Court

reject defendants' argument for affirmance on an alternative basis that plaintiffs

lacked constitutional standing to sue when they brought their case.

Respectfully submitted,

M. PATRICIA SMITH

Solicitor of Labor

G. WILLIAM SCOTT

Associate Solicitor

Plan Benefits Security Division

/s/ Thomas Tso

THOMAS TSO

Counsels for Appellate and Special

Litigation

Melissa Moore

Attorney

U.S. Department of Labor, Room N-4611

200 Constitution Ave., N.W.,

Washington, DC 20210

(202) 693-5281
CERTIFICATE OF COMPLIANCE WITH RULE 32(a)

Certificate of Compliance with Type-Volume Limitation,

Typeface Requirements and Type Style Requirements

FOR CASE NO. 16-1928

1. This brief complies with the type-volume limitation of Fed. R. App. P.

32(a)(7)(B) because:

This brief contains 6,842 words, excluding parts of the brief exempted by

Fed. R. App. P. 32(a)(7)(B)(iii), half of the maximum length authorized by

these rules for a party's principal brief.

2. This brief complies with the typeface requirements of Fed. R. App. P.

32(a)(5) and the type-style requirements of Fed. R. App. P. 32(a)(6) because:

This brief has been prepared in a proportionally spaced typeface using

Microsoft Word 2010, Times New Roman, 14 point font.

/s/ Melissa Moore

Attorney for the U.S. Department of Labor, Plan Benefits Security Division

Dated: October 19, 2016

CERTIFICATE OF VIRUS CHECK

I hereby certify that a virus check, using McAfee Security Virus Scan Enterprise

8.0, was performed on the PDF file and paper version of this brief, and no viruses

were found.

/s/ Melissa Moore

Attorney for the U.S. Department of Labor, Plan Benefits Security Division

Dated: October 19, 2016
CERTIFICATE OF SERVICE

I hereby certify that on October 19, 2016, I electronically filed the foregoing

with the Clerk of the Court for the United States Court of Appeals for the Eighth

Circuit by using the appellate CM/ECF system.

/s/ Thomas Tso

Thomas Tso

Plan Benefits Security Division

U.S. Department of Labor

Room N-4611

200 Constitution Avenue, N.W.

Washington DC, 20210

(202) 693-5281 – Phone

(202) 693-5610 – Fax

tso.thomas@dol.gov