US appeals court dismisses US equity lending mismanagement case
20 October 2017 Missouri
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Allegations of mismanagement of a securities lending programme brought by two US Bank pension beneficiaries was dismissed by the US Court of Appeals for the Eighth Circuit this week.
US Bancorp and its subsidiaries US Bank and FAF Advisors were exonerated for pursuing an exclusively equities-focused lending strategy to supplement US Bank’s pension plan on the grounds that it became overfunded in 2014 and therefore posed no threat to its investors.
The Eighth Circuit affirmed the court’s dismissal of the original case as moot, based on the pension plan's overfunded status, as there was no actual or imminent injury to the plan itself that caused injury to plaintiffs' interests.
It was alleged by the plaintiffs that a total equities strategy in the face of a deteriorating stock market was barred by Employee Retirement Income Security Act’s (ERISA’s) six-year statute of repose.
However, the court concluded that because the plan is now overfunded, the plaintiffs lack a concrete interest in any monetary relief that the court might award to the plaintiffs prevailed on the merits.
The original putative class action against US Bank, US Bancorp and multiple directors challenged the management of a defined benefit pension plan from 30 September 2007 to 31 December 2010.
Defendants were accused of violating Sections 404, 405, and 406 of ERISA by breaching their fiduciary obligations and causing the plan to engage in prohibited transactions with a FAF Advisors.
It was alleged that these ERISA violations caused significant losses to the plan’s assets in 2008 and resulted in the plan being underfunded that year.
The plaintiffs, James Thole and Sherry Smith, who are both retirees of US Bank, do not allege that they have experienced any of these sorts of freezes or reductions in their benefits.
They instead claim they were injured by the increased risk of default from the plan’s liabilities that exceeded its assets as a result of the significant losses caused by the ERISA violations.
The plaintiffs sought to recover plan losses, disgorgement of profits, injunctive relief, and other remedial relief pursuant to ERISA Section 502(a)(2), 29 USC § 1132(a)(2), and ERISA Section 409, 29 USC § 1109.
US Bancorp and its subsidiaries US Bank and FAF Advisors were exonerated for pursuing an exclusively equities-focused lending strategy to supplement US Bank’s pension plan on the grounds that it became overfunded in 2014 and therefore posed no threat to its investors.
The Eighth Circuit affirmed the court’s dismissal of the original case as moot, based on the pension plan's overfunded status, as there was no actual or imminent injury to the plan itself that caused injury to plaintiffs' interests.
It was alleged by the plaintiffs that a total equities strategy in the face of a deteriorating stock market was barred by Employee Retirement Income Security Act’s (ERISA’s) six-year statute of repose.
However, the court concluded that because the plan is now overfunded, the plaintiffs lack a concrete interest in any monetary relief that the court might award to the plaintiffs prevailed on the merits.
The original putative class action against US Bank, US Bancorp and multiple directors challenged the management of a defined benefit pension plan from 30 September 2007 to 31 December 2010.
Defendants were accused of violating Sections 404, 405, and 406 of ERISA by breaching their fiduciary obligations and causing the plan to engage in prohibited transactions with a FAF Advisors.
It was alleged that these ERISA violations caused significant losses to the plan’s assets in 2008 and resulted in the plan being underfunded that year.
The plaintiffs, James Thole and Sherry Smith, who are both retirees of US Bank, do not allege that they have experienced any of these sorts of freezes or reductions in their benefits.
They instead claim they were injured by the increased risk of default from the plan’s liabilities that exceeded its assets as a result of the significant losses caused by the ERISA violations.
The plaintiffs sought to recover plan losses, disgorgement of profits, injunctive relief, and other remedial relief pursuant to ERISA Section 502(a)(2), 29 USC § 1132(a)(2), and ERISA Section 409, 29 USC § 1109.
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