The 11th Circuit recently released its much anticipated decision in Pizarro v. Home Depot. The case is significant since it involves the question of which party has the burden of proof on the issue of causation in ERISA litigation. There is currently a split within the federal circuit courts on this issue, resulting in an inconsistent and inequitable interpretation and enforcement of ERISA, which has resulted in plan participants effectively being denied the rights and protections guaranteed to them under ERISA.

The Court’s decision presented a number of interesting and novel arguments, not the least of which was the court’s rejection of a common argument in these cases, the argument that the burden of proof on causation by necessity must belong to a plan sponsor given the fact that they alone know what policies and procedures were used in evaluating and selecting the plan’s investment options.

The 11th Circuit disputed that assumption:

ERISA imposes on fiduciaries a comprehensive scheme of mandatory disclosure and reporting, both to plan participants and to the public at large. The statute itself thus enforce a suite of requirements mitigating the informational advantage imputed to the trustee at common law. These disclosures, combined with the “proper use of discovery tools,” mean that ERISA fiduciaries lack the informational advantage that would justify shifting the burden of proof.

The 11th Circuit is surely aware that plan sponsors usually file motions to dismiss and/or Summary judgment motions quickly to prevent the type of meaningful discovery contemplated by the Court. In response to the 11th Circuit’s argument, I think the Sixth Circuit properly recognized and addressed the relevant issues in its decision in Foreman v. TriHealth, Inc. decision:

But at the pleading stage, it is too early to make these judgment calls. ‘In the absence of further development of the facts, we have no basis for crediting one set of reasonable inferences over the other. Because either assessment is plausible, the Rules of Civil Procedure entitle [the three employees] to pursue [their imprudence] claim (at least with respect to this theory) to the next stage….’²

This wait-and-see approach also makes sense given that discovery holds the promise of sharpening this process-based inquiry. Maybe TriHealth ‘investigated its alternatives and made a considered decision to offer retail shares rather than institutional shares’ because ‘the excess cost of the retail shares paid for the recordkeeping fees under [TriHealth’s] revenue-sharing model….’ Or maybe these considerations never entered the decision-making process. In the absence of discovery or some other explanation that would make an inference of imprudence implausible, we cannot dismiss the case on this ground. Nor is this an area in which the runaway costs of discovery necessarily cloud the picture. An attentive district court judge ought to be able to keep discovery within reasonable bounds given that the inquiry is narrow and ought to be readily answerable.³

One could argue that the Sixth Circuit’s Chief Judge Jeffery Sutton does not agree that ERISA’s disclosure requirements provide sufficient information to overcome the inherent informational advantage that plan sponsors enjoy in carrying the burden of proof on the issue of causation. Judge Sutton also suggests that too many cases are summarily dismissed prematurely based on this issue of causation, without necessarily all the relevant and legally required facts.

Plan sponsors often seek quick dismissals of ERISA cases, allegedly to avoid the high costs of discovery. However, as Judge Sutton suggested, there are various methods of allowing discovery while controlling costs. “Controlled” discovery, limited to documents and minutes from a plan’s investment meetings, would probably suffice, assuming such documents and minutes actually exist.

The Solicitor General of the United States addressed the burden of proof on causation issue back in 2018 in connection with the Brotherston v. Putnam Investments, LLC⁴ case. While the Solicitor General supported shifting the burden of proof to plan sponsors, he advised SCOTUS against taking the case since it was before the Court as an interlocutory appeal. The Court followed the Solicitor General’s advice.

This case needs to be heard and the issues involved resolved once and for all without letting another 6 years pass and more plan participants suffer needless financial losses.

Given the significance of this decision and the impact of the burden of proof re causation in ensuring that 0lan participants are being treated equitably and that ERISA remains meaningful, hopefully the plan participants will seek certiorari from SCOTUS, who would presumably hear the case given the divide between the courts and the importance of ERISA and plan participants.

Stay tuned!

Notes
1. Pizarro v. Home Depot, Case No. 22-13643 (11th Cir. 2024) decided 8/2/2024
2. Forman v. TriHealth, Inc., 40 F.4th 443, 450 (6th Cir. 2022). (TriHealth)
3. TriHealth, 453.
4. Brotherston v. Putnam Investments, LLC, 907 F.3d 17 (1st Cir. 2018).