Supreme Court Hears Case on Standing of Individual Plan Participants

In an important case, the Supreme Court has started hearing arguments in a case concerning the standing of individual participants in a defined contribution retirement plan to sue for denied benefits rather than having to sue on behalf of the entire plan. The case, James LaRue v. DeWolff, Boberg & Associates, concerns a 401(k) plan participant who alleges that the plan failed to make changes in his investments that he requested just before the 2001-2002 stock market plunge. The Fourth Circuit Court of Appeals had previously decided that LaRue could not sue for denial of individual benefits (No. 05-1756, June 19, 2006), saying participants can sue only on behalf of the entire plan, a doctrine widely followed in other courts. Based on the justices' questions, however, it appears they are skeptical of why individuals should be prevented from recovering damages specific to them. The decision could make it much easier for employees to sue about decisions affecting employer stock as well, especially in 401(k) plans, but potentially also in ESOPs, although the typical cause of action in an ESOP--the improper valuation of shares--would apply to all participants and thus already be covered.