:: Eighth Circuit Clarifies Standing Requirements For Class Action Plaintiffs
The district court erred by conflating the issue of Braden’s Article III standing with his potential personal causes of action under ERISA.
Braden v. Wal-Mart Stores, Inc., 2009 U.S. App. LEXIS 25810 (8th Cir. Mo. Nov. 25, 2009)
The Eighth Circuit found very little correctly done by the district court in this recent opinion addressing threshold requirements for properly stating ERISA claims. The opinion offers a welcome clarification of recurring issues, such as standing and the specificity required in stating claims for relief.
The gist of the complaint was that Wal Mart’s ten billion dollar 401(k) plan paid excessive managment fees and a number of improprieties involving the alleged sharing of these fees with the trustee. In any event, the defendants moved for dismissal under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) and the district court granted the motion:
The district court granted the motion, concluding that Braden lacked constitutional standing to assert claims based on breaches of fiduciary duty prior to the date he first contributed to the Plan and that he otherwise failed to state any plausible claim upon which relief could be granted.
“Conflation” Of Standing And Merits
The Eighth Circuit hewed to a conservative line in circumscribing the contours of Article III standing. This defense, routinely asserted in ERISA litigation, can often overwhelm considerations of the merits of the principal claims such that the two issues converge on one point. When that happens, every case becomes a constitutional issue – and that should suggest a flaw in analysis.
So the Eighth Circuit concluded, was the case here:
[The district court] concluded that Braden could not personally have suffered injury before October 31, 2003, the date he first contributed to the Plan. According to the district court, Braden therefore did not have Article III standing to assert claims for breaches before that date.
This was error. The Court engaged in an elaborate overview of Article III’s requirements which will be truncated here in the following excerpt:
[C]onstitutional standing is only a threshold inquiry, and “so long as [Article III] is satisfied, persons
to whom Congress has granted a right of action, either expressly or by clear implication, may have standing to seek relief on the basis of the legal rights and interests of others.” Id. at 501. In such a case, a plaintiff may be able to assert causes of action which are based on conduct that harmed him, but which sweep more broadly than the injury he personally suffered.
Such was the case at bar, but that fact was lost on the district court. The Eighth Circuit highlighted this error, stating:
The district court erred by conflating the issue of Braden’s Article III standing with his potential personal causes of action under ERISA. It concluded that Braden had no standing for the period before he began participating in the Plan because “[u]nder ERISA, a fiduciary relationship does not exist towards potential participants in a plan and such potential participants have no standing to sue for . . . breach of fiduciary duty.” It therefore granted appellees’ motion to dismiss “all claims occurring prior to October 31, 2003.”
In reaching this conclusion, the district court mixed two distinct issues. Whether Braden may pursue claims on behalf of the Plan at all is a question of constitutional standing which turns on his personal injury. Whether relief may be had for a certain period of time is a separate question, and its answer turns on the cause of action Braden asserts.
The Troublesome Rule 8 Requirement
Federal Rule of Civil Procedure 8 requires that a complaint present “a short and plain statement of the claim showing that the pleader is entitled to relief.” This requirement has vexed courts and litigants alike (including defendants as noted in yesterday’s post.)
When challenged by a motion to dismiss under Rule 12(b)(6), the court examines whether the complaint”contain[s] sufficient factual matter, accepted as true, to ’state a claim to relief that is plausible on its face.’” See, Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)).
Here we find an annoying magnitude of subjectivity, but one that is unavoidable. Thus,
The plausibility standard requires a plaintiff to show at the pleading stage that success on the merits is more than a “sheer possibility.” Id. It is not, however, a “probability requirement.” Id. Thus, “a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of the facts alleged is improbable, and ‘that a recovery is very remote and unlikely.’” Twombly, 550 U.S. at 556 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct. 1683, 40 L. Ed. 2d 90 (1974)). . . Ultimately, evaluation of a complaint upon a motion to dismiss is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.”
The district court’s parsing of the complaint failed to exhibit this discernment.
The district court erred in two ways.
It ignored reasonable inferences supported by the facts alleged. It also drew inferences in appellees’ favor, faulting Braden for failing to plead facts tending to contradict those inferences. Each of these errors violates the familiar axiom that on a motion to dismiss, inferences are to be drawn in favor of the non-moving party.
Note: The Court noted that the plaintiff need not directly describe the ways in which the fiduciaries allegedly breached their duties. “Specific facts” need not be alleged.
The first of [the district court's] errors stems from the mistaken assumption that Braden was required to describe directly the ways in which appellees breached their fiduciary duties. Thus, for example, the district court faulted the complaint for making “no allegations regarding the fiduciaries’ conduct.” Rule 8 does not, however, require a plaintiff to plead “specific facts” explaining precisely how the defendant’s conduct was unlawful. Erickson v. Pardus, 551 U.S. 89, 93, 127 S. Ct. 2197, 167 L. Ed. 2d 1081 (2007) (per curiam).
Rather, it is sufficient for a plaintiff to plead facts indirectly showing unlawful behavior, so long as the facts pled “‘give the defendant fair notice of what the claim is and the grounds upon which it rests,’” id. (quoting Twombly, 550 U.S. at 555) (alteration omitted), and “allow[] the court to draw the reasonable inference” that the plaintiff is entitled to relief. Iqbal, 129 S. Ct. at 1949.
More On Article III - Article III requires a “case or controversy” which in turn requires “injury in fact”.
“Injury in fact” is an invasion of a legally cognizable right. Whether a plaintiff has shown such an injury “often turns on the nature and source of the claim asserted.” Warth v. Seldin, 422 U.S. 490, 500, 95 S. Ct. 2197, 45 L. Ed. 2d 343 (1975). In most cases, then, a plaintiff’s standing tracks his cause of action. That is, the question whether he has a cognizable injury sufficient to confer standing is closely bound up with the question of whether and how the law will grant him relief. See William A. Fletcher, The Structure of Standing, 98 Yale L.J. 221, 239 (1988) (”[T]he question of whether plaintiff ’stands’ in a position to enforce defendant’s duty is . . . . determined by looking to the substantive law upon which plaintiff relies.”). It is crucial, however, not to conflate Article III’s requirement of injury in fact with a plaintiff’s potential causes of action, for the concepts are not coextensive. See Ass’n of Data Processing Serv. Orgs. v. Camp, 397 U.S. 150, 152-54, 90 S. Ct. 827, 25 L. Ed. 2d 184 (1970).
See also – :: Class Action Complaint Sufficient To Meet Twombley Standards ; :: Fourth Circuit Holds Plaintiff Has Standing To Sue, State Law Claims ERISA Preempted ; The Continuing Controversy Over Standing To Sue Under ERISA; Seventh Circuit Opinion Permits Suit By Former ESOP Participants – A Balanced View Of Standing To Sue; Threading The Standing Needle: A Closer Look At Representative Claims By Plan Participants
