Fletcher v. Convergex Group LLC
164 F. Supp. 3d 588
S.D.N.Y.2016Background
- Plaintiff Landol Fletcher is a participant in the Central States, Southeast and Southwest Area Pension Plan (a multiemployer ERISA defined-benefit plan) whose benefits have vested but are not yet being paid.
- Defendants are brokers alleged to have added undisclosed markups/markdowns to trades executed for plan customers from 2006–2011, generating unauthorized trading profits.
- Discovery showed defendants booked $1,577.93 of unauthorized trading profits on trades for the Central States Plan.
- The Central States Plan was deeply underfunded (about 53.9% funded as of 2012, a shortfall of over $16 billion).
- The plan adopted a rescue proposal that would reduce Fletcher’s monthly benefit by 28%; that reduction requires additional approvals before implementation.
- Fletcher sued under ERISA for breaches of fiduciary duty; defendants moved to dismiss for lack of subject-matter jurisdiction (12(b)(1)). Fletcher is the sole remaining plaintiff when the court ruled.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Constitutional standing to sue under ERISA for fiduciary breaches that reduced plan assets | Fletcher: defendants’ overcharges diminished plan assets and increased risk of reduced or lost benefits for him | Defendants: the asserted injury is too small and speculative relative to massive plan underfunding; not fairly traceable to defendants | Dismissed — no constitutional standing; alleged individual injury is de minimis and not fairly traceable |
| Whether a participant’s entitlement to fiduciary compliance alone is an injury-in-fact | Fletcher: statutory fiduciary violation itself constitutes injury | Defendants: violation alone is not a concrete, particularized injury | Dismissed — ERISA duty violation without a concrete individualized injury insufficient for standing |
| Causation between overcharges and the rescue-plan benefit reductions | Fletcher: the overcharges contributed to plan shortfall and thus to benefit cuts | Defendants: benefit reduction stems from long-standing multi-billion-dollar underfunding, not the tiny overcharges | Dismissed — any effect of $1,577.93 across ~400,000 participants is negligible and not causally significant |
| Class allegations to represent participants of other plans | Fletcher: seeks class for other ERISA plans charged similar markups | Defendants: Fletcher is not a participant/beneficiary/fiduciary of those other plans | Dismissed — lacks standing to represent participants of plans of which he is not a member |
Key Cases Cited
- Makarova v. United States, 201 F.3d 110 (2d Cir. 2000) (jurisdictional dismissal standard under Rule 12(b)(1))
- Kendall v. Employees Retirement Plan of Avon Prods., 561 F.3d 112 (2d Cir. 2009) (participant must show statutory and constitutional standing; fiduciary-duty breach alone does not automatically create injury-in-fact)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (constitutional standing requirements: injury-in-fact, causation, redressability)
- LaRue v. DeWolff, Boberg & Assocs., 552 U.S. 248 (2008) (defined-benefit participants have interest in fixed payments; fiduciary misconduct affects individual only if it enhances plan default risk)
- Hughes Aircraft Co. v. Jacobson, 525 U.S. 432 (1999) (distinction between rights in defined-contribution and defined-benefit plans)
- David v. Alphin, 704 F.3d 327 (4th Cir. 2013) (participant’s interest in fixed future payments, not plan assets)
- Fid. & Deposit Co. v. Office of Thrift Supervision, 964 F.2d 142 (2d Cir. 1992) (statutory-duty violation must cause a specific injury to satisfy injury-in-fact requirement)