October 23, 2019

October 22, 2019

Subscribe to Latest Legal News and Analysis

October 21, 2019

Subscribe to Latest Legal News and Analysis

Tenth Circuit Follows Majority of the Circuit Courts and Holds Plaintiff Bears the Burden of Proving Causation in ERISA Breach of Fiduciary Duty Cases

On June 5, 2017, in Pioneer Centres Holding Co. Employee Stock Ownership Plan & Trust v. Alerus Fin., N.A., Case No. 15-1227, the U.S. Court of Appeals for the Tenth Circuit held that the plaintiff bears the burden on each element of its breach of fiduciary duty claim under ERISA.

Plaintiff brought suit for breach of fiduciary duty against the independent transactional trustee in connection with a failed employee-stock purchase transaction which would have allowed the ESOP to become the 100% owner of the car dealerships. The ESOP purchase transaction failed because one of the car manufacturers, whose contract required that it approve any change in ownership of the dealership, had stated that it would not approve the transaction if it gave the ESOP 100% ownership. Plaintiff asserted that Defendant failed to sign the transaction documents and send them to the car manufacturer. As a result, the car dealership sold its assets to a third party for a significantly higher price.

The Tenth Circuit recognized that the Fourth, Fifth, and Eighth Circuit Courts of Appeals have adopted a “burden-shifting” framework which requires that once an ERISA plaintiff has proven a breach and prima facie case of loss, the burden shifts to the trustee to prove that the breach of duty did not cause the loss. However, the Court rejected this analysis and found that the statute’s plain language did not support “burden-shifting.” In addition to holding that Plaintiff had failed to demonstrate that Defendant’s alleged breach caused the Plaintiff to suffer damages, the Court concluded that the statute’s plain language limited liability to losses “resulting from” a breach of fiduciary duty. The Court determined that because causation is an element of the claim, the burden remains with the plaintiff at all times. This holding follows decisions from the Second, Sixth, Ninth, and Eleventh Circuit Courts of Appeals.

Jackson Lewis P.C. © 2019

TRENDING LEGAL ANALYSIS


About this Author

Heather C. Panick, Jackson Lewis, Income Tax Lawyer, compensation arrangements Attorney
Associate

Heather C. Panick is an Associate in the Omaha, Nebraska, office of Jackson Lewis P.C.

Ms. Panick has an active ERISA and federal income tax practice involving the representation of clients in tax adversary proceedings before the Internal Revenue Service, United States Tax Court and Second Circuit Court of Appeals relating to payroll, trust fund recovery penalties, employee benefit plans and executive compensation arrangements.  Her practice also includes working with clients and the Internal Revenue Service, Department of Labor and PBGC in...

402-391-1991