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The Supreme Court ruled 7-2 recently in favor of James LaRue, saying his suit against his former employer for mishandling his 401(k) account could go forward.
Legal eagles ahead of the ruling seemed split about the ramifications of such a decision. The crush of mainstream media coverage following the Supreme's decision -- some carrying breathless headlines declaring that "employees can now sue retirement plan managers" -- has substantiated early concerns about such a finding.
Ken Raskin, who heads White & Case's global Executive Compensation, Benefits and Employment Law Practice Group, says the threat to employers from an explosion of suits is real.
"The ruling itself is not a surprise, but I think it's meaningful for employers because it will open up the flood gates with respect to litigation," Raskin says. Cases like this aren't new, but heretofore plaintiffs haven't been able to receive much in monetary damages, according to Raskin. Those days are gone. "In this case because it allows for monetary damages, this will just end up being another area where there will be many, many cases, many filings and unfortunately probably some frivolous ones as well," he says.
Raskin, isn't all doom and gloom, he's got some suggestions and tips for employers to avoid bruising or more serious injury from the anticipated crush of participant suits. Hear his suggestions online.
For those still unfamiliar with the details of this case, James LaRue told his employer, DeWolff, Boberg & Associates Inc., a management consulting firm in Dallas, to switch his investment selections ahead of stock market losses earlier this decade. Alas, the change was not made and neither employer nor employee caught it. When the error was finally discovered, $150,000 was lost, and LaRue wants it back. The lower courts differed on whether he could actually bring such a suit. The Supreme Court says he can, now LaRue will head back to the lower court and see what he can get.
DeWolff's attorney, D.C.'s Thomas Gies, says the ruling could have the unintended impact of dissuading employers from sponsoring retirement plans.
"Ultimately, employers aren't going to sponsor plans if they're going to be sued every time they make an innocent mistake," Gies, told The Washington Post. He adds that DeWolff will be "vindicated" as the case heads back to the lower court.
