Blog Updates
One of the Supreme Court’s cert grants yesterday was Putnam Investments, LLC v. Brotherston, a case about the burden of proving causation losses in ERISA suits. There is a 6-4 circuit split about whether the ERISA plaintiff or the fiduciary defendant has the burden of persuasion regarding whether the fiduciary defendant’s breach caused the loss. Here is how the first Question Presented reads:
The cert petition presents the ordinary rule in U.S. law (i.e., outside of ERISA) as being that the plaintiff has the burden of showing causation. The cert petition notes, however, that the court below recognized “that it ‘has long been the rule in trust law’ that 'the burden of disproving causation [rests] on the fiduciary.’ Pet. App. 32a-33a (citing Tatum v. RJR Pension Inv. Comm., 761 F.3d 346, 363 (4th Cir. 2014)).” How could it possibly be that the fiduciary defendant has the burden of disproving causation? With the caveat that I haven’t yet explored this case in detail, there are at least three reasons to think the fiduciary defendant has this burden. (Note that these reasons aren’t truly independent as much as overlapping and reinforcing.) First, ERISA relies on, and in significant respects incorporates, the common law of trusts. (For a careful statement of this point, with qualifications, see John H. Langbein, What ERISA Means by “Equitable”: The Supreme Court’s Trail of Error in Russell, Mertens, and Great-West, 103 Colum. L. Rev. 1317, 1324-1329 (2003).) By “common law” in this paragraph I don’t mean “common law vs. equity,” since the law of trusts is and was equitable—rather, “common law” in the sense of law recognized, developed, and formulated by judges. Second, equity has different rules for “damages,” i.e., loss-based monetary remedies. This is something I address in my Fiduciary Remedies chapter in the Oxford Handbook of Fiduciary Law (2019). Here is my discussion of “equitable compensation,” minus the footnotes, and with emphasis added to highlight a point of relevance for Putnam:
Finally, there is a point I raise in a footnote in the passage just quoted. After saying that one difference between legal “damages” and equitable compensation “is that a rigorous showing of causation is not required in equitable compensation, at least if it is seen as a kind of direct 'negative accounting’"—a proposition for which I quote the world’s leading equity treatise, Meagher, Gummow & Lehane—I then add this sentence: "The explanation for this may not be specific to equity, but instead may be due to the fact that the plaintiff is enforcing the primary right, rather than seeking damages for loss caused by a wrong.” via Tumblr [Samuel Bray] New on the Supreme Court docket: ERISA and “damages” in equity
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