Hearing a case of a 401(k) investor from Dallas who claimed his employer failed to execute an order, costing him $100,000, U.S. Supreme Court justices on Monday questioned business group arguments that 401(k) investors can only contest mismanagement of the plans through class-action lawsuits, Bloomberg reports.
If the court rules in James LaRue’s favor, it could pave the way for 70 million defined contribution investors throughout the nation with $3.3 trillion in assets to forge their own lawsuits.
The Supreme Court decided to hear the case after the 4th U.S. Circuit Court of Appeals in Richmond, Va., rejected it, saying it wasn’t allowed under the 1974 Employee Retirement Income Security Act.
Thomas Gies, the attorney for LaRue’s former employer, management consulting firm DeWolff Boberg & Associates, told the court that under ERISA, LaRue can use a court order to change his investments but that he is not entitled to money lost. But Justices Ruth Bader Ginsburg and Antonin Scalia said the court order would be too late to save any money LaRue may have lost, and Justices Stephen Breyer, John Paul Stevens and Samuel Alito also challenged Gies.
“If you say, ‘I want these funds in this particular set of shares for this six-month period,’ then two years later, you can have that trade made?” Ginsburg said. “I don’t understand that.”
Furthermore, an attorney representing the Bush administration told the court he is also in favor of supporting LaRue, as his case would help pave the way for protecting defined contribution plan participants. Recovered money wouldn’t come out of the accounts of other participants but from the fiduciaries, the attorney said.