WASHINGTON - James LaRue said he lost $150,000 when his instructions to his employer about where to invest money in his retirement plan were ignored.
Now the Supreme Court will decide whether a federal pension-protection law gives Mr. LaRue the right to sue to recover his losses. Arguments in the case, which has far-reaching consequences, were scheduled for today.
Mr. LaRue, who used to work at a management consulting firm, is among the 42 million U.S. workers who contributed to a 401(k) retirement plan. At issue in Mr. LaRue's case are the limits to lawsuits under the Employee Retirement Income Security Act.
It regulates private-sector retirement plans holding more than $5.5 trillion in assets, including $2 trillion in an estimated quarter of a million 401(k) plans across the country.
Unlike traditional pension plans, participants in 401(k) plans - named after a section in tax law - do not know how much money they will receive in retirement. It depends on how well their chosen investments have performed.
The Employee Retirement Income Security Act was designed to safeguard pension fund money from misappropriation. The 1974 law followed the failure of some companies to pay promised pensions and looting of some pension and welfare funds at companies and labor unions.
Class-action lawsuits filed under the law over the past decade have targeted Enron, WorldCom, and other major companies tainted by scandal.
From a legal standpoint, it is less clear what action an individual account holder can take against a retirement plan when the conduct at issue is less than criminal.
Mr. LaRue has said that in 2000 and 2001, he requested changes in his investment allocations in mutual funds that were available to participants in his company's 401(k) plan. He said the requests were not honored.
"I wanted to sell stocks and move to cash because I thought the market would head down. I was right," Mr. LaRue said.
"I didn't find out that the plan had not executed my transactions until 10 months later. They had a substandard reporting system. I left the firm," he said. "I asked them again to make the change, and they still didn't do it. I don't know why."
The Bush Administration, siding with Mr. LaRue, said an appeals court ruling against him would leave participants in "the most common form of pension plan who have been injured by a breach of fiduciary duty without a meaningful remedy from any court."
Mr. LaRue sued in 2004, saying he had tried to avoid going to court and instead tried - unsuccessfully - to reach a settlement with his former employers.
"We had already been through one lawsuit over stock in the company, which I won," he said. "Even though I prevailed, it was not pleasant. I didn't want to go through it again."
Business groups assign a different motive to the long delay in filing the second lawsuit, saying Mr. LaRue was waiting to see how the market performed. If the value of his investment went up, he made money. If it went down, he would head to court.
In court filings, business organizations cautioned that allowing cases like Mr. LaRue's could lead to a wave of lawsuits without merit.
Guidelines: Please keep your comments smart and civil. Don't attack other readers personally, and keep your language decent. Comments that violate these standards, or our privacy statement or visitor's agreement, are subject to being removed and commenters are subject to being banned. To post comments, you must be a registered user on toledoblade.com. To find out more, please visit the FAQ.