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The Tenth Circuit Stands Against “But-For Standing” in ERISA Claims

By Dave Frommell

In Chastain v. AT&T, four retired employees from AT&T or its subsidiaries saw their retirement benefits programs contractually transferred among various companies – most recently from AT&T to Lucent Technologies in 1996 – following their retirement.  No. 07- 6288, (10th Cir. 2009).  In 2003, Lucent eliminated several benefits from the plan, including a death benefit, Medicare Part B premiums, and dental coverage.  The retirees filed a class action ERISA claim against AT&T, alleging that AT&T should be forced to honor its “stand-alone plan with uniform enforceable promises for benefits for certain periods."

The district court granted summary judgment for AT&T, reasoning that the retirees lacked standing under ERISA because they are not “participants” or “beneficiaries” of an AT&T-sponsored ERISA plan.  In affirming the district court’s ruling, the Tenth circuit relied on several Supreme Court precedents.  First, the court cited Varity Corp. v. Howe, 516 U.S. 489 (1996), which “stands for the proposition that when a business entity creates a spinoff and transfers an employee benefits plan to the spinoff, employees covered under the spinoff's plan cannot file suit against the original business entity under ERISA § 502(a)(1)(B).”  The retirees asserted no argument to distinguish Varity, nor did the Tenth Circuit offer one.

Instead, the retirees asked the Court to adopt the “but-for” standing doctrine, which argues that “but for the employer's conduct alleged to be in violation of ERISA, the employee would be a current employee with a reasonable expectation of receiving benefits.”  The Tenth Circuit strongly reaffirmed its stance against “but-for” ERISA standing, despite the fact that five other federal circuit courts of appeals support the doctrine. Relying on their own circuit precedent and the Supreme Court’s analysis from Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), the court asserted that the “but-for” standing doctrine eviscerates ERISA’s statutory definitions: “[t]o say that a ‘participant’ is any person who claims to be one begs the question of who is a ‘participant’ and renders the definition set forth in [ERISA] superfluous.”

The court reiterated a position it took five years earlier in Felix v. Lucent Techs., Inc., 387 F.3d 1146 (10th Cir. 2004), criticizing the circuits that support “but-for” standing for applying traditional notions of standing and ignoring ERISA’s limited grant of federal jurisdiction.  The statute’s limited jurisdiction only allows federal courts to hear claims brought by ERISA program participants or beneficiaries against their current ERISA program administrator.  However, as suggested by the Tenth Circuit in Chastain, their jurisdiction over common law tort claims related to breach of fiduciary duties involving retirement programs is not so limited.