Divided Supreme Court Curbs Pension Suits

tell us about the issue behind this case. So the issue here was whether a couple of pensioners who hold stakes in the particular pension had standing to sue those who were managing the pension for having lost a great deal of money out of the pension right through excessively

reckless and or insufficiently careful investment activity. And normally, if you were a shareholder in a particular fund such that your own payout was a function of the value of the fund itself, it would be very clear right that you've lost money at the fund lost money, and that

you had gained money at the fund gained money. But because these are pensioners who have basically fixed income rights in the investment trust, their income is the same right no matter what the value of the pension, at least assuming that the pension kind of continues in existence and has not gone bankrupt, right and in other ways, in more or less ordinary times, quite irrespective of the value of the fund, the pensioners have the same rights to

the same income because these are essentially debt liabilities that the fund owes to the pensioners, right, rather than equity liabilities. So the question really is whether the pensioners have standing to sue UH in light of some loss of value on the part of the fund, because legally speaking, the obligations that are owed to the pensioners are not contingent on the value of the fund. Right, strictly speaking, the fund has to pay the fixed obligation, whether it be

worth five billion dollars or a hundred billion dollars. Right, So again, in sort of strictly legal terms, nothing sort of changes for the pensioners just cause the pension itself might change in value. But you know, you of course know by now, I mean the questions are almost never strictly legal or strictly theoretical in cases like this, because of course we're really dealing with the reality of which

risk matters. In other words, a pensioner's likelihood of actually receiving what she is owed is not only a function of the legal obligations of the fund manager. It's also a function of the financial health of the fund. If the fund, in other words, is in the vicinity of insolvency, then the risk that the pensioners don't end up being paid grows appreciably right if not indeed enormously in some cases.

And so what that means, in turn is that there really is a particular danger to which the pensioners are subject if the fund is mismanaged, and if it loses value massively and thus endures a sort of significant rise in the likelihood that it will ultimately fail and go bankrupt and not be able to pay out its liabilities. And how is the Supreme Court treating this issue of standing in recent years when it comes to standing all rights on some very curious developments in the Supreme Court

over the last thirty years where standing doctrine is concerned. So, by way of very very brief background, um, the way we tend to operate under the Article three of our Constitution is essentially just sort of treat our courts as deciders of what we oftentimes call actual cases or controversies. Right. In other words, some actual material state has to be at stake in a lawsuit. We don't typically think of our courts as entities that sort of just declare what

the law is, just as as if they were professors. Right. Um, they don't simply uh answer theoretical questions or sort of way in theoretical questions. Uh. They decide actual cases and controversies. And so if you, June had a beef with with me, bob, um, let's say, with respect to my theory of relative theory of relativity, you and I have a just agreement or the theory of relativity. Um, you know, this is not an actual case or controversy between us. It's simply a

disagreement on the theory of relativity. So you wouldn't really have standing to sue me, and you wouldn't have a cause of action against me either in a case like that. On the other hand, if I do something to sort of deprive you of something to which you're entitled, if I steal from you, for example, if I harm you in any particular way, then of course you do have standing to sue. We have an actual material dispute rather than to say, theoretical dispute, and so the courts are

situated to decide it. Now, that's a pretty easy distinction to draw, right that. The somewhat harder part sometimes can be a circumstance in which the disagreement that we're talking about is definitely over something concrete and real, it's not really theoretical. However, in some cases, the concrete or real thing might not be an actually occurred harm or actually a current harm, but might be a substantial rise in the likelihood of harm. Right. In other words, the sort

of risk of harm might rise significantly. And so the question then for a court to sort of figure out is do we think of a risk, right that sort of increases the likelihood of a physical harms happening, or at actual concrete harms occurring. Should we think about a theoretical thing, kind of like the theory of relativity, or should we think of it as itself a real thing? Right that, basically, you know, risk is a real thing,

it's not just theoretical. And you know, historically we've tended to answer that question in the affirmative that basically the risk is a real thing. And so if I do something that subjects you to significant risk, or that actually, you know, lowers the expected value of some asset that you hold, like the pension benefit, that's a concrete harm as far as the law is concerned. And that's the

way it has typically been in our legal history. Starting in the nineteen eighties and proceeding on to the nine nineties right down to the present, the Supreme Court seems to have been really kind of keen on limiting people's access to the courts. And one way of doing that, of course, is to shrink the number of things that

count as concrete or actual non theoretical harms. The more such things they can remove from the class of actual concrete harms, the harder it gets for you or me to get into court, because the harder it gets for you or me to establish that we have standing, that we actually have an actual case or controversy that is

sort of amenable to judicial decision or adjudication. So, in a sense, you can view this particular case, this particular decision by the Supreme Court is simply the latest in this rather distressing, from my point of view, long line of decisions that have sort of progressively narrowed the doorway for you and I to get access to justice in the courts, basically simply by defining in a sense out of existence certain harms that previously would have been treated

as actual harms and would have been defined as harms and us would have qualified us to get into court withstanding to sue. So in this particular case, you it's it's quite transparent. In Kavanaugh's rather surprisingly school boyish opinion for the majority, tell us more about Kavanaugh's opinion for the Conservative majority in the case, he says, you know, look, this is a fixed liability and the part of the

pension um that's owed to these pensioners um. That means that, at least legally speaking, uh, they basically enjoy the same benefit through the pension if they win this suit as if they lose this suit. Right, the outcome of the suit, in other words, doesn't change the liability that the pension fund owes to the pensioners. Therefore, it makes no difference whether they're in the suit or not, and therefore they

don't have standing. Right. But again, the problem with that line of reasoning is it completely ignores the fact that there are two determinants of harm here, right. One is the legal obligation of the pension fund, which is admittedly invariant as between the circumstance in which the plaint iss

win and the circumstances which they lose. But the other determinant, again is the actual likelihood of being hey right, the actual risk of the funds turning out not to be able to pay what it oes and thus going bankrupt. And that's just completely ignored. It's treated this so we're just a non existent issue. It's almost as there were there were sort of a blind spot where the color orange and Justice Kavanaugh was wearing orange glasses and so he just couldn't see it. It's just sort of not

there as far as he is concerned. And in that sense, this is a sort of garden variety, you know, once again narrowing the doorway standing determination by the Supreme Court. So you know, if you I think what this means really is there's sort of two reasons to bases on which to be sort of really disturbed about this decision.

The first is what I just mentioned, that it is just yet another one of these cases that sort of narrows the doorway, makes it less and less possible for you or me uh to get redress in the courts of law, which are there to provide us with redress.

And secondly um it sort of carries on with this tendency among some judges to treat risk as we're something that's not real, as though it were as theoretical as the theory of quantum mechanics or something, so that disputes over risks are no different than disputes in Parisian cafes over you know, the truth or falsehood of the theory of quantum mechanics or the theory of relativity or what have you. And risk is not like that, right. The only proof you need of that is just to look

at our financial markets, right. I mean, basically, every price associated with every asset in any financial market is itself partly a function of the risk that attaches to that asset. In other words, we deal not in value but in expected value when we're talking about financial assets, and that means we're treating risk as something real. We're treating risk, in other words, as something with a dollar value. Right.

A riskier asset is something that all else being equal, you pay less for, and a less risky asset, all else being equally you pay more for right, it's dollar valued. What could be more concrete or real than that in a modern economy? Um, And so when Justice Kathina sort of pretends like, well, the only things that are concrete are this really primitive things like you know, clubs and baseball bats and fists in your nose and stuff. But but you know, risk is just not real. I mean,

it's it's, first of all, again very primitive. It's a very sort of pre modern way of thinking of the world or thinking of things. But it's also completely obtuse to pretty much everything that gets done in our economy, pretty much every decision that stated in our economy, because every decision made in our economy is at least partly made on the basis of perceived or even measurable risks. You look at this and you say, well, it's just an issue of standing. Why is it a five to

four split along ideological lines? Give us another explanation of why this split the justices along ideological lines? Sure? Yeah, so, Um.

The reason that this tends that that the standing question tends to divide the court belonging at theological lines, and tence sort of invites the five four type decisions that we see so much of these days is precisely that it's primarily political and judicial conservatives who have been sort of who have been the primary drivers, you might say, of this long term trend over the last thirty years or so within the Supreme Court to narrow the gates through which people can get um in order to get

access to justice. In other words, conservatives for the last three years or so seemed to be really reluctant to let people have access to the courts um. And so, you know, the whole history of the conservative legal movement over the last thirty years or so is in a sense a sort of history of systematic, uh diminishment of the grounds on the basis of which you can get

justice in a court of law. And if you think about it, this kind of hangs together rather nicely, right with the sentence, the way in which conservatives and political campaigns and then their rhetoric in congression and legislatures and so forth, are always demonizing the quote unquote the trial lawyers.

You know, they're always upset about lawyers, they seem to and they're always on about unelectric judges, and you know, there's that tendency for them to demonize the courts and and and and the legal process and the law itself. There's this kind of inherent suspicion that they seem to

have UM. And so I think, you know, if you look at the way they've sort of changed standing doctrine over the years, if you also look at the doctrine surrounding the circumstances that determining the circumstances under which there are private rights of action that individuals can bring into court, you know, as distinguished from regulators uh sort of uh

initiating process in the court about UM. If you look at UM, you know, the grounds on which people even are deemed as having causes of action under particular bodies of law, the regulatory law or other. The trend is pretty much the same, you know, all of those different realms UM when it comes to conservative the judges or lawyers or legislators on the one hand, and non conservative judges or lawyers or or or politicians on the other hand.

In general, those who are not conservative seem to be more friendly to the idea of giving people access to justice, making sure that people have access to the courts, making sure that people can vindicate their rights and enforce their rights in courts of law. That's what the courts are for, after all. And then it seems that what the conservatives are sort of all about is sort of progressively taking all of that stuff away, sort of diminishing. So let

me ask you this. The circuit courts were split before this decision. Does this mean that those courts will now have to follow this decision? Yeah, the short answer is yes, um. And the slightly longer answer is that mainly yes. So so to explain, I mean, the reason that the short answer is yes is that, yeah, that's that's typical ground on which the Supreme Court to science to hear a case. Right, it has discretion to not to hear cases or to

go ahead and hear them. And what are the principal reasons are basically on which the Supreme Court will go ahead, um, and grant the so called rite of sertuary and thus hear a case and decide it is the so called circuit split. Right, if there's a significant split between circuits in the country, then to sort of resolve the ambiguity, the Supreme Court will take the case and sort of you know, weigh in and settle it once and for all. And that's the way it's supposed to work, that theory,

and in general that's the reality as well. The one sense in which you might hedge this, and hence the slightly longer answer, um, is that you know, if this decision is as controversial as it seems to me it ought to be, um, and hence remains a kind of contested territory for a while, then circuits that are that do not find this opinion persuasive or congenial or consistent with principles of justice will look for grounds on which, to quote unquote, distinguish this decision from later cases that

might come up. Right. In other words, other cases might come up that are similar to this one in some respects while also differing from it in other respects. And if it's plausible to sort of single out the differing respects in any particular case as legally relevant or salient, then you might, as a circuit court come come down in a way that's not in a sense consistent with

this Supreme Court decision. But but on the other end, kind it is right, um, because you can sort of say, well, look, if this particular case before us were identical in every relevant respect to the case that was before the Supreme Court. In this decision, then yes, we would be bound by

that Supreme Court decision. But again, at this case before us differs in some legally relevant respect or seemingly salient or important respect from the case that was before the Supreme Court, then we can plausibly argue that that Supreme

Court decision doesn't actually apply here. It's about a different sort of issue than this issue, um, and therefore we can come down differently, even if it's superficially looks like it is a decision that is intentioned with that Supreme Court decision, and whether that happens is pretty much just a matter of, you know, just sort of what happens

out there in the world. That's the sort of function of what sorts of disputes or cases or controversies arise if anybody brings them to court, and then whether they get past the disreport up to the circuit court in the territory in question. Thanks Bob. That's Robert Hacket, a professor at Cornell Law School. And that's it for the

edition of Bloomberg Law. I'm June Grosso. Thanks so much for listening, and remember to tune to The Bloomberg Law Show weeknights at ten pm Eastern, right here on Bloomberg Radio.