High Court to Rule on Pension Fund Lawsuits

The Supreme Court said Friday that it will decide whether a workers’ pension fund that lost $20 million through alleged double dealing by stock brokers can sue the brokerage firm to recover the money.

The case, to be heard in April, tests the reach of the 1974 federal law that was supposed to protect the pensions and benefits of American workers.

In recent years, this law has become instead a shield for corporations and health maintenance organizations that are sued by workers.

Because the law, the Employee Retirement Income Security Act, sets federal standards, courts have ruled that it blocks all lawsuits under state law. For example, workers who receive health benefits from their employers but are denied medical treatment cannot go to a state court and sue for damages.

Meanwhile, the law has also been read to strictly limit suits in federal court. As a result, workers and their benefit plans often find themselves with nowhere to turn if they believe they have been cheated. But that may be changing.

And in a different case, next month the court will consider whether to change course on HMOs. The justices will hear arguments on whether a patient can sue her HMO in federal court if doctors in her health care plan had financial incentives to deny diagnostic tests or other treatments. That case (Herdrich vs. Pegram, 98-1949) will be heard Feb. 23.

The new case concerns whether pension plans can sue brokers, insurers and others to recover money that is lost through questionable schemes.

The Ameritech Corp., the Midwestern phone company, has a pension fund for 118,000 employees. The fund invested $20 million through the brokerage firm Salomon Brothers Inc. in a motel chain whose financing had been arranged earlier by Salomon Brothers.

The investment proved to be worthless for the pension fund. However, Salomon Brothers reaped nearly $21 million in commissions from the deal.

The pension plan sued the brokerage under the terms of the federal law, alleging that it had been tricked into investing in a risky scheme. But last year, the U.S. 7th Circuit Court of Appeals in Chicago threw out the suit. It ruled that brokers and other outside investment advisors cannot be held liable under ERISA.

Administrators of the pension fund appealed to the Supreme Court, arguing that the law should reach broadly to protect the benefits due workers. In a brief order, the justices agreed to hear the case (Harris Trust vs. Salomon Brothers, 99-579).

The justices also said that they would decide whether to spare an inmate on Virginia’s death row whose lawyer was barred from explaining to jurors during his sentencing that he would never leave prison.

If jurors think a murderer might be paroled in the future, they are more likely to sentence him to death.

Six years ago, the court told trial judges to make sure jurors understand that these days, the phrase “life in prison” means in fact that an inmate will never go free.

Nonetheless, the justices now find themselves reviewing the cases of murderers facing execution whose sentencing came before the 1994 ruling.

Bobby Ramdass went on a rampage in 1992 and killed a convenience store clerk. Though he would have been ineligible for parole, prosecutors told jurors he represented “a continuing threat to society.”

In the case (Ramdass vs. Angelone, 99-7000) the court will consider whether those words misled jurors into believing a death sentence was the only option to protect the community.