Yesterday the Supreme Court called for the views of the Solicitor General on Putnam Investments, LLC v. Brotherston, a case about the burden of proving causation for losses in ERISA suits. There is a 6-4 circuit split about whether the ERISA plaintiff or the fiduciary defendant has the burden of persuasion regarding whether the fiduciary defendant's breach caused the loss. Here is how the first Question Presented reads:

Whether an ERISA plaintiff bears the burden of proving that "losses to the plan result[ed] from" a fiduciary breach, as the Second, Sixth, Seventh, Ninth, Tenth, and Eleventh Circuits have held, or whether ERISA defendants bear the burden of disproving loss causation, as the First Circuit concluded, joining the Fourth, Fifth, and Eighth Circuits.

The cert petition presents the ordinary rule in U.S. law (i.e., outside of ERISA) as being that the plaintiff has the burden of showing causation. The cert petition notes, however, that the court below recognized "that it 'has long been the rule in trust law' that 'the burden of disproving causation [rests] on the fiduciary.' Pet. App. 32a-33a (citing Tatum v. RJR Pension Inv. Comm., 761 F.3d 346, 363 (4th Cir. 2014))."

How could it possibly be that the fiduciary defendant has the burden of disproving causation? With the caveat that I haven't yet explored this case in detail, there are at least three reasons to think the fiduciary defendant has this burden. (Note that these reasons aren't truly independent as much as overlapping and reinforcing.)

First, ERISA relies on, and in significant respects incorporates, the common law of trusts. (For a careful statement of this point, with qualifications, see John H. Langbein, What ERISA Means by "Equitable": The Supreme Court's Trail of Error in Russell, Mertens, and Great-West, 103 Colum. L. Rev. 1317, 1324-1329 (2003).) By "common law" in this paragraph I don't mean "common law vs. equity," since the law of trusts is and was equitable—rather, "common law" in the sense of law recognized, developed, and formulated by judges.

Second, equity has different rules for "damages," i.e., loss-based monetary remedies. This is something I address in my Fiduciary Remedies chapter in the Oxford Handbook of Fiduciary Law (2019). Here is my discussion of "equitable compensation," minus the footnotes, and with emphasis added to highlight a point of relevance for Putnam:

Equitable compensation is a remedy that looks like damages. It even travels under names like "equitable damages" and simply "damages," as well as names more redolent of trusts, "surcharge" and "falsification." This, too, is a frequently sought remedy when a beneficiary sues a trustee for breach of duty, especially for a breach of the duty of care. Unlike accounting for profits and constructive trust, equitable compensation is loss-based. Instead of stripping gains from the defendant, it makes the defendant compensate the plaintiff (or the trust itself) for something that has been lost. What name is used for this remedy may seem inconsequential. But there are reasons to avoid conflating it with legal damages. First, damages is the central remedy in tort, and it expresses the remedial aspiration of tort law: to make the defendant restore the plaintiff to the position he was in before the defendant's wrongful act. Tort damages look back to the rightful position. But the focus of fiduciary remedies is not on loss. Their primary function is not to compensate. They look forward to the rightful position. Thus equitable compensation is not the paradigmatic remedy for a breach of fiduciary duty, as damages is in tort. Indeed, equitable compensation as a distinctive remedy emerged out of accounting. It was a shortcut: without going to the trouble of an accounting, a beneficiary could sue for what might be called the expected results on the negative side of the ledger. According to its "traditional principles," equitable compensation "focused on the trustee's obligation to account for his or her stewardship of the trust property, and [t]he form of relief [was] couched in terms appropriate to require the defaulting trustee to restore to the estate the assets of which he deprived it." There may be analytical advantages to separating "accounting for profits" from "equitable compensation," as well as advantages to thinking of them as profit and loss of a single remedy of accounting for what the fiduciary has done with the beneficiary's resources. Either way, the affinity between these remedies is a hint that "equitable compensation" is not the same as damages in tort. Indeed, in some jurisdictions there are a number of fairly subtle differences between "damages" and "equitable compensation," though the extent to which these are recognized by courts will depend on their familiarity with equity. One is that a rigorous showing of causation is not required in equitable compensation, at least if it is seen as a kind of direct "negative accounting." Another is that courts may allow offsets for services rendered by the fiduciary. This, too, is in keeping with the roots of the remedy in accounting, but is at odds with ordinary calculations of legal damages. Yet another difference, at least in some common law jurisdictions, is that a court awarding equitable compensation may choose to allow the plaintiff to recover the lost value as of the time of the decree, not as of the time of breach, on the theory that what the beneficiary is owed is a continuing obligation of prudent administration by the fiduciary—an obligation that, if performed by the fiduciary, would have obtained the assets' appreciation. A further difference is that equitable compensation allows no recovery for non-pecuniary losses, such as emotional distress. This limitation is consistent with the theory that equitable compensation is requiring a fiduciary to make up what is lacking, due to breach of a duty, in the trust corpus (or more generally in the beneficiary's resources that are in the hand of the fiduciary.) The general principle is, as the U.S. Supreme Court put it, that for the remedy of equitable compensation "any requirement . . . must come from the law of equity." Sometimes this remedy is more generous than legal damages, sometimes less so. These divergences are not random. They are due to the fact that equitable compensation is tied to the fiduciary's duties. In the words of one scholar, "If the fiduciary no longer has the original property, and cannot therefore specifically perform his or her obligation, the claim will be that he or she must perform by payment of a monetary equivalent." In such a case, equitable compensation "does not extend to loss suffered beyond that which is mandated by the scope and purpose of the duty," yet it is "denied or reduced only in those circumstances where such denial or reduction is consistent with the reach of and expectations engendered by the duty." By using distinctive terminology, such as "equitable compensation" rather than "damages," courts and scholars can show their awareness that what they are discussing is a distinctive monetary remedy. "Labels . . . shape the connotation of a legal principle and thus the way people think about it." Second, the use of distinctive terminology helps avoid misunderstanding about this remedy's classification. A typical award of damages in tort or contract is a legal remedy. But when a court awards equitable compensation against a trustee for breach of fiduciary duty, the court is not giving a "legal" remedy. The entire field of trust law was developed in equity; it is in equity's exclusive jurisdiction. This conclusion that equitable compensation is equitable has a number of implications in U.S. law, including that a claim for this remedy should be subject to equitable defenses such as laches and unclean hands, and that the remedy should not be awarded by a jury.

Finally, there is a point I raise in a footnote in the passage just quoted. After saying that one difference between legal "damages" and equitable compensation "is that a rigorous showing of causation is not required in equitable compensation, at least if it is seen as a kind of direct 'negative accounting'"—a proposition for which I quote the world's leading equity treatise, Meagher, Gummow & Lehane—I then add this sentence: "The explanation for this may not be specific to equity, but instead may be due to the fact that the plaintiff is enforcing the primary right, rather than seeking damages for loss caused by a wrong."