October Term, 2006--No. 13
June 18, 2007
The Supreme Court granted certiorari today in one case of interest to the business community:
ERISA--Scope Of Civil Enforcement Actions
The Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et. seq., contains limited civil enforcement provisions. The Supreme Court granted certiorari in LaRue v. De Wolff, Boberg & Assocs., No. 06-856, to address the scope of two of those provisions. The Court will decide, first, whether 29 U.S.C. § 1132(a)(2) authorizes an individual participant in a defined contribution plan to sue the plan’s fiduciaries to recover losses when the losses affect only the individual participant, and second, whether such an action seeks “equitable relief” within the meaning of § 1132(a)(3).
Petitioner James LaRue participates in a 401(k) plan that allows an individual to direct his or her investments by allocating assets among a variety of investment options. Relying on ERISA § 1132(a)(3), LaRue sued the plan administrator, alleging that the administrator breached its fiduciary duty by purportedly failing to implement LaRue’s investment directives. LaRue claimed that the alleged failure to execute his instructions caused losses to his account of approximately $150,000. In his complaint, LaRue asked that the administrator be ordered to reimburse the plan to make LaRue’s interest in the plan whole. The district court granted the administrator judgment on the pleadings, and LaRue appealed to the Fourth Circuit.
On appeal, LaRue first argued that the plan administrator was liable under § 1132(a)(2). That provision allows a participant to bring an action for relief under § 1109, which in turn provides that anyone who breaches a fiduciary duty imposed by ERISA may be personally liable for “losses to the plan” and “shall be subject to such other equitable or remedial relief as the court may deem appropriate.” 29 U.S.C. § 1109(a). The Fourth Circuit rejected this claim, holding that although LaRue’s claim was styled as a request to reimburse the plan, it was actually a request for individual recovery and as such unavailable under § 1132(a)(2), which provides for recovery only “to the benefit of the plan as a whole.” 453 F.3d at 573 (quoting Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 140 (1985)) (emphasis added by 4th Cir.).
The Fourth Circuit also rejected LaRue’s claim under § 1132(a)(3), which allows a participant to “obtain * * * appropriate equitable relief” to “redress violations of this subchapter.” LaRue argued that his “make whole” request was a form of equitable relief. The Fourth Circuit rejected that contention and concluded that the relief LaRue sought did not constitute “equitable relief” under § 1132(a)(3) but was instead essentially a demand for damages, which are legal rather than equitable in nature. The appellate court noted that Supreme Court precedent imposes a narrow interpretation on the term “equitable relief” as used in § 1132(a)(3).
In response to an invitation by the Supreme Court, the Solicitor General filed an amicus brief in support of certiorari. The government asserted that the Fourth Circuit’s decision was incorrect under both § 1132(a)(2), because LaRue was asking for recovery payable to the plan, even if that relief would ultimately benefit only one participant, and § 1132(a)(3), because LaRue sought a surcharge of the trustee for losses resulting from the fiduciary breach, which relief historically has been considered equitable in nature. It also noted that the decision conflicts with decisions of other courts of appeals.
The Supreme Court’s decision in this case will likely be important to all ERISA fiduciaries, be they plan administrators or plan sponsors, because the Supreme Court will likely clarify both the circumstances under which participants may recover for fiduciary breaches and whether individual plan participants may recover for individual losses. Absent an extension, which is likely, amicus briefs in support of the petitioner will be due on August 2, 2007; amicus briefs in support of the respondent will be due 35 days after petitioner’s brief is filed. Any questions about this case should be directed to firstname.lastname@example.org.