If An ERISA Breach of Fiduciary Duty Claim Seeks Individual Recovery (Not Recovery on Behalf of the Plan) Only Equitable Remedies May Be Available

ERISA, through §1132(a)(2), allows an individual to bring a claim for breach of fiduciary duty under 29 U.S.C § 1109.  Section 1109 is read to require that the individual sue in her representative capacity on behalf of the plan.  See 29 U.S.C. § 1132(a)(2).  If the claim of breach of fiduciary duty seeks relief for the individual and not the plan, it falls under § 1132(a)(3) and ERISA limits the individual's remedies to equitable relief.  See 29 U.S.C. § 1132(a)(3).  Thus an individual cannot obtain for herself monetary recovery for a claim of breach of fiduciary duty.  An exception would be if the equitable relief seeks money belonging to the individual that was wrongfully withheld or obtained by the fiduciary.  See Kenseth v. Dean Health Plan, Inc., 610 F.3d 452, 481-82 (7th Cir. 2010).

In contrast, if an individual makes a claim for benefits, she is entitled to monetary recovery under § 1132(a)(1)(B).

 

 

 

Oral Representations Did Not Modify Written Terms of a Plan

In an unpublished opinion, Watson v. Consolidated Edison Co. of New York, Inc., 2010 WL 1564654 (2nd Cir. Apr. 20, 2010), the Second Circuit Court of Appeals held that claims related to an employer's and plan administrator's oral promises failed because the oral promises contradicted the plan's unambiguous terms.

The court stated that because ERISA requires a written employee benefit plan, oral promises are unenforceable under ERISA and cannot vary the terms of the plan. 

Watson was decided in the context of a claim for breach of fiduciary duty based on an ERISA fiduciary making oral statements that misrepresented the terms of the plan.  The court stated, based on Second Circuit case law, that a plan administrator has a fiduciary duty to not make material misrepresentations regarding the availability of future plan benefits.  If an ERISA fiduciary makes guarantees regarding future benefits that misrepresents present facts, the statements are material if they would induce a reasonable person to rely on them.  The court stated based on Second Circuit case law that the party alleging a breach of fiduciary duty must point to a written statement purporting to alter the terms of the plan.  When a party instead points to an oral statement that contradicts the unambiguous terms of the plan, the party does not have a claim for a breach of fiduciary duty because it was not reasonable for them to rely on an oral statement that contradicts the terms of the plan.

 

Where No QDRO Exists, Plan Administrator Should Follow Plan For Distribution of Benefits

The United States Supreme Court held in Kennedy v. Plan Administrator for Dupont Savings & Investment Plan, No. 07-636 (Jan. 26, 2009), that the plan administrator correctly relied on the plan language to determine that the deceased plan participant's former spouse was entitled to the plan benefits even though the spouse disclaimed the right to the benefits in her divorce decree but did not have a QDRO.

Merger Is Not a Permissible Form of Plan Termination Under ERISA

In Beck v. Pace International Union, No. 05-1448 (June 2007), the United States Supreme Court held that an employer who is a plan administrator and plan sponsor for a single-employer plan does not have a fiduciary obligation when considering whether to terminate an employee benefits plan governed by ERISA to consider merger into another plan unless the plan documents require it to do so. 

The employer, which was going through bankruptcy, realized that it could recoup $5 million dollars for the benefit of its creditors if it terminated the plan and purchased annuities to cover the plan's obligations to the participants.  The Supreme Court said that the employer's purchase of annuities comported with the provision of ERISA setting forth permissible methods of terminating a single-employer plan and distributing assets, 29 U.S.C. section 1341(b)(3)(A).

The court made another useful point concerning ERISA fiduciary duties when it noted that although the employer acted as the plan sponsor and plan administrator, ERISA fiduciary duties are implicated only when the employer acts as the plan administrator.  When the employer acts as a plan sponsor, it is acting as a settlor, which is immune from ERISA's fiduciary obligations.

 

Restitution Claim Against Fiduciaries to Be Heard by Supreme Court

On June 12, 2007, The United States Supreme Court agreed to hear LaRue v. DeWolff, Boberg & Assoc., 06-856, a case in which a court of appeals held that a plan participant could not sustain a claim for restitution under ERISA against fiduciaries of his 401(k) plan.  See 458 F.3d 359 (4th Cir. 2006).  In this case, the plan participant claimed that the fiduciaries had failed to follow his directions regarding investments in his account.  The court of appeals for the 4th Circuit held that the provisions of ERISA relied upon by the plan participant for his claim, 29 U.S.C. § 1132(a)(2) and (3), do not permit individual recovery and the plan participant did not allege any unjust enrichment, self-dealing or unlawful possession that would permit recovery under subsection (3), which is the provision governing equitable relief. 

The Supreme Court's analysis of this matter is likely to be a far reaching decision and should be closely watched.