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In LaRue: Supreme Court Upholds Participant's Damages Claim


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From today's BenefitsLink Retirement Plans Newsletter:

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[Official Guidance] Text of LaRue Unanimous Supreme Court

Opinion Upholding Damages Claim Against ERISA Fiduciaries

for Participant's Investment Losses (PDF)

http://benefitslink.com/cases/larue-06-856.pdf

18 pages; decided February 20, 2008. Excerpt (from the

opinion's syllabus): "Held: Although §502(a)(2) does not

provide a remedy for individual injuries distinct from

plan injuries, it does authorize recovery for fiduciary

breaches that impair the value of plan assets in a

participant's individual account. . . . For defined

contribution plans . . . fiduciary misconduct need not

threaten the entire plan's solvency to reduce benefits

below the amount that participants would otherwise

receive. Whether a fiduciary breach diminishes plan

assets payable to all participants or only to particular

individuals, it creates the kind of harms that concerned

§409's draftsmen. Thus, [the references in Massachusetts

Mutual Life Ins. Co. v. Russell to] 'entire plan' . . .

which accurately reflect §409's operation in the

defined benefit context, are beside the point in the

defined contribution context." (United States Supreme

Court)

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An issue not addressed directly in the LaRue decision was whether he yet had standing since he'd been paid out, I understand, the entire balance of his DC plan account. However, implicit is that such a participant may have standing (at least for a 502(a)(2) action brought derivatively on behalf of the plan) "whether his account includes 1% or 99% of the total assets in the plan." Arguably by the time he brought suit, LaRue had zero percent in the plan. However, that was not addressed in the Court's opinion, or in either of the two concurring opinions.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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An issue not addressed directly in the LaRue decision was whether he yet had standing since he'd been paid out, I understand, the entire balance of his DC plan account. However, implicit is that such a participant may have standing (at least for a 502(a)(2) action brought derivatively on behalf of the plan) "whether his account includes 1% or 99% of the total assets in the plan." Arguably by the time he brought suit, LaRue had zero percent in the plan. However, that was not addressed in the Court's opinion, or in either of the two concurring opinions.

See bulletpoint #6 on page 8:

6 After our grant of certiorari respondents filed a motion to dismiss the writ, contending that the case is moot because petitioner is no longer a participant in the Plan. While his withdrawal of funds from the Plan may have relevance to the proceedings on remand, we denied their motion because the case is not moot. A plan “participant,” as defined by §3(7) of ERISA, 29 U. S. C. §1002(7), may include a former employee with a colorable claim for benefits. See, e.g., Harzewski v. Guidant Corp., 489 F. 3d 799 (CA7 2007).

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Thanks, PLAN MAN, I hadn't had time to sift through the footnotes yet. Glad they spelled that out.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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But what was resolved? The only thing the Supremes agreed on is that a DC plan participant is not prohibited from bringing a claim on behalf of the plan under 502(a)(2) for a breach of fiduciary duty which resulted in a loss only to his acocunt.. The Supremes did not say that he has a right to a claim under ERISA 502(a)(2). Indeed CJ Roberts concurring opinon leaves open the question whether the availability of relief under 502(a)(1)(B) for a claim to benefits precludes a claim for breach of fiduciary duty under 502(a)(2). " I see nothing in today's opinion precluding the lower courts on remand, if they determine that the argument is properly before them, from considering the contention that LaRue's claim may proceed only under 502(a)(1)(B). In any event other courts in other cases remain free to consider what we have not- what effect the availability of relief under 502(a)(1(B) may have on a plan participant's ability to proceed under 502(a)(2). "

As a practical matter LaRue's claim that his investment instructions were not followed can be avoided by stricter plan provisions governing investment decisions by participants, e.g., by requiring that all changes to contribution % and investment selections must be submitted via the internet or by a written request submitted via an 800 fax # to the plan admin which must be confirmed in writing. Most large plans have such procedures in effect already.

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mjb, is your point that while the Supremes say that LaRue can bring the derivative action under 502(a)(2) on behalf of the plan against the fiduciaries for breach and obtain a restoration to the plan for its losses, LaRue might not then receive the restored amount as benefits payable from the plan to LaRue other than per 502(a)(1)(B)? The claim for breach losses belongs to the plan (though brought by a participant). All a participant has is a claim for benefits against the plan, not the fiduciaries.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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mjb, is your point that while the Supremes say that LaRue can bring the derivative action under 502(a)(2) on behalf of the plan against the fiduciaries for breach and obtain a restoration to the plan for its losses, LaRue might not then receive the restored amount as benefits payable from the plan to LaRue other than per 502(a)(1)(B)? The claim for breach losses belongs to the plan (though brought by a participant). All a participant has is a claim for benefits against the plan, not the fiduciaries.

No. According the the CJ the courts could determine that LaRue's only viable claim is a claim for benefits under 501(a)(1)(B) which does not allow a recovery for lost profits because recovery under 502(a)(2) is only available if it is appropirate relief. According the the CJ the SC in Varity Co v. Howe determiend that relief under 502(a)(3) is not appropriate if relief under 502(a)(1)(B) offers an adequte remedy. Therefore the courts could preclude recovery under 502(a)(2) if the courts believe that he is compensated adequately for his loss under 502(a)(1)(B). This analysis of course would only be needed if the courts conclude that he suffered a loss because of a breach of fiduciry breach.

Stay tuned for LaRue II.

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The issue I see with 502(a)(1)(B) being inadequate is that the plan does not have in LaRue's plan account the other $150,000 he is claiming as additional benefits. Would he have an adequate remedy in a DC plan where the only assets to honor the benefits claim would be through shorting the plan accounts (and thus benefits) of other employees, which would trigger a cascade of additional claims? The employer cannot put the $150,000 into the plan as an 'employer contribution' to cover the benefits claim, as such a contribution would have to be allocated per the plan's formula and LaRue is terminated with no compensation on which to base any.

It would appear to me that in a DC plan environment, a 502(a)(1)(B) claim could not be an adequate remedy for a claim about the impact of investment underperformance (such as through failure to implement an investment directive from the employee or through excessive fees being charged). The plan first needs to collect the loss amount from the malfeasant fiduciary per 502(a)(2) in order to have the funds to then pay the benefits claimed by LaRue under 502(a)(1)(B). Until the plan has collected through a 502(a)(2) action from the fiduciary, the employee's 502(a)(1)(B) claim cannot be honored and is an inadequate remedy.

I think the net uptake of the 9-0 LaRue decision is two-fold: (a) a former employee whose account balance has all been paid out has standing under ERISA by virtue of having a colorable claim to additional benefits, and (b) even though it would redound just to the benefit of an employee's plan account, the employee can pursue a derivative action under 502(a)(2) on behalf of the plan to recover the losses occasioned by the fiduciary breach.

But, for the reasons explained above, I do not see how 502(a)(1)(B) could provide an adequate remedy in a DC plan situation where the employee claims his benefits balance should be greater but the plan doesn't have corresponding other assets to honor the claim for additional benefits--unless the plan has recouped from the malfeasant fiduciary the necessary funds to then be able to honor the benefits claim.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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Unfortunately for mjb, there will likely be no LaRue II because CJ Roberts concurring opinion is NOT the law. The majority opinion, which is the law, states very clearly that if a fiduciary breach occurred, this behavior "falls squarely within that category" of misconduct that is meant to be redressed by the remedial provisions of 502(a)(2); the only potential limits should be (1) there was no fiduciary breach or (2) one of the other limits discussed in footnote 3 applies (failure to exhaust administrative remedy, etc.).

Roberts says that courts are free to consider the effect of 502(a)(1)(B) on the ability to proceed under 502(a)(2), but this statement is not supported by the rule or rationale put forth by the majority. The plaintiff, by the terms of the opinion, need not show that 502(a)(1)(B) is inadequate, and a trial court that makes this argument should be overturned.

But really, as has been pointed out very eloquently, 502(a)(1)(B) would not be adequate in most breaches of this type, anyway, so why open this can of worms, it adds nothing and only serves to detract from the analysis. Justice Roberts pointed out that other plaintiffs have used 501(a)(1)(B) for similar claims. Well, duh, that's because they're making every argument they can where the deck was heavily stacked against them. Any plaintiff would be stupid not to make every argument, and I fail to see how there would be a proliferation of claims for benefits that are being recharacherized as fiduciary breach in cases where, as in this case, the money is gone and isn't going to instantaneously materialize out of nowhere. Maybe someone can help me out on why he should be so overconcerned about that.

We may wonder whether Roberts is right, but we shouldn't have to care, and it shouldn't really matter anyway, since you would have to prove fiduciary breach and the plaintiff will only be entitled to be "made whole."

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Thomas and Roberts got it right. The correct cause of action is and can only be 502(a)(2): restoring losses to the plan caused by a 409 breach. Once the loss is restored to the plan, it is then merely a function of the plan's investment and accounting procedures that the amount restored is allocated to LaRue's account. (Indeed, I think a different plan participant would have had standing to sue under 502(a)(2) in place of LaRue, but that's an issue for another day.) The next step is that LaRue files an applicaton for benefits and signs all the necessary consents (with his or her spouse's consent, if applicable). If the plan does not give LaRue his replenished account balance, he can follow the plan's claims procedures, etc., exhaust his administrative remedies, and if necessary bring a new lawsuit to recover beneits under 502(a)(3).

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I think you mean thomas and Scalia. I agree that that the action is for a participant to restore losses to the plan, then the participant should recover from the plan. Before this case was decided, in an other thread I said something like the term "plan" in the statute should be construed to include an individual's account. The majority didn't seem to concern itself with that detail.

the next step, though is that he go back to trial and prove there was a fiduciary breach since it would seem that administrative remedies would be futile at this point.

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The issue I see with 502(a)(1)(B) being inadequate is that the plan does not have in LaRue's plan account the other $150,000 he is claiming as additional benefits. Would he have an adequate remedy in a DC plan where the only assets to honor the benefits claim would be through shorting the plan accounts (and thus benefits) of other employees, which would trigger a cascade of additional claims? The employer cannot put the $150,000 into the plan as an 'employer contribution' to cover the benefits claim, as such a contribution would have to be allocated per the plan's formula and LaRue is terminated with no compensation on which to base any.

It would appear to me that in a DC plan environment, a 502(a)(1)(B) claim could not be an adequate remedy for a claim about the impact of investment underperformance (such as through failure to implement an investment directive from the employee or through excessive fees being charged). The plan first needs to collect the loss amount from the malfeasant fiduciary per 502(a)(2) in order to have the funds to then pay the benefits claimed by LaRue under 502(a)(1)(B). Until the plan has collected through a 502(a)(2) action from the fiduciary, the employee's 502(a)(1)(B) claim cannot be honored and is an inadequate remedy.

I think the net uptake of the 9-0 LaRue decision is two-fold: (a) a former employee whose account balance has all been paid out has standing under ERISA by virtue of having a colorable claim to additional benefits, and (b) even though it would redound just to the benefit of an employee's plan account, the employee can pursue a derivative action under 502(a)(2) on behalf of the plan to recover the losses occasioned by the fiduciary breach.

But, for the reasons explained above, I do not see how 502(a)(1)(B) could provide an adequate remedy in a DC plan situation where the employee claims his benefits balance should be greater but the plan doesn't have corresponding other assets to honor the claim for additional benefits--unless the plan has recouped from the malfeasant fiduciary the necessary funds to then be able to honor the benefits claim.

As a real world matter most DC plans will not have non allocated assets sufficient to pay a claim for lost profits.

Assuming the claim is really worth $150,000 (which as yet to be determined) what happens in the likely event that the fiduciary declares bankruptcy after being adjudged to have breached his fiduciary duty in the amount claimed? What is the adequate remedy? Should the fiducary's own benefits be seized because of an innocent mistake? Can the participant recover some or all of his 150k from the accounts of the other plan participants if no other funds are available? Can the plan sue the non fiduciary employer to pay the judgment instead of taking it out of the participant's accounts?

The practical answer to these questions is the reason why Congress limited the recovery for participant benefit claims under 502(a)(1)(B) to the remedies in equity, e.g, the account balance plus any earnings pocketed by the wrongdoer. Recovery is not permitted for money damages such as lost profits or punative damages. Allowing recovery of lost profits by individual participants as a breach of fiduicary duty will have a detrimental impact on DC plans and their participants as well result unpaid judgements.

As a separate matter do you think small/midsized DC plans will be able to afford fiduciary insurance?

The court decisions I have reviewed did not allow recovery under both 502(a)(1)(B) and 502(a)(2) by a participant. They only allow recovery under one or the other provision, but not both. If you have a case that holds differently I would like to see it.

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mjb--Yes, there is personal liability for fiduciary breaches under ERISA. So they can and should be held personally liable.

But why are you worried about collection? You are now ignoring the law and have entered the realm of not agreeing with it. The Court did say that a resoration of profits under trust law is an appropriate remedy under ERISA. If Congress doesn't like it they need to amend the statute.

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One thing I would like to know is how did this case get to the S. Ct. without being settled for something between $0 and $150k? Who is paying the lawyers (or are they handling it for free for the privilege of appearing before the Court and the name recognition)? Are there other, similarly situated participants in LaRue's plan who filed complaints to toll the SOL and their cases are on hold pending the resolution of LaRue's case?

Don't bother to speculate, but if you actually know the answers I'd be interested to hear them.

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Thomas and Roberts got it right. The correct cause of action is and can only be 502(a)(2): restoring losses to the plan caused by a 409 breach. Once the loss is restored to the plan, it is then merely a function of the plan's investment and accounting procedures that the amount restored is allocated to LaRue's account. (Indeed, I think a different plan participant would have had standing to sue under 502(a)(2) in place of LaRue, but that's an issue for another day.) The next step is that LaRue files an applicaton for benefits and signs all the necessary consents (with his or her spouse's consent, if applicable). If the plan does not give LaRue his replenished account balance, he can follow the plan's claims procedures, etc., exhaust his administrative remedies, and if necessary bring a new lawsuit to recover beneits under 502(a)(3).

If what you say is true why does Roberts state in his last paragraph "I see nothing in today's opinion precluding the lower courts on remand, if they determine that the argument is properly before them, from considering the contention that LaRue's claim my proceed only under 502(a)(1)(B)"?

In an earlier part of the same paragraph the CJ states that the availability of relief under 502(a)(1)(B) may alter the Supreme Court's determination that a claim may be brought under 502(a)(2).

Also, what benefits can LaRue recover under ERISA 502(a)(3) other than his account balance? The cases that I have seen have held that "other equitable relief" does not include money damages which would include lost profits.

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The issue I see with 502(a)(1)(B) being inadequate is that the plan does not have in LaRue's plan account the other $150,000 he is claiming as additional benefits. Would he have an adequate remedy in a DC plan where the only assets to honor the benefits claim would be through shorting the plan accounts (and thus benefits) of other employees, which would trigger a cascade of additional claims? The employer cannot put the $150,000 into the plan as an 'employer contribution' to cover the benefits claim, as such a contribution would have to be allocated per the plan's formula and LaRue is terminated with no compensation on which to base any.

It would appear to me that in a DC plan environment, a 502(a)(1)(B) claim could not be an adequate remedy for a claim about the impact of investment underperformance (such as through failure to implement an investment directive from the employee or through excessive fees being charged). The plan first needs to collect the loss amount from the malfeasant fiduciary per 502(a)(2) in order to have the funds to then pay the benefits claimed by LaRue under 502(a)(1)(B). Until the plan has collected through a 502(a)(2) action from the fiduciary, the employee's 502(a)(1)(B) claim cannot be honored and is an inadequate remedy.

I think the net uptake of the 9-0 LaRue decision is two-fold: (a) a former employee whose account balance has all been paid out has standing under ERISA by virtue of having a colorable claim to additional benefits, and (b) even though it would redound just to the benefit of an employee's plan account, the employee can pursue a derivative action under 502(a)(2) on behalf of the plan to recover the losses occasioned by the fiduciary breach.

But, for the reasons explained above, I do not see how 502(a)(1)(B) could provide an adequate remedy in a DC plan situation where the employee claims his benefits balance should be greater but the plan doesn't have corresponding other assets to honor the claim for additional benefits--unless the plan has recouped from the malfeasant fiduciary the necessary funds to then be able to honor the benefits claim.

As a real world matter most DC plans will not have non allocated assets sufficient to pay a claim for lost profits.

Assuming the claim is really worth $150,000 (which as yet to be determined) what happens in the likely event that the fiduciary declares bankruptcy after being adjudged to have breached his fiduciary duty in the amount claimed? What is the adequate remedy? Should the fiducary's own benefits be seized because of an innocent mistake? Can the participant recover some or all of his 150k from the accounts of the other plan participants if no other funds are available? Can the plan sue the non fiduciary employer to pay the judgment instead of taking it out of the participant's accounts?

The practical answer to these questions is the reason why Congress limited the recovery for participant benefit claims under 502(a)(1)(B) to the remedies in equity, e.g, the account balance plus any earnings pocketed by the wrongdoer. Recovery is not permitted for money damages such as lost profits or punative damages. Allowing recovery of lost profits by individual participants as a breach of fiduicary duty will have a detrimental impact on DC plans and their participants as well result unpaid judgements.

As a separate matter do you think small/midsized DC plans will be able to afford fiduciary insurance?

The court decisions I have reviewed did not allow recovery under both 502(a)(1)(B) and 502(a)(2) by a participant. They only allow recovery under one or the other provision, but not both. If you have a case that holds differently I would like to see it.

I don't know that small/midsized DC plans will be able to afford fiduciary insurance. Such plans will likely move more towards brokerage windows rather than investment menus set by plan officials, particularly in light of the Hecker v Deere decision of June 21, 2007 (albeit now being appealed by the employee plaintiffs). Others may go all the way to open architecture.

I agree that double recovery is not allowed under ERISA, but there does seem to be room for 502(a)(2) relief beyond what 502(a)(1)(B) provides. 502(a)(1)(B) provides a right to claim benefits due under the plan. But the employee might need to pursue a 502(a)(2) action on behalf of the plan against the fiduciaries in order to recoup losses, so that the plan fund has assets with which to honor the 502(a)(1)(B) claim. Equitable recoupment from the fiduciary might be needed so that the plan has the funds to provide the employee an adequate remedy under his 502(a)(1)(B) claim.

Here are a couple of cases that slice and dice, finding room for 502(a)(2) and (a)(3) relief to aid an employee who is also pursuing a 502(a)(1)(B) benefits claim:

In Ehrman v Standard Ins Co, ND California Case # 3:06-cv-05454-MJJ, the court entered an Order

Granting in Part and Denying in Part Defendants’ Motion to Dismiss and to Strike Plaintiffs’

First Amended Complaint on May 2, 2007. There, the court said it did

not read Forsyth or Ford to stand

for the broad proposition that a Plaintiff may not seek relief under § 1132(a)(3) merely because

he or she has also pleaded a claim under § 1132(a)(1)(B), § 1132(a)(2) and/or other ERISA

remedial sections. Indeed, reading such a bright-line rule into Forsyth or Ford would run

contrary to the Supreme Court's recognition in Varity that even where Congress has fashioned a

remedial provision for a class of injury, there may still be circumstances where additional

equitable relief under § 1132(a)(3)'s ‘catch-all’ provision is appropriate. 516 US at 515 (‘we

should expect that where Congress elsewhere provided adequate relief for a beneficiary's injury,

there will likely be no need for further equitable relief, in which case such relief normally would

not be 'appropriate’ ’) (emphasis added).

In Schultz v Texaco Inc, 127 FSupp2d 443 (SD NY 2001), the court said:

It is true that Varity (Corp v Howe, 516 US 489 (1996)) holds that a litigant may not double dip

by seeking to recover on a Section 502(a)(1)(B) claim while at the same time pursuing

the equitable remedies of Section 502(a)(3). However, that is not the plaintiffs' theory. The

Amended Complaint alleges a denial of benefits and, as a separate and distinct argument,

asks the Court to use its injunctive powers to find that plaintiffs were employees as defined

under ERISA and to require that the employer reclassify them as such.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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I actually wonder if plans will have the opposite reaction (not widen the window for self direction but narrow it). LaRue claims he lost money because his election was not followed. The only way to ensure that all elections are properly followed, is to not let elections be made (ie, direct money for them).

A plan is put in the position of being at risk for not following directions and is also at risk for following directions where the fiduciary believes that the investment is no longer a prudent investment. We all know that the fiduciaries won't be sued if they were right (and saved the participant from losses).

It is all going to come down to plan drafting, policies, participant communications and general participant relations.

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It'd be pretty safe to assume that the Supreme Court was aware of 502(a)(1)(B) but likely assumes that a claim under that section would either be denied or used as an adjuct/subsequent claim to recover what is owed after the loss is restored. The Court clearly stated that there can be a cause of action under 502(a)(2) assuming a breach occurred. Who cares if 502(a)(1)(B) is available or unavailable for relief? It's a different claim. What is the point of continuing to discuss the interplay between them, other than the obvious point that no one should be able to double dip?

Does anyone here seriously think that after this opinion, a court could or should get away with dismissing this claim on the basis that 502(a)(1)(B) provides an adequate remedy because relief under 502(a)(2) might be inappropriate?

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Roberts opinion doesn't make a lot of sense to me. On the one hand he affirms the majority decision that there is a claim somewhere, but then he says that if the court had considered 502(a)(1) maybe he didn't really have a claim. Not very helpful - it seems like he thinks that in this instance the participant was harmed and ought to have a remedy, but he doesn't want to say that out loud because he doesn't want to give too much away to plaintiffs, so he just says yeah he can sue but I'm not saying why.

The whole discussion of whether to consider the "landscape" of employee benefit plans is interesting. In one way Thomas' opinion saying that you shouldn't take into account "trends in the pension plan market" and you should just say that it's ok to sue a fiduciary for harm to a participant's individual account because that is harm to the plan is appealing, but I think it unrealistic and would result in convoluted interpretations because the landscape has in fact changed so much since 1974. Interpretation by "original intention" is ok in some contexts, but here?

Finally, I wonder what this opinion bodes for the cash balance cases where participants claim that the accrual rate rules for defined benefit plans are violated by the cash balance formula. There seems to be a recognition in the majority opinion that db plan rules are different, and Thomas talks about what ERISA originally said (without regard to the trends in the pension plan market). This would seem to favor the cash balance participants - unless the majority takes into account the changing landscape and concludes that the original understanding of the accrual rate rules shouldn't apply to cash balance plans. On the other hand favoring participants in these cases is not what Roberts and Thomas like to do - they are more free market types it seems to me - so would they take into account current trends in looking at cash balance plans?

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responding to Locusts second paragraph--sometimes I wish the justices would address concurring and dissenting opinions like they used to do. I actually thought that Thomas was slightly misinterpreting the majority. I didn't get the sense that the majority was saying that the change in benefits landscape caused a change in how the law should be interpreted. If that's what they are saying, then I don't really agree and I definitely don't think they had to go that far. I interpreted that part of the discussion as essentially saying that Russell was decided with defined benefit-type plans in mind and should be basically be interpreted in that light and limited to analogous facts. I mean Russell isn't irrelevant just because the benefits landscape changed.

A Cash balance plan would really be problematic as a hybrid; it would be hard to tell when to apply the "entire plan" theory or the individual account theory. Likely the answer would depend on the nature of the breach, the approprate remedy and whether the behavior affects the "individual account" aspects of the plan or the "defined benefit" nature of the plan.

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You are all so focused on what are the participants rights to recovery that you are ignoring the question how will participants be compensated if they prevail, not to mention the fact of who will want to be the fiduciary of a DC plan who has exposure to unlimited liability for innocuous mistakes in processing participant allocations. Most fiducaries will not have the personal assets to pay the cost of a judgment for lost profits of $150,000 plus legal fees. Which would the participant prefer: a recovery of the current value of the account balance and any earnings credited to the plan or a judment for lost profits that cannot be enforced because the plan fiduciary declares bankruptcy? Or would you prefer that all participants pay for the lost profits to make one participant whole?

Most employers will institute procedures to require that plan participants submit changes in elections/deferrals by email or by faxing the form to the plan administrator to avoid liabilty and pay for the assitional cost of the security. Small employers will lose fiduciary coverage and the plan fiduicary will not have enough personal asset to pay the judgment.

What will you say to the corporate employee who asks what is my exposure if I am a fiduciary?

If you think about it, the CJ's concurring opinion was intended to bring this issue before the court again in the context of what is the proper remedy under ERISA after the lower courts have thoughly vetted the facts and renderd a judgment rather than havng the supreme ct rule on a vague claim for $150,000 in lost profits which have not been proved. It is also possible that the case could be dismissed because of the payment of benefits.

Like I said stay tuned for LaRue II.

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well, I actually just spoke with an ERISA litigator who has been operating all along under the assumption (i.e." advising clients") that these types of claims are (have always been) permissible based on the fact that many lower courts have held that such claims are permissible and a belief that the defenses against these claims have been generally regarded as weak. His advice is that, based on the above assumption having been in place and generally regarded as true, there shouldn't be a flood of litigation, unless all the media attention focusing on this case causes participants to file suit.

But even if that isn't true, and there is a flood of litigation, since when does the tail wag the dog. How to collect or the feasibility of collection is ancillary to substantive rights and many people get out of judgements by filing bankruptcy or just being uncollectible (this happens all the time in tort and contrat law) Ability to collect shouldn't dictate law. Why should a person who has lost substantial retirement income not be able to recover just because a mistake might be as you say innocuous? It's about making the party who can better bear the cost be responsible. Why should the participant bear the cost? A participant generally will not be able recover finanacially froms such a blow. There is no evidence to support the contention that allowing these claims will destroy the foundation of the current retirement scheme or the fabric of the universe.

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well, I actually just spoke with an ERISA litigator who has been operating all along under the assumption (i.e." advising clients") that these types of claims are (have always been) permissible based on the fact that many lower courts have held that such claims are permissible and a belief that the defenses against these claims have been generally regarded as weak. His advice is that, based on the above assumption having been in place and generally regarded as true, there shouldn't be a flood of litigation, unless all the media attention focusing on this case causes participants to file suit.

But even if that isn't true, and there is a flood of litigation, since when does the tail wag the dog. How to collect or the feasibility of collection is ancillary to substantive rights and many people get out of judgements by filing bankruptcy or just being uncollectible (this happens all the time in tort and contrat law) Ability to collect shouldn't dictate law. Why should a person who has lost substantial retirement income not be able to recover just because a mistake might be as you say innocuous? It's about making the party who can better bear the cost be responsible. Why should the participant bear the cost? A participant generally will not be able recover finanacially froms such a blow. There is no evidence to support the contention that allowing these claims will destroy the foundation of the current retirement scheme or the fabric of the universe.

You still dont get it. Why would a litigator take on a case that has little potential for recovery if a favorable judgment is rendered? I have seen many promising cases that not been prosecuted because there is little possible of collecting on the claim. I dont know of many litigators who will file suit against a client who will declare bankruptcy if a judgment is rendered.

What I still dont understand is how can a participant recover a judgment from a DC plan if the plan fiduciary does not have sufficient assets to pay the judgment.

I disagree that participant claims for lost profits are automatially recoverable, as the CJ opined that it is up to the lower courts to determine the validity of a claim that lost profits are to be recovered under 502(a)(2) instead of being limited to the remedies under 502(a)(1)(B). This issue will be before the Supreme Court again.

I also dont understand what you mean by the third party conversation that these claims have always been permissible and defenses are weak. There have been cases in the 6th (Helfrich v PNC Bank, 267 F3d 477) and 9th circuits (against Charles Schwab) which have denied claims for lost profits by participants and beneficiaries.

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