LaRue v. Dewolff

• Decision Date: 20 February 2008
• Docket Number: No. 06–856.,06–856.
• Citation: 2008 Daily Journal D.A.R. 2505,76 USLW 4083,552 U.S. 248,42 Employee Benefits Cas. 2857,128 S.Ct. 1020,169 L.Ed.2d 847,08 Cal. Daily Op. Serv. 2160
• Parties: James LaRUE, Petitioner, v. DeWOLFF, BOBERG & ASSOCIATES, INC., et al.
• Court: U.S. Supreme Court

08 Cal. Daily Op. Serv. 2160

128 S.Ct. 1020

169 L.Ed.2d 847

2008 Daily Journal D.A.R. 2505

42 Employee Benefits Cas. 2857

552 U.S. 248

76 USLW 4083

James LaRUE, Petitioner,

v.DeWOLFF, BOBERG & ASSOCIATES, INC., et al.

No. 06–856.

Supreme Court of the United States

Argued Nov. 26, 2007.Decided Feb. 20, 2008.

Syllabus ^*

Petitioner, a participant in a defined contribution pension plan, alleged that the plan administrator's failure to follow petitioner's investment directions “depleted” his interest in the plan by approximately $150,000 and amounted to a breach of fiduciary duty under the Employee Retirement Income Security Act of 1974 (ERISA). The District Court granted respondents judgment on the pleadings, and the Fourth Circuit affirmed. Relying on Massachusetts Mutual Life Ins. Co. v. Russell, 473 U.S. 134, 105 S.Ct. 3085, 87 L.Ed.2d 96, the Circuit held that ERISA § 502(a)(2) provides remedies only for entire plans, not for individuals.

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. Section 502(a)(2) provides for suits to enforce the liability-creating provisions of § 409, concerning breaches of fiduciary duties that harm plans. The principal statutory duties imposed by § 409 relate to the proper management, administration, and investment of plan assets, with an eye toward ensuring that the benefits authorized by the plan are ultimately paid to plan participants. The misconduct that petitioner alleges falls squarely within that category, unlike the misconduct in Russell. There, the plaintiff received all of the benefits to which she was contractually entitled, but sought consequential damages arising from a delay in the processing of her claim. Russell's emphasis on protecting the “entire plan” reflects the fact that the disability plan in Russell, as well as the typical pension plan at that time, promised participants a fixed benefit. Misconduct by such a plan's administrators will not affect an individual's entitlement to a defined benefit unless it creates or enhances the risk of default by the entire plan. For defined contribution plans, however, 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, Russell's “entire plan” references, which accurately reflect § 409's operation in the defined benefit context, are beside the point in the defined contribution context. Pp. 1023 – 1026.

450 F.3d 570, vacated and remanded.

STEVENS, J., delivered the opinion of the Court, in which SOUTER, GINSBURG, BREYER, and ALITO, JJ., joined. ROBERTS, C.J., filed an opinion concurring in part and concurring in the judgment, in which KENNEDY, J., joined. THOMAS, J., filed an opinion concurring in the judgment, in which SCALIA, J., joined.

Peter K. Stris, Costa Mesa, CA, for petitioner.

Matthew D. Roberts, for the United States as amicus curiae, by special leave of the Court, supporting the petitioner.

Thomas P. Gies, Washington, DC, for respondents.Jean-Claude Andre, Sarah E. Andre Ivey, Smith & Ramirez, Los Angeles, CA, Robert E. Hoskins, Foster Law Firm, LLP, Greenville, SC, Peter K. Stris, Counsel of Record, Whittier Law School, Costa Mesa, CA, Brendan S. Maher, Dallas, Texas, Shaun P. Martin, University of San Diego, School of Law, San Diego, CA, for petitioner.Thomas P. Gies, Counsel of Record, Clifton Elgarten, Ellen M. Dwyer, Crowell & Moring LLP, Washington, DC, for respondents.Justice STEVENS delivered the opinion of the Court.

In Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985), we held that a participant in a disability plan that paid a fixed level of benefits could not bring suit under § 502(a)(2) of the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 891, 29 U.S.C. § 1132(a)(2), to recover consequential damages arising from delay in the processing of her claim. In this case we consider whether that statutory provision authorizes a participant in a defined contribution pension plan to sue a fiduciary whose alleged misconduct impaired the value of plan assets in the participant's individual account.¹ Relying on our decision in Russell, the Court of Appeals for the Fourth Circuit held that § 502(a)(2) “provides remedies only for entire plans, not for individuals .... Recovery under this subsection must ‘inure[ ] to the benefit of the plan as a whole,’ not to particular persons with rights under the plan.” 450 F.3d 570, 572–573 (C.A.4 2006) (quoting Russell, 473 U.S., at 140, 105 S.Ct. 3085). While language in our Russell opinion is consistent with that conclusion, the rationale for Russell 's holding supports the opposite result in this case.

These safeguards encourage employers and others to undertake the voluntary step of providing medical and retirement benefits to plan participants, see Aetna Health Inc. v. Davila, 542 U.S. 200, 215, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004), and have no doubt engendered substantial reliance interests on the part of plans and fiduciaries. Allowing what is really a claim for benefits under a plan to be brought as a claim for breach of fiduciary duty under § 502(a)(2), rather than as a claim for benefits due “under the terms of [the] plan,” § 502(a)(1)(B), may result in circumventing such plan terms.

I do not mean to suggest that these are settled questions. They are not. Nor are we in a position to answer them. LaRue did not rely on § 502(a)(1)(B) as a source of relief, and the courts below had no occasion to address the argument, raised by an amicus in this Court, that the availability of relief under § 502(a)(1)(B) precludes LaRue's fiduciary breach claim. See Brief for ERISA Industry Committee as Amicus Curiae 13–30. I simply highlight the fact that the Court's determination that the present claim may be brought under § 502(a)(2) is reached without considering whether the possible availability of relief under § 502(a)(1)(B) alters that conclusion. See, e.g., United Parcel Service, Inc. v. Mitchell, 451 U.S. 56, 60, n. 2, 101 S.Ct. 1559, 67 L.Ed.2d 732 (1981) (noting general reluctance to consider arguments raised only by an amicus and not considered by the courts below). In matters of statutory interpretation, where principles of stare decisis have their greatest effect, it is important that we not seem to decide more than we do. 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).

Justice THOMAS, with whom Justice SCALIA joins, concurring in the judgment.

I agree with the Court that petitioner alleges a cognizable claim under § 502(a)(2) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1132(a)(2), but it is ERISA's text and not “the kind of harms that concerned [ERISA's] draftsmen” that compels my decision. Ante, at 1025. In Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985), the Court held that § 409 of ERISA, 29 U.S.C. § 1109, read together with § 502(a)(2), authorizes recovery only by “the plan as an entity,” 473 U.S., at 140, 105 S.Ct. 3085, and does not permit individuals to bring suit when they do not seek relief on behalf of the plan, id., at 139–144, 105 S.Ct. 3085. The majority accepts Russell 's fundamental holding, but reins in the Court's further suggestion in Russell that suits under § 502(a)(2) are meant to “protect the entire plan,” rather than “the rights of an individual beneficiary.” Ante, at 1023 – 1026; see Russell, supra, at 142, 105 S.Ct. 3085. The majority states that emphasizing the “entire plan” was a sensible application of §§ 409 and 502(a)(2) in the historical context of defined benefit plans, but that the subsequent proliferation of defined contribution plans has rendered Russell 's dictum inapplicable to most modern cases. Ante, at 1025. In concluding that a loss suffered by a participant's defined contribution plan account because of a fiduciary breach “creates the kind of harms that concerned the draftsmen of § 409,” the majority holds that § 502(a) (2) authorizes recovery for plan participants such as petitioner. Ante, at 1025 – 1026.

Although I agree with the majority's holding, I write separately because my reading of §§ 409 and 502(a)(2) is not contingent on trends in the pension plan market. Nor does it depend on the ostensible “concerns” of ERISA's drafters. Rather, my conclusion that petitioner has stated a cognizable claim flows from the unambiguous text of §§ 409 and 502(a)(2) as applied to defined contribution plans. Section 502(a)(2) states that “[a] civil action may be brought” by a plan “participant, beneficiary or fiduciary,” or by the Secretary of Labor, to obtain “appropriate relief” under § 409. 29 U.S.C. § 1132(a)(2). Section 409(a) provides that “[a]ny person who is a fiduciary with respect to a plan ... shall be personally liable to make good to such plan any losses to the plan resulting from each [fiduciary] breach, and to restore to such plan any profits of such fiduciary which have been made through use of assets of the plan by the fiduciary ... .” 29 U.S.C. § 1109(a) (emphasis added).

The plain text of § 409(a), which uses the term “plan” five times, leaves no doubt that § 502(a)(2) authorizes recovery only for the plan. Likewise, Congress'...