Griggs v. E.I. Dupont De Nemours & Co.

• Decision Date: 29 September 2004
• Docket Number: No. 03-1985.,03-1985.
• Citation: 385 F.3d 440
• Parties: Joseph D. GRIGGS, Plaintiff-Appellee, v. E.I. DUPONT DE NEMOURS & COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

385 F.3d 440

Joseph D. GRIGGS, Plaintiff-Appellee, v. E.I. DUPONT DE NEMOURS & COMPANY, Defendant-Appellant.

No. 03-1985.

United States Court of Appeals, Fourth Circuit.

Argued: June 4, 2004.

Decided: September 29, 2004.

Appeal from the District Court, James C. Fox, J.

ARGUED

: Raymond Michael Ripple, E.I. Du Pont de Nemours & Company, Wilmington, Delaware, for Appellant. Michael Murchison, Murchison, Taylor & Gibson, P.L.L.C., Wilmington, North Carolina, for Appellee.

ON BRIEF

: David F. Dabbs, McGuirewoods, L.L.P., Richmond, Virginia; Donna L. Goodman, E.I. Du Pont de Nemours & Company, Wilmington, Delaware, for Appellant.

Before WILKINS, Chief Judge, and NIEMEYER and TRAXLER, Circuit Judges.

Affirmed in part, vacated in part, and remanded by published opinion. Judge TRAXLER wrote the majority opinion, in which Judge NIEMEYER joined. Chief Judge WILKINS wrote a concurring and dissenting opinion.

OPINION

TRAXLER, Circuit Judge:

At the heart of this case, which is before us for a second time, see Griggs v. E.I. DuPont de Nemours & Co., 237 F.3d 371 (4th Cir.2001) ("Griggs I"), are questions about the propriety of a rescissionary remedy in an action governed by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C.A. §§ 1001-1461 (West 1999 & Supp.2004). We conclude that, in general, rescission is a remedy traditionally available in equity and that rescission is therefore a proper remedy under ERISA. As to this case, however, we conclude that the district court erred with regard to certain aspects of the equitable relief that it fashioned. Accordingly, we affirm in part, vacate in part, and remand.

I.

Joseph Griggs, a long-time employee of E.I. DuPont de Nemours & Co., took early retirement in 1994 after learning that he was eligible to participate in DuPont's temporary pension system ("TPS"), a program that paid eligible employees one month's salary for every two years of service. All of the TPS information that DuPont provided to eligible employees stated that the TPS benefit could be taken in the form of a lifetime annuity with monthly payments that would be subject to federal tax or as a lump sum that could be rolled over tax-free into an IRA or other qualified retirement account. Griggs elected the lump-sum distribution, which was calculated to be $132,900. Before Griggs officially retired, however, DuPont learned that because of Griggs's salary level, his lump sum TPS benefit could not be rolled over and would be subject to federal tax. DuPont never corrected the information it had given Griggs and never told Griggs that his lump-sum TPS benefit would be taxed. When Griggs retired, DuPont gave him a check for the amount of his TPS benefit, less approximately $50,000 in federal taxes. Griggs ultimately paid approximately $58,000 in taxes on his TPS benefit, leaving Griggs with a net TPS distribution of $74,627.

Griggs filed an action in North Carolina state court, claiming that DuPont negligently misrepresented to him the tax consequences of his TPS election. Because Griggs's state-law claims were preempted by ERISA, DuPont removed the case to federal court. The district court concluded that DuPont breached its fiduciary duty by failing to tell Griggs that he was ineligible for a tax-free lump sum distribution, but that ERISA provided no remedy for DuPont's wrong.

On appeal, this court concluded that some equitable remedy might be available to Griggs, perhaps reinstatement of Griggs to his prior position, or reinstatement to the benefit plan so that he could make a new TPS election. Accordingly, we remanded for further proceedings before the district court:

[W]e remand for further factual development with respect to whether the reinstatement of the parties to the pre-election status quo is appropriate. In determining whether such relief is appropriate, the district court's consideration should be broader than the question of whether it would be appropriate, or even possible at this point, to reinstate Griggs to his job. The district court should also consider whether it would be appropriate, or even possible, to return Griggs to his preelection position so that he could make an alternate TPS distribution election. In either event, we note that because reinstatement is equitable in nature, Griggs is not entitled to a windfall; if he is reinstated, we agree with the district court that he must return his TPS benefit. Indeed, Griggs concedes that he would be required to return at least part of his TPS distribution. We will leave it to the sound discretion of the district court to consider the subtleties that will surely arise, including what portion of Griggs's benefit he must return if equitable relief is appropriate, i.e., on whom the loss occasioned by the tax liability should fall.

Griggs I, 237 F.3d at 385-86.

After remand, the district court concluded that reinstating Griggs to his prior position would not be appropriate. The court noted that Griggs had been out of the work force since 1994, and that the changes in the company and technological advancements in the industry "would render Griggs's efficacy in his former position questionable, at best." J.A. 288. Moreover, reinstating Griggs "would require the displacement of an incumbent employee." J.A. 287. Thus, the court declined to order reinstatement. Because Griggs has not appealed this aspect of the district court's order, we will not consider whether reinstatement of Griggs to his prior position would have been proper.

The court did, however, conclude that it would be appropriate to allow Griggs to rescind his election to take his TPS benefit as a lump-sum and to instead select the lifetime annuity option.¹ The court ordered DuPont to pay Griggs a lump sum of the monthly annuity payments, retroactive to the date of his original TPS election — $78,861. Because the monthly annuity payment is fully taxable, the court determined that Griggs would be taxed twice on the same money if he were required to repay DuPont the gross amount of the TPS benefit he recovered. The district court therefore ordered Griggs to repay only the amount he actually received, net of taxes — $74,627. The court ordered Griggs to pursue all available avenues for recovering the state and federal taxes paid on the original TPS lump-sum distribution, and the court required Griggs to involve DuPont in this process, for example, by submitting his proposed tax filings to DuPont 30 days before filing with the IRS and conferring with DuPont about any communication he might receive from the IRS. Any money that Griggs recovered was to be turned over to DuPont. By separate order, the district court awarded Griggs more than $40,000 in attorney's fees and costs.

DuPont appeals. DuPont first contends that the rescissionary remedy ordered by the district court is not proper in an ERISA action. Alternatively, DuPont argues that even if rescission might, in general, be an appropriate remedy in some ERISA cases, it is not appropriate in this case, because the parties cannot be fully restored to their prior positions. Finally, DuPont challenges the award of attorney's fees and costs.

II.

A.

Griggs is proceeding under section 502(a)(3) of ERISA, which authorizes a beneficiary or participant to bring a civil action "(A) to enjoin any act or practice which violates any provision of this sub-chapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan." 29 U.S.C.A. § 1132(a)(3) (West 1999). Griggs is not seeking an injunction, but is instead seeking "other appropriate equitable relief" under section 502(a)(3)(B). The question, then, is whether the relief Griggs sought and was awarded is "appropriate equitable relief."

In Mertens v. Hewitt Associates, 508 U.S. 248, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993), the Supreme Court considered the scope of relief available under section 502(a)(3)(B). While recognizing that ERISA's roots are grounded in the law of trusts, the Court rejected the argument that "appropriate equitable relief" under section 502(a)(3)(B) should mean whatever relief a common-law court of equity could have granted in a breach of trust case. The Court noted that with regard to trust actions, courts of equity could award monetary damages, the quintessential legal remedy, and that courts of equity in other situations could "establish purely legal rights and grant legal remedies which would otherwise be beyond the scope of its authority." Id. at 256, 113 S.Ct. 2063 (internal quotation marks omitted). Given the broad powers available to equity courts, particularly in breach of trust actions, the Supreme Court explained that to read section 502(a)(3)(B) as authorizing "all relief available for breach of trust at common law" would render meaningless Congress' attempt to limit relief to appropriate equitable relief:

Since all relief available for breach of trust could be obtained from a court of equity, limiting the sort of relief obtainable under § 502(a)(3) to "equitable relief" in the sense of "whatever relief a common-law court of equity could provide in such a case" would limit the relief not at all. We will not read the statute to render the modifier superfluous.

Id. at 257-58, 113 S.Ct. 2063 (internal footnote omitted). The Court therefore concluded that under section 502(a)(3), relief was limited "to those categories of relief that were typically available in equity (such as injunction, mandamus, and restitution, but not compensatory damages)." Id. at 256, 113 S.Ct. 2063.

Relying on Mertens, this court in Griggs I concluded that the remedy sought by Griggs was typically available in equity and thus generally permissible under section 502(a)(3). See Griggs I, 237 F.3d at 384-85. In this appeal, DuPont seeks to reargue this point, contending that it is inconsistent with the Supreme Court's opinion in Great-West Life...