McCullough v. Aegon Usa, Inc.

• Decision Date: 03 November 2009
• Docket Number: No. 08-1952.,08-1952.
• Citation: 585 F.3d 1082
• Parties: Randal E. McCULLOUGH, Appellant, v. AEGON USA, INC.; AEGON USA Inc. Board of Directors; Patrick S. Baird; James A. Beardsworth; Kirk W. Buese; Tom A. Schlossberg; Arthur C. Schneider; Mary Taiber; James R. Trefz; Does 1-20; Diversified Investment Advisors, Inc.; Transamerica Financial Life Insurance Company; Transamerica Investment Management, LLC; Transamerica Life Insurance Company; Transamerica Occidental Life Insurance Company; Marilyn Carp; Dan Kolsrud; James Halfpap; Jill Anderson; Jeff Rosen; Martha McConell; Steve Albritton; Mark Mullin; James McArdle; Diane Meiners; Daniel Fox; Investment Committee; Trustee of the Plan, Appellees. AARP, Amicus on Behalf of Appellant, American Benefits Council, Amicus on Behalf of Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

585 F.3d 1082

Randal E. McCULLOUGH, Appellant, v. AEGON USA, INC.; AEGON USA Inc. Board of Directors; Patrick S. Baird; James A. Beardsworth; Kirk W. Buese; Tom A. Schlossberg; Arthur C. Schneider; Mary Taiber; James R. Trefz; Does 1-20; Diversified Investment Advisors, Inc.; Transamerica Financial Life Insurance Company; Transamerica Investment Management, LLC; Transamerica Life Insurance Company; Transamerica Occidental Life Insurance Company; Marilyn Carp; Dan Kolsrud; James Halfpap; Jill Anderson; Jeff Rosen; Martha McConell; Steve Albritton; Mark Mullin; James McArdle; Diane Meiners; Daniel Fox; Investment Committee; Trustee of the Plan, Appellees AARP, Amicus on Behalf of Appellant American Benefits Council, Amicus on Behalf of Appellee.

No. 08-1952.

United States Court of Appeals, Eighth Circuit.

Submitted: December 12, 2008.

Filed: November 3, 2009.

Gregory Y. Porter, argued, Washington, DC, Kay M. Johansen, Cedar Rapids, IA, on the brief, for appellant.

Gary S. Tell, argued, Robert N. Eccles, Adam Hellman, Theresa Gee, on the brief, Washington, DC, for appellee.

Before BYE and COLLOTON, Circuit Judges, and GOLDBERG,¹ Judge.

COLLOTON, Circuit Judge.

Randal McCullough, a participant in a defined-benefit pension plan sponsored and administered by AEGON USA, Inc. ("AEGON"), brought suit under section 502(a)(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1132(a)(2). He alleged that various plan fiduciaries breached their fiduciary duties to the plan and engaged in prohibited transactions in violation of ERISA. The district court² granted summary judgment for the defendants, holding that McCullough lacked Article III standing to assert his claims. We affirm on an alternative ground, following the circuit precedent of Harley v. Minnesota Mining & Manufacturing Co., 284 F.3d 901 (8th Cir. 2002), and its construction of § 1132(a)(2).

I.

As a result of his former employment with one of AEGON's subsidiaries, McCullough is a participant in the AEGON USA, Inc. Pension Plan ("the Plan"), which is sponsored and administered by AEGON and covered by ERISA. The Plan is a defined-benefit plan, which provides participants fixed periodic payments upon retirement from a general pool of plan assets. See Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 439-41, 119 S.Ct. 755, 142 L.Ed.2d 881 (1999).

In October 2005, McCullough filed this action against AEGON and various other defendants in the United States District Court for the Central District of California. In his first amended complaint, McCullough alleged that the defendants breached their fiduciary duties under ERISA. See 29 U.S.C. § 1104. He asserted that the defendants caused the Plan to invest in funds offered by AEGON subsidiaries and affiliates and to purchase products and services from such affiliates and subsidiaries, resulting in the payment of fees "that were higher than the norm." McCullough also alleged that this conduct violated 29 U.S.C. § 1106, which prohibits certain transactions between the Plan and fiduciaries and between the Plan and parties in interest. In addition, McCullough asserted the same claims against defendants relating to the management of a defined-contribution plan.

McCullough sought a refund to the Plan of "all fees paid to AEGON Subsidiaries and Affiliates by the Plan[ ], including disgorgement of profits," as well as "equitable restitution and other appropriate equitable monetary relief." He also sought an injunction against defendants prohibiting "further violations of their ERISA fiduciary responsibilities, obligations, and duties," and any other appropriate equitable relief, "including the permanent removal of the Defendants from any positions of trust with respect to the Plan[ ] and the appointment of independent fiduciaries to administer the Plan[ ]."

AEGON successfully requested transfer of the case to the Northern District of Iowa, and then moved for partial summary judgment. The parties agreed that at the time McCullough filed his complaint, and at all times from 2001 to 2006, the Plan was "substantially overfunded," according to actuarial valuation reports of the Plan's assets and liabilities. The parties also agreed that Plan never failed to pay benefits owed to participants or beneficiaries, and that AEGON had no intention to terminate the Plan. In light of these facts, AEGON argued that under Harley, 284 F.3d 901, McCullough lacked standing to assert his claims against the Plan. The district court agreed that Harley controlled, and granted AEGON's motion for summary judgment. See McCullough v. Aegon USA, Inc., 521 F.Supp.2d 879, 894 (N.D.Iowa 2007). The parties subsequently filed a joint stipulation of dismissal, see Fed.R.Civ.P. 41(a)(1)(A)(ii), dismissing with prejudice McCullough's claims relating to the defined-contribution plan, and the district court entered final judgment. McCullough now appeals the grant of summary judgment, and we review de novo.

II.

ERISA provides that the Secretary of Labor and participants, beneficiaries, and fiduciaries of an employee benefit plan may bring an action "for appropriate relief under section 1109 of this title." 29 U.S.C. § 1132(a)(2). Section 1109 makes fiduciaries of a plan personally liable to the plan for any losses resulting from their breaches of "any of the responsibilities, obligations, or duties imposed upon fiduciaries" by ERISA. Id. § 1109(a). It also empowers the court to award "such other equitable or remedial relief as the court may deem appropriate, including removal of such fiduciary." As relevant here, ERISA imposes certain duties on plan fiduciaries in 29 U.S.C. § 1104, including the duty to act "solely in the interest of the participants and beneficiaries" of the plan, and to act "with the care, skill, prudence, and diligence" of "a prudent man acting in a like capacity and familiar with such matters." Id. § 1104(a)(1). Fiduciaries are also prohibited by 29 U.S.C. § 1106 from engaging in certain transactions with the plan or causing the plan to engage in certain transactions with a "party in interest." Id. § 1106(a)-(b).

In Harley, this court concluded that § 1132(a)(2) does not permit a participant in a defined-benefit plan to bring suit claiming liability under § 1109 for alleged breaches of fiduciary duties when the plan is overfunded. 284 F.3d at 905-07. The Harley plaintiffs alleged that fiduciaries of the defined-benefit plan in which they participated breached fiduciary duties by failing to investigate adequately and monitor properly a $20 million investment in a hedge fund, resulting in a complete loss of the investment. The plaintiffs also alleged that the plan fiduciaries breached their fiduciary duties by allowing the Plan to enter into a prohibited transaction under § 1106(b)(1) when it paid a $1.17 million fee to the hedge fund's investment advisor. See id. at 903-04, 908.

On appeal, this court affirmed the district court's grant of summary judgment for the defendants. With respect to the failure-to-investigate and failure-to-monitor claims, the court held that § 1132(a)(2) did not permit the plaintiffs to bring suit because the plan's surplus was sufficiently large that the "investment loss did not cause actual injury to plaintiffs' interests in the Plan." Id. at 907. The court explained that "a contrary construction [of § 1132(a)(2)] would raise serious Article III case or controversy concerns," because it would "permit[ ] participants or beneficiaries who have suffered no injury in fact" to bring an action "to enforce ERISA fiduciary duties on behalf of the Plan." Id. at 906. The court also reasoned that "the purposes underlying ERISA's imposition of strict fiduciary duties" — namely, "the protection of individual pension rights" — "are not furthered by granting plaintiffs standing," because the plaintiffs' individual pension rights are "fully protected," and "would if anything be adversely affected by subjecting the Plan and its fiduciaries to costly litigation." Id. at 907. Although the court did not identify the precise text of § 1132(a)(2) that it was construing, we presume the court determined that the suit would not be one "for appropriate relief" under the circumstances. On the prohibited-transaction claim, the court did not discuss whether § 1132(a)(2) permitted the suit, but dismissed the claim on the merits instead. See id. at 908-09.

McCullough, like the Harley plaintiffs, brought this action under § 1132(a)(2) and asserts that the defendants are liable to the Plan under § 1109 for breaching their fiduciary duties to the Plan under § 1104. As in Harley, the Plan is a defined-benefit plan, and McCullough does not dispute that the Plan was "substantially overfunded" at the time he brought suit. Unless there is a basis for this panel to disregard Harley, therefore, McCullough may not bring his § 1104 claim under § 1132(a)(2). See Drake v. Scott, 812 F.2d 395, 400 (8th Cir.1987) ("One panel of this Court is not at liberty to disregard a precedent handed down by another panel. Only the Court en banc can take such action.").

McCullough also asserts a claim that the defendants were liable to the Plan under § 1109 because they caused the Plan to engage in prohibited transactions in violation of § 1106. The court in Harley skipped to the merits of a claim involving § 1106 without addressing whether a participant may bring such a claim under § 1132(a)(2) against a "substantially overfunded" defined-benefit plan. 284 F.3d at 908-09. McCullough does not argue, however, that a claim alleging a violation of § 1106 should be treated differently than one alleging a violation of § 1104, and like the district court, 521 F.Supp.2d at 892, we see no logical basis for a distinction.

McCullough makes two principal arguments why Harley does not preclude his action. First, although acknowledging that Harley was decided on statutory grounds, he argues that the Supreme Court's intervening decision...