fiduciary breach

LaRue v. DeWolff, Boberg & Assoc.

Issues

1. May an individual bring a claim on behalf of the plan under ERISA section 502(a)(2) for failure to follow the individual's investment instructions, where the only recovery would be to the individual's personal account?

2. When ERISA section 502(a)(3) limits a participant to suing for equitable relief, does that include reimbursement by a fiduciary for lost profits to a 401(k) retirement plan?

 

James LaRue, an employee of the management consulting firm DeWolff, Bobert & Associates, sued his employer for improper management of his 401(k) pension plan. Under DeWolff's pension plan, LaRue could choose among a variety of investment options for his individual account. In his suit, LaRue alleged that DeWolff failed to follow his investment instructions. LaRue sued under sections 502(a)(2) and 502(a)(3) of the Employee Retirement Income Security Act (ERISA). The Fourth Circuit held that neither section authorized LaRue's claim because it was an individual claim and because LaRue sought compensatory damages. LaRue argues that his claim benefits the plan as a whole rather than himself individually, and that he seeks equitable relief rather than compensatory damages. The outcome of this case will determine whether an individual can use these provisions to sue an employer for improper management of a pension fund.

Questions as Framed for the Court by the Parties

1. Section 502(a)(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. 1132(a)(2), provides that a "civil action may be brought ... by a participant ... for appropriate relief under section 1109 of this title." 29 U.S.C. 1109 states that "a fiduciary with respect to a plan who breaches any ... duties imposed upon fiduciaries ... shall be personally liable to make good to such plan any losses to the plan resulting from each such breach."

The First Question Presented is:

Does ? 502(a)(2) of ERISA permit a participant to bring an action to recover losses attributable to his account in a "defined contribution plan" that were caused by a fiduciary breach? Hereinafter, this will be referred to as the "502(a)(2) Question."

2. Section 502(a)(3) of ERISA, 29 U.S.C. 1132(a)(3), provides that a "civil action may be brought ... by a participant ... to obtain other appropriate equitable relief ... to redress ... violations" of the statute.

The Second Question Presented is:

Does ? 502(a)(3) permit a participant to bring an action for monetary "make-whole" relief to compensate for losses directly caused by fiduciary breach (known in pre-merger courts of equity as "surcharge")? Hereinafter, this will be referred to as the "502(a)(3) Question."

James LaRue, an employee of the management consulting firm DeWolff, Boberg & Associates ("DeWolff"), brought suit against his employer and his employer's 401(k) plan for breach of fiduciary duty with respect to administration of the plan, in which LaRue was a participant. See LaRue v. DeWolff, Boberg & Assoc., Inc.

Acknowledgments

The authors would like to thank Professors Davidson Douglas and Emily Sherwin for their insights into LaRue v. DeWolff.

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Thole v. U.S. Bank, N.A.

Issues

Does a defined-benefit pension plan participant have standing to seek injunctive relief or restoration of plan losses without demonstrating any personal financial loss?

In this case, the Supreme Court will decide whether ERISA plan participants have standing to sue for breaches of fiduciary duty where the underlying employee benefit plan is overfunded. Thole and Smith argue that they have standing under 29 U.S.C. § 1132(a)(2)–(3) and the common law of trusts because neither conditions standing on a showing of individual financial loss. U.S. Bank counters that Thole and Smith have not suffered an injury sufficient to support standing because their retirement benefits were never actually at risk and they have no interest in a plan’s overfunded surplus. The outcome of this case will determine the circumstances in which certain plan participants may enforce ERISA violations.

Questions as Framed for the Court by the Parties

(1) Whether an ERISA plan participant or beneficiary may seek injunctive relief against fiduciary misconduct under 29 U.S.C. § 1132(a)(3) without demonstrating individual financial loss or the imminent risk thereof; (2) whether an ERISA plan participant or beneficiary may seek restoration of plan losses caused by fiduciary breach under 29 U.S.C. § 1132(a)(2) without demonstrating individual financial loss or the imminent risk thereof; and (3) whether petitioners have demonstrated Article III standing.

James Thole and Sherry Smith are retirees of U.S. Bank, N.A. (“U.S. Bank”) and participants in its defined benefit pension plan (the “Plan”). Thole v. U.S.

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