United States Court of Appeals

For the First Circuit

No. 07-1140

KERI EVANS, on behalf of herself and a class of all others

similarly situated; TIMOTHY WHIPPS, on behalf of himself and a

class of all others similarly situated,

Plaintiffs, Appellants, 

LAWRENCE BUNCH, individually and on behalf of all others

similarly situated and on behalf of the W.R. Grace & Co. Employee

Savings and Investment Plan and the Grace Stock Fund; JERRY L.

HOWARD, SR.; DAVID MUELLER, individually and on behalf of all

others similarly situated, and on behalf of the W.R. Grace & Co.

Employee Savings and Investment Plan and the Grace Stock Fund,

Plaintiffs,

v.

JOHN F. AKERS; RONALD C. CAMBRE; MARYE ANNE FOX; JOHN J. MURPHY;

PAUL J. NORRIS; THOMAS A. VANDERSLICE; H. FURLONG BALDWIN;

INVESTMENTS AND BENEFITS COMMITTEE; ADMINISTRATIVE COMMITTEE;

BRENDA GOTTLIEB; W. BRIAN MCGOWAN; MICHAEL PIERGROSSI; ROBERT M.

TAROLA; EILEEN WALSH; DAVID NAKASHIGE; ELYSE NAPOLI; MARTIN

HUNTER; REN LAPADARIO,

Defendants, Appellees,

FIDELITY MANAGEMENT TRUST COMPANY; STATE STREET BANK AND TRUST

COMPANY; UNKNOWN FIDUCIARY DEFENDANTS 1-100; STATE STREET GLOBAL

ADVISORS; W.R. GRACE & CO.; W.R. GRACE INVESTMENT AND BENEFITS

COMMITTEE; FRED E. FESTA,

Defendants.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. William G. Young, U.S. District Judge]
Of the Ninth Circuit, sitting by designation. *

Before

 Torruella, Circuit Judge, 

Wallace, Senior Circuit Judge, *

and Lipez, Circuit Judge.

Edward W. Coilko, with whom Joseph H. Meltzer, Katherine B.

Bornstein, Schiffrin Barroway Topaz & Kessler, LLP, David Pastor,

and Gilman and Pastor, LLP were on brief, for appellants. 

Carol Connor Cohen, with whom Nancy S. Heermans, Caroline

Turner English, Valerie N. Webb, and Arent Fox LLP were on brief,

for appellees.

Jonathan Hammer, with whom Elizabeth Hopkins, Counsel for

Appellate and Special Litigation, Jonathan L. Snare, Acting

Solicitor of Labor, Timothy D. Hauser, Associate Solicitor, and

Nathaniel I. Spiller, Counsel for Appellate and Special Litigation,

were on brief, for Secretary of Labor Elaine L. Chao, amicus

curiae. 

July 18, 2008
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LIPEZ, Circuit Judge. This case requires us to decide

whether former employees who have received lump-sum distributions

of the entire balance in their employer's defined contribution plan

may sue on behalf of the plan to recover for alleged fiduciary

breaches that diminished the value of their accounts. The question

turns on whether they are "participants" within the relevant

statutory definition in the Employee Retirement Income Security Act

of 1974 ("ERISA"), 29 U.S.C. §§ 1002(7), 1132. After careful

consideration, we hold that former employees who allege that

fiduciary breaches reduced their lump-sum distribution from a

defined contribution plan have standing to sue as "participants"

under the ERISA statute.

I.

Plaintiffs Keri Evans and Timothy Whipps are former

employees of W.R. Grace & Co. ("Grace"), a large manufacturing

company. While employed at Grace, the plaintiffs participated in

the W.R. Grace & Co. Savings and Investment Plan (the "Plan"), a

"defined contribution" plan under ERISA § 3(34), 29 U.S.C. §

1002(34). Evans and Whipps, who terminated their employment with

Grace on August 30, 2002 and April 27, 2001, respectively, received

lump-sum distributions of the balance of their Plan accounts

shortly after leaving the company. They do not intend to return to

employment at Grace.
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A defined contribution plan provides an individual

account for each participant into which the participant and the

employer make contributions. Upon retirement, the participant's

pension benefit under this type of plan is the balance of the

individual account; the amount of the benefit is directly dependent

on the performance of the investments made with the contributions.

See 29 U.S.C. § 1002(34). In this case, the Plan offered, as one

choice on the menu of investment options available to Plan

participants, the Grace Common Stock Fund (the "Fund"), a fund

invested primarily in Grace stock. Additionally, Grace

automatically invested all employer contributions in the Fund, and

employees were not permitted to move those contributions out of

Grace stock and into other investments until they reached age

fifty.

On January 1, 2001, with Grace stock becoming an

increasingly risky investment due to mounting financial pressures

from asbestos-related product-liability litigation, the Plan

stopped investing employer contributions in the Fund and began

allocating them instead in accordance with participants' investment

elections. At this time, the Plan also permitted, but did not

advise or require, participants to move past matching contributions

out of the Fund and into other Plan investments. Despite these

changes in the employer contribution policy, the Fund remained open

to participants as one of the investment options for their own
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contributions under the Plan. Grace and its subsidiaries filed for

bankruptcy protection on April 2, 2001.

On April 17, 2003, the Fund ceased accepting any new

contributions, but past contributions were not transferred to other

funds unless a participant expressly changed her investment

options. Then, on February 27, 2004, Plan fiduciaries announced

their conclusion that investment in Grace stock was "clearly

imprudent." The Fund's investment manager, State Street Bank &

Trust Company, subsequently embarked on a program to sell the Grace

stock and dissolve the Fund. The Fund ceased to exist on April 19,

2004.

The plaintiffs filed a putative class action suit (the

"Evans action") against various Plan fiduciaries, alleging that

they "breached their fiduciary duties by (1) continuing to offer

Grace common stock as a Plan investment option for participant

contributions; (2) utilizing Grace securities for employer

contributions to the Plan; and (3) maintaining the Plan's preexisting heavy investment in Grace securities when the stock was no

longer a prudent investment." Evans v. Akers, 466 F. Supp. 2d 371,

374 (D. Mass. 2006). The plaintiffs also alleged that other

fiduciaries had breached their duty to monitor their co-fiduciaries

and advise Plan participants. Id. They brought these claims on

behalf of the Plan to recover alleged losses to the Plan pursuant

to ERISA § 502(a)(2), which permits the Secretary of Labor,
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participants, beneficiaries, or fiduciaries to file suit to hold

fiduciaries personally liable for fiduciary breaches. 29 U.S.C. §§

1109, 1132(a)(2). The plaintiffs' proposed class included all

participants and beneficiaries of the Plan between July 1, 1999 and

April 19, 2004.

Another suit challenging the actions of Plan fiduciaries,

which originally had been filed in Kentucky, was later consolidated

with the Evans action. That suit, led by plaintiff Lawrence Bunch

(the "Bunch action"), alleged fiduciary breaches against a

different set of fiduciaries and asserted a diametrically opposed

theory of liability. It claimed that the Plan fiduciaries had

imprudently divested the Plan of its holdings in Grace common stock

despite the company's solid potential to emerge from bankruptcy

with substantial value for shareholders. Following the transfer of

the Bunch action to Massachusetts, the dockets for the two cases

were combined and the two sets of plaintiffs worked together on

various pretrial discovery and scheduling matters in the district

court. However, the actions otherwise proceeded separately,

maintaining separate complaints and seeking certification of

distinct classes.

On December 6, 2006, the district court denied the motion

by Evans and Whipps seeking class certification for their claims

and dismissed the Evans action, concluding that the plaintiffs

lacked standing and that, as a result, the court lacked subject
See Bridges v. American Elec. Power Co., Inc., 498 F.3d 442 1

(6th Cir. 2007); Graden v. Conexant Sys. Inc., 496 F.3d 291 (3d

Cir. 2007); Harzewski v. Guidant Corp., 489 F.3d 799 (7th Cir.

2007).

The parties dispute whether the Secretary's position is 2

entitled to deference. We do not have to resolve that issue for

the purpose of deciding this case. We simply treat the Secretary's

brief as another source of helpful analysis.

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matter jurisdiction over the suit. In the district court's view,

Evans and Whipps were asserting claims for compensatory damages,

rather than for additional Plan benefits, and thus had failed to

meet the statutory definition of "participants" entitled to bring

suit. With the aid of recent decisions by three of our sister

circuits – issued after the district court had dismissed the Evans 1

action – and helpful briefing by the Secretary of Labor as amicus

curiae, we conclude that Evans and Whipps are "participants" with 2

standing to sue and reverse the dismissal.

II.

As a threshold matter, the appellees argue that the Evans

action was consolidated with the Bunch action "for all purposes,"

and that, as a result, the district court's dismissal order is not

a final judgment over which we have jurisdiction pursuant to 28

U.S.C. § 1291. See Global Naps, Inc. v. Verizon New England, Inc.,

396 F.3d 16, 22 (1st Cir. 2005) ("[D]isposition of one case in a

consolidated action is a final and appealable judgment unless the

cases were consolidated 'for all purposes.'"). This argument has

no merit. We see no evidence in the record that the Evans and
Relatedly, we note that the Bunch action was certified as a 3

class action on March 1, 2007. The parties filed cross-motions for

summary judgment. Following a hearing, judgment was entered in

favor of the defendants in the Bunch action on January 30, 2008.

A separate appeal of that disposition is pending. See Bunch, et

al. v. W.R. Grace & Co., No. 08-1406, docketed on April 2, 2008.

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Bunch actions were consolidated "for all purposes." Moreover,

given that the plaintiffs in each action were pursuing conflicting

theories of fiduciary liability, we think it far more plausible

that the cases were consolidated for purposes of judicial

efficiency in pretrial matters and were not intended to be

consolidated for "all purposes." Indeed, judicial efficiency and

economy was the stated purpose of the defendants' request for

consolidation. Thus, the dismissal of the Evans action is a final

judgment from which the plaintiffs are entitled to appeal.3

III.

We review de novo the district court's dismissal for lack

of subject matter jurisdiction, accepting the plaintiffs' wellpleaded facts as true and making all reasonable inferences on the

plaintiffs' behalf. Dominion Energy Brayton Point, LLC v. Johnson,

443 F.3d 12, 16 (1st Cir. 2006). As in any case of statutory

construction, we begin our analysis with the plain language of the

statute. Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 438

(1999).

Evans and Whipps brought suit under § 502(a)(2) of ERISA,

29 U.S.C. § 1132(a)(2), which provides that "[a] civil action may
Suits brought pursuant to this provision are derivative in 4

nature; those who bring suit do so on behalf of the plan and the

plan takes legal title to any recovery. Mass. Mut. Life Ins. Co.

v. Russell, 473 U.S. 134, 141 (1985). The recovery then inures to

the benefit of the plan's participants and beneficiaries. Graden,

496 F.3d at 295.

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be brought by the Secretary [of Labor], or by a participant,

beneficiary or fiduciary for appropriate relief under section 1109

of this title." Section 1109, in turn, specifies the following

remedies for breaches of the fiduciaries' duties:

[(1)] mak[ing] good to such plan any losses to

the plan resulting from each such breach, . .

. [(2)] . . . restor[ing] to such plan any

profits of such fiduciary which have been made

through use of assets of the plan by the

fiduciary, and [(3)] . . . such other

equitable or remedial relief as the court may

deem appropriate, including removal of such

fiduciary.

29 U.S.C. § 1109(a); see also Graden v. Conexant Sys. Inc.,496 F.3d

291, 295 (3d Cir. 2007).

The appellants contend that they are entitled to bring

suit on behalf of the Plan because they are "participants" within 4

the statutory definition. Section 3(7) of ERISA, 29 U.S.C. §

1002(7), defines "participant" to include "any . . . former

employee . . . who is or may become eligible to receive a benefit

of any type from an employee benefit plan." The Supreme Court has

interpreted this provision to include a former employee who has "a

colorable claim that . . . she will prevail in a suit for

benefits." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117
-9-

(1989); see also Crawford v. Lamantia, 34 F.3d 28, 32 (1st Cir.

1994) (applying Firestone analysis to determine standing of former

employee to sue under ERISA). The appellees concede that this is

the applicable definition of "participant," but they contend that

the appellants have not stated a claim for "benefits." Rather,

they maintain that the relief sought is "damages" and that

plaintiffs thus fall outside the scope of the Firestone definition

of participant.

The Third, Sixth, and Seventh Circuits have each recently

rejected this very argument. See Bridges v. Am. Elec. Power Co.,

Inc., 498 F.3d 442, 445 (6th Cir. 2007) (adopting the Seventh

Circuit's analysis); Graden, 496 F.3d at 299 ("[W]e cannot endorse

the distinction . . . between benefits and damages."); Harzewski v.

Guidant Corp., 489 F.3d 799, 804, 807 (7th Cir. 2007) (rejecting

view of courts that have "strain[ed] to distinguish between

'benefits' and 'damages'"). We fully agree with their analyses and

rely on their thoughtful discussions in explaining our own

reasoning.

In this context, the term "benefits" denotes "the money

to which a person is entitled under an ERISA plan." Graden, 496

F.3d at 297 (quoting a dictionary definition of "benefit" as a

"payment or service provided for under an annuity, pension plan, or

insurance policy."). A defined contribution plan "promises the

participant the value of an individual account at retirement."
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LaRue v. DeWolff, Boberg & Assocs., Inc., 128 S. Ct. 1020, 1023 n.1

(2008). This value is a function of the employee's contributions,

plus vested employer matching contributions and investment gains,

minus investment losses and any allocable expenses. 29 U.S.C. §

1002(34); see also Graden, 496 F.3d at 297; Harzewski, 489 F.3d at

804-05. Under ERISA, a participant is also promised that the funds

in her individual account will be managed prudently by the plan

fiduciary. 29 U.S.C. § 1104; see also Graden, 496 F.3d at 297.

Consequently, the full "benefit" to which the participant is

entitled by a defined contribution plan is "the value of [her]

account unencumbered by any fiduciary impropriety." Graden, 496

F.3d at 297. Put differently, the "benefit" in a defined

contribution plan is equal to "whatever is in the retirement

account when the employee retires or whatever would have been there

had the plan honored the employee's entitlement, which includes an

entitlement to prudent management." Harzewski, 489 F.3d at 804-05

(emphasis in original).

Plaintiffs' claim fits within this understanding of the

statutory language. They were participants in the Plan during the

class period and portions of their individual accounts were

invested in Grace stock. They allege that fiduciary breaches by

the defendants diminished the value of their accounts, such that

they received less money on the day they cashed out of the Plan

than they would have received in the absence of any fiduciary
Under a defined benefit plan, participants are typically 5

promised a fixed level of retirement income, computed on the basis

of a formula contained in the plan documents. See 29 U.S.C. §

1002(35). The formula generally accounts for an employee's years of

service and compensation level at retirement. Graden, 496 F.3d at

297 n.10. In contrast with a defined contribution plan, where the

amount of benefits is directly related to the investment income

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breach. See Graden, 496 F.3d at 300 ("If the plaintiff colorably

claims that under the plan and ERISA he was entitled to more than

he received on the day he cashed out, then he presses a claim for

vested benefits and must be accorded participant standing."). In

other words, plaintiffs seek only the amount that should have been

in their accounts but for the defendants' "fiduciary impropriety."

Thus, basic statutory construction supports the plaintiffs'

argument that their "benefits" are at stake in this suit.

Moreover, drawing all inferences in the plaintiffs' favor, as is

appropriate at this stage in the proceedings, the claim meets the

Firestone requirement that it be "colorable."

Our conclusion that the appellants have standing to sue

as "participants" under ERISA § 502(a)(2) is also supported by our

previous cases considering ERISA standing. In Vartanian v.

Monsanto Co., 14 F.3d 697 (1st Cir. 1994), we observed that

"Congress intended the federal courts to construe [ERISA's]

jurisdictional requirements broadly in order to facilitate

enforcement of its remedial provisions." Id. at 702. That case

involved a former employee who was a participant in a defined

benefit plan. Before retiring, the employee asked his employer 5
earned in an individual account, the investment performance of the

portfolio held by a defined benefit plan has no effect on the level

of benefits to which a participant is entitled, provided that the

plan remains solvent. See LaRue,128 S. Ct. at 1025 ("Misconduct by

the administrators of a defined benefit plan will not affect an

individual's entitlement to a defined benefit unless it creates or

enhances the risk of default by the entire plan.").

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whether the plan would be altered to provide more generous benefits

in the near future. He explained that he would delay his

retirement if the plan was going to be changed. The employer

assured him that no changes were likely. The employee retired, and

the plan was changed less than two months later. We held the

administrators of the plan had a fiduciary duty not to mislead

Vartanian and that, as a result, his claims fell "squarely within

the 'zone of interests' ERISA was designed to protect." Id. at

702. We reasoned that "where the employee shows that in the

absence of the employer's breach of fiduciary duty he would have

been entitled to greater benefits than those which he received,

then his receipt of payment cannot be used to deprive him of

'participant' status and hence, standing to sue under ERISA." Id.

at 703.

Seven months after our decision in Vartanian we

considered a claim brought by a former employee who had

participated in a defined contribution plan. Crawford, 34 F.3d at

30. In Crawford, the plaintiff sued plan fiduciaries for alleged

misconduct in a complicated loan transaction that was part of a

strategy to take the employer private. We concluded that even if
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the shares purchased by the plan with loaned funds were overvalued,

as the plaintiff alleged, the result of proper valuation would have

been a smaller loan, not a distribution of excess cash or

additional shares to the accounts of participants. Accordingly, we

analyzed the plaintiff's claim under Firestone and concluded that

he had "failed to show that defendants' alleged breach of fiduciary

duty had a direct and inevitable effect on his benefits." Id. at

33 (emphasis in original). Thus, we concluded that the plaintiff

did not have standing.

In reviewing these precedents, the district court agreed

with the defendants' contention that Crawford meant that Vartanian

should be read narrowly because "it create[d] a unique exception to

the Firestone definition of participant exclusively in cases where

the employee would still be part of the plan (and thus entitled to

higher benefit levels) but for the employer's malfeasance." Evans,

466 F. Supp. 2d at 376. The district court then determined that

"there is no evidence suggesting that the Plaintiffs' cessation of

employment was causally connected to the defendant's alleged

misconduct" and that, as a result, the plaintiffs did not fit

within the "Firestone exception" created by Vartanian. Id. With

no "exception" to Firestone available, the district court proceeded

to analyze whether the plaintiffs could, under Firestone, "assert

a colorable claim to vested benefits." Id. The district court

concluded that the plaintiffs had not done so because they had
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asserted "a claim not for benefits but for damages to the Plan."

Id. Accordingly, the district court dismissed the suit for lack of

standing.

The defendants assert numerous reasons for embracing this

reasoning of the district court. We find none of them persuasive.

First, they argue that we should draw a bright line between suits

brought under ERISA § 502(a)(1)(B), which permits a participant to

bring suit "to recover benefits due to him under the terms of his

plan," 29 U.S.C. § 1132(a)(1)(B), and those brought under

§ 502(a)(2), the provision relied upon here, which enables

participants to sue on behalf of the plan to recover for fiduciary

breaches. Appellees contend that the former provision authorizes

a "suit for benefits" while the latter is an "action for damages."

This dichotomy is untenable. The chief difference between an

action brought under § 502(a)(1)(B) and § 502(a)(2) is the proper

defendant, not the proper plaintiff. Graden, 496 F.3d at 301.

Whereas a suit "to recover benefits" under § 502(a)(1)(B) is

brought against the plan itself (or the plan administrators in

their official capacities), a suit brought under § 502(a)(2) seeks

to hold the plan's fiduciaries liable in their personal capacities

for breaches of their duty to the plan. Id.

In the context of a defined contribution plan, where all

of the plan's money is allocable to plan participants' individual
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accounts, a plaintiff has good reason to bring his claims for

additional benefits as § 502(a)(2) claims:

Using a § [502](a)(1)(B) suit to force the

plan to use money already allocated to others'

accounts to make good on [the plaintiff's]

loss would present a host of difficulties with

which few sensible plaintiffs would want to

contend. Indeed, it may be that ERISA's

fiduciary obligations prevent plans from

paying judgments out of funds allocable to

other participants, in which case the plan,

though liable, would be judgment proof. Thus,

for most plaintiffs the sensible route is to

use § [502](a)(2) to get the money in the

first instance from a solvent party liable to

make good on the loss, not from the plan

itself.

Graden, 496 F.3d at 301. Bringing the suit under § 502(a)(2) does

not "change the underlying nature" of the plaintiffs' claim as one

for benefits. It simply provides an avenue for restoring those

benefits to the plan coffers so that they may then be allocated to

those who were harmed by the fiduciary breach. Id.; see also

LaRue, 128 S. Ct. at 1026 (holding that § 502(a)(2) "authorize[s]

recovery for fiduciary breaches that impair the value of plan

assets in a participant's individual account").

We thus see no merit in appellee's strained distinction

between suits for "benefits" and those for "money damages." But

see Sommers Drug Stores Co. Employee Profit Sharing Trust v.

Corrigan, 883 F.2d 345 (5th Cir. 1989) (drawing a distinction

between "benefits" and "damages" and classifying former employees'

claims as falling "between these poles"). Indeed, any claim for
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breach of fiduciary duty is to some extent a claim for damages

arising from the breach. Great-West Life & Annuity Ins. Co. v.

Knudson, 534 U.S. 204, 210 (2002) ("'Almost invariably . . . suits

seeking . . . to compel the defendant to pay a sum of money to the

plaintiff are suits for 'money damages,' as that phrase has

traditionally been applied, since they seek no more than

compensation for loss resulting from the defendant's breach of

legal duty.'" (quoting Bowen v. Massachusetts, 487 U.S. 879,

918-919 (1988) (Scalia, J., dissenting))). Whether or not they

always overlap, the concepts of "benefits" and "damages" are not

mutually exclusive. Money damages may -- and here clearly would --

represent additional benefits to which participants are properly

entitled under the plan.

The appropriate distinction is not between "benefits" and

"damages," but rather between relief to which a participant is

entitled under ERISA and relief which is not authorized by that

Act. Harzewski, 489 F.3d at 804. As the Seventh Circuit recently

explained, the Supreme Court's refusal to allow suits for "damages"

does not mean that "monetary relief is excluded, but [that] it must

be [monetary] relief to which the plan documents themselves entitle

the participant." Id. Thus, ERISA does not authorize suits for

what the Seventh Circuit calls "extracontractual damages" – i.e.,

damages separate from the benefits to which the plan documents

entitle the participants – such as emotional distress resulting
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from a plan's failure to honor it obligations, Reinking v.

Philadelphia Am. Life Ins. Co., 910 F.2d 1210, 1219-20 (4th Cir.

1990), damages resulting from a plan's failure to advise a

participant of an option that would enable him to avoid taxes,

Fraser v. Lintas: Campbell-Ewald, 56 F.3d 722, 724-26 (6th Cir.

1995), or consequential damages arising from a delay in processing

a benefit claim, Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134,

148 (1985). Evans and Whipps are not seeking "extracontractual

damages"; instead, their claim for fiduciary breach, whether

characterized as a suit for money damages or for additional

benefits, is expressly contemplated and explicitly authorized by

ERISA § 409, which requires fiduciaries who breach their duties "to

make good to such plan the losses to the plan resulting from such

breach." See 29 U.S.C. §§ 1109(a), 1132(a)(2).

Second, appellees argue that the damages sought by the

plaintiffs are too "speculative" and "unascertainable" to be

characterized as a claim for "benefits." However, "there is

nothing in ERISA to suggest that a benefit must be a liquidated

amount in order to be recoverable." Harzewski, 489 F.3d at 807.

Losses to a plan from breaches of the duty of prudence may be

ascertained, with the help of expert analysis, by comparing the

performance of the imprudent investments with the performance of a

prudently invested portfolio. Graden, 496 F.3d at 301; see also

Cal. Ironworkers Field Pension Trust v. Loomis Sayles & Co., 259
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F.3d 1036, 1046 (9th Cir. 2001). At this early stage in the

proceedings, the plaintiffs need not be able to show the precise

amount of additional benefits to which they are entitled. Indeed,

they need not even state a claim on which they are likely to

succeed; they need only state a colorable claim. See Harzewski,

489 F.3d at 807. Evans and Whipps have done so here.

Third, appellees argue that the requirements for

constitutional standing are not met here. They claim that the harm

suffered by Evans and Whipps is unlikely to be redressed because

any relief ordered would be awarded to the Plan rather than to the

plaintiffs individually. Therefore, the Plan fiduciaries could

decide to allocate the recovery only to the accounts of current

employees or to pay current and future Plan expenses, leaving Evans

and Whipps without a remedy.

We doubt that such a decision would be consistent with

the fiduciaries' duty to act in the interest of participants.

Defined contribution plans pursuant to ERISA have their roots in

the common law of trusts. Graden, 496 F.3d at 295-96; see also

Firestone, 489 U.S. at 110 ("ERISA abounds with the language and

terminology of trust law."). These plans are collections of

individual accounts, managed for the benefit of the participants

and beneficiaries. Unlike shareholder derivative suits, where

recovery for a fiduciary breach goes into the coffers of the

corporation and is not generally paid out to the shareholders,
Appellees claim that "pronouncements from the Department of 6

Labor," in the form of a Field Assistance Bulletin ("FAB") issued

by the Secretary of Labor in 2006, support their contention that

fiduciaries could allocate recovered funds to current participants

to the exclusion of former participants. See U.S. Dep't of Labor,

Field Assistance Bulletin No. 2006-01 (Apr. 19, 2006), available at

https://www.dol.gov/ebsa/pdf/fab_2006-1.pdf. We disagree. The

FAB, which concerned only the allocation by plans of proceeds from

an SEC settlement with mutual funds involved in certain market

timing practices, states that the plan fiduciary should allocate

proceeds, "where possible, to the affected participants in relation

to the impact the market timing and late trading activities may

have had on the particular account." Id. at 8. The FAB

acknowledges only that this may not be possible, or may be

excessively costly, where, for example, "records are insufficient

to reasonably determine the extent to which participants invested

in mutual funds during the relevant period." Id. There is no

reason to think that the records in this case would be insufficient

to afford a remedy to Evans and Whipps for their alleged losses.

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recovery made on behalf of a defined contribution plan must be

allocated to the individual accounts injured by the breach. See

Graden, 496 F.3d at 296 n.6. Although there may be certain

circumstances where the transaction costs of allocating additional

benefits to individual plan accounts or to those who have cashed

out of the plan would exceed the amount of the recovery itself, we

have no reason to think that such circumstances would be present in

this case. Instead, if the plaintiffs are ultimately successful in

this suit, the fiduciaries should, in accord with their statutory

duty of care, strive to allocate any recovery to the affected

participants in relation to the impact the fiduciary breaches had

on their particular accounts. Thus, the plaintiffs' allegation of 6

fiduciary mismanagement, which at this stage in the proceedings we

assume to be true, identifies a concrete injury that is redressable
-20-

by a court and falls within the scope of Article III standing. See

Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992); see

also Graden, 496 F.3d at 295 (describing the distinction between

constitutional, prudential, and statutory standing, and

characterizing a similar ERISA claim as raising no constitutional

standing issue); Harzewski, 489 F.3d at 803 ("Obviously the [former

employee plaintiffs] have standing to sue in the sense of being

entitled to ask for an exercise of the judicial power of the United

States as that term in Article III of the Constitution has been

interpreted, because if they win they will obtain a tangible

benefit.").

Finally, appellees raise the concern that, by adopting a

broad view of the term "participants" for standing purposes, we

would greatly increase the costs of plan administration by

requiring that costly disclosures, which must routinely be

distributed to each "participant covered under the plan," see 29

U.S.C. § 1021(a), be sent to all former employees who have received

lump-sum distributions of their benefits under the plan. This

concern is overstated. Pursuant to 29 C.F.R. § 2510.3-

3(d)(2)(ii)(B), a plan need not send disclosures to individuals who

have "received from the plan a lump-sum distribution or a series of

distributions of cash or other property which represents the

balance of his or her credit under the plan." Plan administrators

could still rely on that regulation because, as the Third Circuit
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explained, "we cannot imagine holding a plan fiduciary liable for

failing to provide information to someone who, as far as the

fiduciary knows, is cashed out." Graden, 496 F.3d at 302.

Although informational obligations may reattach once the

administrator is on notice that a former employee is asserting a

colorable claim that the lump-sum she received did not, in fact,

represent the full balance of her credit under the plan, id. at

302-03, the marginal costs associated with this additional

reporting cannot alter our reading of the plain language of the

statute itself and of the Supreme Court's definition of

"participant" in Firestone.

We perceive far greater risks to the ERISA framework that

would flow from denying these plaintiffs standing to sue for breach

of fiduciary duty. Such a result would draw arbitrary distinctions

between current and former employees: those individuals who had

continued their employment with the company and their investment in

the plan could recover for fiduciary breaches while those who had,

for reasons unconnected with the breach, cashed out their benefits

before the breach was discovered could not. Further, as we noted

in Vartanian, such a restricted view of standing "would enable an

employer to defeat the employee's right to sue for breach of

fiduciary duty by keeping his breach a well guarded secret until

the employee receives his benefits or[] by distributing a lump sum

and terminating benefits before the employee can file suit." 14
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F.3d at 702. Congress, in crafting the protections in ERISA,

certainly did not intend such arbitrary and unjust results. Id.

IV.

In sum, Evans and Whipps have stated a colorable claim

that their benefit payments were deficient on the day they were

paid due to fiduciary breaches by the defendants. As a result,

they are "participants" with standing to maintain their suit under

ERISA § 502(a)(2). We therefore vacate the district court's order

dismissing the Evans action and remand for further proceedings

consistent with this decision.

So ordered.