FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

JERRY VAUGHN; THERESA TRAVERS, 

Plaintiffs-Appellants, No. 05-17100

v. D.C. No.

BAY ENVIRONMENTAL MANAGEMENT, CV-03-05725-MJJ

INC.; PINA J. BARBIERI; CAESAR 

ORDER AND NUTI; DENNIS VARNI; FSC AMENDED SECURITIES CORPORATION; JERROLD OPINION N. WEINBERG,

Defendants-Appellees. 

Appeal from the United States District Court

for the Northern District of California

Martin J. Jenkins, District Judge, Presiding

Argued and Submitted

May 12, 2008—San Francisco, California

Filed September 19, 2008

Amended June 4, 2009

Before: Betty B. Fletcher and Pamela Ann Rymer,

Circuit Judges, and Kevin Thomas Duffy,*

Senior District Judge.

Opinion by Judge B. Fletcher

*The Honorable Kevin Thomas Duffy, Senior United States District

Judge for the Southern District of New York, sitting by designation. 

6691
COUNSEL

Teresa S. Renaker, Lewis Feinberg Lee Renaker & Jackson,

P.C., Oakland, California, for the plaintiffs-appellants. 

VAUGHN v. BAY ENVIRONMENTAL MANAGEMENT 6695
Nicole A. Diller (argued), D. Ward Kallstrom, Andrew C.

Sullivan, Morgan Lewis & Bockius, LLP, San Francisco, California, for defendants-appellees Bay Environmental Inc.,

Caesar Nuti, and Dennis Varni. 

Bernard Gehlhar (argued), James D. Boughey, Reina G.

Minoya, Wilson Elser Moskowitz Edelman & Dicker, LLP,

San Francisco, California, for defendants-appellees FSC

Securities Corp. and Jerrold N. Weinberg. 

Elizabeth Hopkins, U.S. Dep’t of Labor, Washington, D.C., as

amicus curiae supporting plaintiffs-appellants.

ORDER

The opinion filed on September 19, 2008 and appearing at

544 F.3d 1008 (9th Cir. 2008), is amended as follows. At 544

F.3d 1010, delete the paragraph in Section II and substitute

the following paragraph in its stead: 

Although the district court dismissed the case for

lack of subject matter jurisdiction, a dismissal for

lack of statutory standing is properly viewed as a

dismissal for failure to state a claim rather than a dismissal for lack of subject matter jurisdiction. See

Lanfear v. Home Depot, Inc., 536 F.3d 1217, 1221-

22 (11th Cir. 2008) (clarifying that statutory standing

under ERISA is a question of merits rather than subject matter jurisdiction); Harzewski v. Guidant

Corp., 489 F.3d 799, 803-04 (7th Cir. 2007) (same).

Because we review dismissals under both Rule

12(b)(1) and Rule 12(b)(6) de novo, see Rhoades v.

Avon Prods., Inc., 504 F.3d 1151, 1156 (9th Cir.

2007), the district court’s error does not affect the

result in this case. We accept all facts alleged in the

First Amended Complaint as true. See id.; see also

6696 VAUGHN v. BAY ENVIRONMENTAL MANAGEMENT
LaRue v. DeWolff, Boberg & Assocs., Inc., 553 U.S.

___, 128 S. Ct. 1020, 1024 (2008) (“As the case

comes to us we must assume that respondents

breached fiduciary obligations defined in [ERISA]

§ 409(a), and that those breaches had an adverse

impact on the value of the plan assets in petitioner’s

individual account.”). 

The mandate shall issue forthwith.

OPINION

B. FLETCHER, Circuit Judge: 

This case requires us to consider whether a former

employee who has received a full distribution of his or her

account balance under a defined contribution pension plan has

standing as a plan participant to file suit under the Employee

Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.

§ 1001 et seq., to recover losses occasioned by a breach of

fiduciary duty that allegedly reduced the amount of his or her

benefits. We join the First, Third, Fourth, Sixth, Seventh, and

Eleventh Circuits, and hold that these former employees have

standing to bring their claims.1 Accordingly, we vacate the

district court order dismissing the action for lack of subject

matter jurisdiction, and remand for further proceedings.

I

Jerry Vaughn and Theresa Travers (“Vaughn”) are former

1

See Lanfear v. Home Depot, Inc., ___ F.3d ___, No. 07-14362, 2008

WL 2916390 (11th Cir. July 31, 2008); Evans v. Akers, 534 F.3d 65 (1st

Cir. 2008); In re Mutual Funds Inv. Litig., 529 F.3d 207 (4th Cir. 2008);

Bridges v. Am. Elec. Power Co., 498 F.3d 442 (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). 

VAUGHN v. BAY ENVIRONMENTAL MANAGEMENT 6697
employees of Bay Environmental Management Inc. (“Bay

Environmental”) who participated in two types of ERISAgoverned retirement plans offered by the company (“Plans”).

The first, referred to as the “Pension Plan,” was funded solely

by the discretionary contributions of Bay Environmental. The

second, known as the “Retirement Plan,” consisted of both a

profit-sharing component and a 401(k) component. Both

Plans were individual account plans, also known as defined

contribution plans.2 All Plan investments were chosen by the

Plan trustees and investment advisors except for the 401(k)

component of the Retirement Plan, which was directed by the

Plan participants. 

In 2000 or early 2001, Republic Services, Inc. purchased

Richmond Sanitary Services, Inc. (“RSS”), of which Bay

Environmental was an affiliate. At around this same time, the

Trustees of the Plans voted to terminate the Plans. On or

about April 13, 2001, Bay Environmental notified its employees that the Plans would be terminated effective April 30,

2001. In August 2001, the Trustees transferred all nonparticipant-directed plan assets to money market funds. Subsequently, in the year 2002, Plan participants received a lumpsum distribution of the value of their individual accounts. 

On December 18, 2003, Vaughn filed suit on behalf of himself and all similarly-situated individuals.3

 He named Bay

Environmental and the Plans’ Trustees as defendants, alleging

that Defendants breached their fiduciary duties by investing

2Defined contribution plans “provide[ ] for an individual account for

each participant and for benefits based solely upon the amount contributed

to the participant’s account, and any income, expenses, gains and losses

. . . which may be allocated to such participant’s account.” ERISA § 3(34),

29 U.S.C. § 1002(34). Because the benefits received under a defined contribution plan are determined in part by the rate of return on investments

made by the plan, a plan’s chosen investments can have a substantial

impact on the account balance. 

3The district court never considered Vaughn’s motion for class certification because it held that he did not have standing to bring the suit. 

6698 VAUGHN v. BAY ENVIRONMENTAL MANAGEMENT
the Plans’ assets imprudently. Specifically, Vaughn alleged

that Defendants knew or should have known that the purchase

of Bay Environmental by RSS would likely result in the termination of the Plans and that Defendants should have transferred the non-participant-directed plan assets to money

market funds sooner in light of the Plans’ shortened investment horizon. Vaughn sought relief in the form of a declaration that Defendants had breached their fiduciary duties, a

preliminary injunction prohibiting distribution of the individual Defendants’ Plan accounts, and the establishment of a successor trust for benefits owed to the Plans, benefits to be paid

by the Defendants. 

On March 14, 2005, after the parties failed to mediate the

dispute, Vaughn filed his First Amended Complaint, adding

the Plans’ investment advisors, FSC Corporation and Jerrold

N. Weinberg (“FSC Defendants”), as defendants.4 Vaughn

also added a second claim for relief alleging that Bay Environmental further breached its fiduciary duties by failing to

conduct an adequate investigation before selecting the investment advisors or to monitor the performance of the Plans’

investments and investment advisors. 

On July 22, 2005, the FSC Defendants filed a motion to

dismiss for lack of subject matter jurisdiction arguing that

Vaughn lacked statutory standing under ERISA. Specifically,

they claimed that Vaughn failed to allege sufficient facts to

bring him within ERISA’s definition of “participant.” See 29

U.S.C. § 1002(7) (defining “participant” as “any employee or

former employee of an employer . . . who is or may become

eligible to receive a benefit of any type from an employee

benefit plan which covers employees of such employer . . . or

whose beneficiaries may become eligible to receive any such

benefit”). 

4Subsequent references to “Defendants” include both the original defendants and the FSC Defendants. 

VAUGHN v. BAY ENVIRONMENTAL MANAGEMENT 6699
The district court granted the FSC Defendants’ motion to

dismiss on September 26, 2005. The court concluded that

Vaughn was not a participant because he had received a lumpsum distribution of his individual account balance and was

therefore not entitled to additional benefits under the plan.

Vaughn timely appealed.5

II

Although the district court dismissed the case for lack of

subject matter jurisdiction, a dismissal for lack of statutory

standing is properly viewed as a dismissal for failure to state

a claim rather than a dismissal for lack of subject matter jurisdiction. See Lanfear v. Home Depot, Inc., 536 F.3d 1217,

1221-22 (11th Cir. 2008) (clarifying that statutory standing

under ERISA is a question of merits rather than subject matter

jurisdiction); Harzewski v. Guidant Corp., 489 F.3d 799, 803-

04 (7th Cir. 2007) (same). Because we review dismissals

under both Rule 12(b)(1) and Rule 12(b)(6) de novo, see

Rhoades v. Avon Prods., Inc., 504 F.3d 1151, 1156 (9th Cir.

2007), the district court’s error does not affect the result in

this case. We accept all facts alleged in the First Amended

Complaint as true. See id.; see also LaRue v. DeWolff, Boberg

& Assocs., Inc., 553 U.S. ___, 128 S. Ct. 1020, 1024 (2008)

(“As the case comes to us we must assume that respondents

breached fiduciary obligations defined in [ERISA] § 409(a),

and that those breaches had an adverse impact on the value of

the plan assets in petitioner’s individual account.”). 

III

[1] ERISA § 404(a) imposes a “[p]rudent man standard of

care” on plan fiduciaries. 29 U.S.C. § 1104(a). This standard

requires that the fiduciary discharge her duties “with the care,

skill, prudence, and diligence under the circumstances then

5On appeal, the Secretary of Labor appeared as amicus curiae in support

of Vaughn. 

6700 VAUGHN v. BAY ENVIRONMENTAL MANAGEMENT
prevailing [of] a prudent man acting in like capacity . . . .” 29

U.S.C. § 1104(a)(1)(B). It also requires the fiduciary to “diversify[ ] the investments of the plan so as to minimize the

risk of large losses, unless under the circumstances it is

clearly prudent not to do so.” 29 U.S.C. § 1104(a)(1)(C). A

plan fiduciary who breaches her fiduciary duties “shall be personally liable to make good to such plan any losses to the plan

resulting from each such breach.” ERISA § 409(a), 29 U.S.C.

§ 1109(a). 

[2] ERISA § 502 provides for a civil action by a plan participant “for appropriate relief” for a breach of fiduciary duty.

29 U.S.C. § 1132(a)(2). Under the statute, “ ‘participant’

means any employee or former employee of an employer . . .

who is or may become eligible to receive a benefit of any type

from an employee benefit plan which covers employees of

such employer . . . .” 29 U.S.C. § 1002(7). The Supreme

Court has interpreted this section as conferring standing on

former employees who “have a reasonable expectation of

returning to covered employment or . . . a colorable claim to

vested benefits.” Firestone Tire & Rubber Co. v. Bruch, 489

U.S. 101, 117 (1989) (original alterations and quotation omitted). In contrast, former employees do not have standing if a

successful suit would result in a damage award that was not

for benefits due under the plan. Kuntz v. Reese, 785 F.2d

1410, 1411 (9th Cir. 1986) (per curiam) (“Kuntz II”); see also

Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 148 (1985)

(holding that ERISA § 409(a) does “not provide . . . a cause

of action for extra-contractual damages caused by improper or

untimely processing of benefit claims”). 

[3] In concluding that Vaughn lacked standing, the district

court first rejected his argument that Kuntz did not apply

because Bay Environmental’s Plans were defined contribution

plans, whereas the plan in Kuntz was a defined benefit plan.

In so doing, the district court noted that the Ninth Circuit has

not distinguished between the two types of plans and that two

district courts have applied Kuntz to defined contribution

VAUGHN v. BAY ENVIRONMENTAL MANAGEMENT 6701
plans. The court also noted that Vaughn’s claim was not for

an ascertainable amount of improperly calculated benefits, but

rather alleged imprecise financial losses due to imprudent

investment, and concluded that neither of the recognized

exceptions to Kuntz applied because Vaughn did not allege

self-dealing and the case did not involve an annuity. The court

thus concluded that under Kuntz, former employees who have

received a lump sum distribution of their individual accounts

are seeking damages for breach of fiduciary duty, not vested

benefits, and do not have standing as participants under

ERISA. 

[4] Contrary to the district court’s order, Kuntz does not

control this case. The Kuntz plaintiffs sued their former

employer for breach of fiduciary duty alleging that the

employer had misrepresented the benefits that would be paid

under a defined benefit plan. Kuntz v. Reese, 760 F.2d 926,

929 (9th Cir. 1985) (“Kuntz I”), vacated by Kuntz II, 785 F.2d

1410. On rehearing, we held that the Kuntz plaintiffs were not

“participants” within the meaning of ERISA § 3(7), 29 U.S.C.

§ 1002(7), because “if successful, [their] claim would result in

a damage award, not an increase of vested benefits.” 785 F.2d

at 1411. Importantly, the Kuntz plaintiffs conceded that they

had received all of the benefits due to them under the plan.

They alleged only that they would not have participated in the

plan but-for the defendant’s misrepresentations about the

amount of benefits they would receive. Kuntz I, 760 F.2d at

929. 

[5] In contrast, Vaughn alleges that he has not received all

of the benefits due to him under the Plans. Although he

received a lump-sum distribution of the value of his individual accounts, he claims that he did not receive a “full” distribution because his accounts contained less than they would

have if the fiduciaries had not breached their duty of prudent

investment. Because Vaughn alleges that he did not receive

everything that was due to him under the Plan, he has stand6702 VAUGHN v. BAY ENVIRONMENTAL MANAGEMENT
ing, even under Kuntz.

6

See Kuntz II, 785 F.2d at 1411 (quoting Joseph v. New Orleans Elec. Pension & Ret. Plan, 754

F.2d 628, 630 (5th Cir. 1985) (holding that “retirees who have

accepted the payment of everything due them in a lump sum”

do not have standing (emphasis added))); see also LaRue, 128

S. Ct. at 1024 (distinguishing LaRue’s claim from that of the

plaintiff in Russell because the latter “received all of the benefits to which she was contractually entitled”); Harzewski v.

Guidant Corp., 489 F.3d 799, 806 (7th Cir. 2007) (noting that

the Kuntz plaintiffs “were not suing to enforce any entitlement

created by the plan” and that the result might have been different if the Kuntz plaintiffs had argued that the representations were the plan). 

[6] The district court also erred by denying Vaughn standing on the basis that his claim is not for an ascertainable

amount of improperly computed benefits. The requirement

that a claim be to correct a miscomputation of benefits comes

from Kuntz, a defined benefit plan case. See 785 F.2d at 1411.

Under a defined benefit plan, benefits are determined by

applying a “formula that takes into account factors such as

final salary and years of service with the employer.” Pension

Benefit Guar. Corp. v. LTV Corp., 496 U.S. 633, 637 n.1

(1990) (citing 29 U.S.C. § 1321). Thus, a plan fiduciary could

improperly compute benefits by not applying the correct formula or using incorrect values. In contrast, there is no formula

involved in calculating benefits under a defined contribution

plan—the benefits payable are determined by the “amount

contributed to the participant’s account, and any income,

expenses, gains and losses, and any forfeitures of accounts of

other participants which may be allocated to such partici6Plaintiffs argue that Kuntz should not apply in cases involving defined

contribution plans. We decline to decide that question because Kuntz does

not affect Plaintiffs’ standing in this case. We note, however, that the

Supreme Court has recently directed that cases involving defined benefit

plans are not necessarily controlling in cases involving defined contribution plans. See LaRue, 128 S. Ct. at 1025. 

VAUGHN v. BAY ENVIRONMENTAL MANAGEMENT 6703
pant’s account.” 29 U.S.C. § 1002(34). Because there is no

formula involved in determining the benefits due under a

defined contribution plan, Kuntz’s requirement that a claim be

to correct for an miscomputation of benefits is inapplicable.

[7] Moreover, we have never required that the claim be for

an “ascertainable amount.”

7

 We decline to determine whether

we should apply such a requirement, because in this case, the

amount sought is ascertainable, despite the fact that it is not

readily apparent on the face of the First Amended Complaint.

Vaughn seeks the difference between the benefit he received

and what he would have received if the Plans’ assets had been

prudently invested. This amount is ascertainable through

expert testimony or other evidence regarding investment

returns during the relevant period. See Graden, 496 F.3d at

301; cf. Cal. Ironworkers Field Pension Trust v. Loomis

Sayles & Co., 259 F.3d 1036, 1046-47 (9th Cir. 2001)

(upholding district court’s decision to rely on a “benchmark

yield as an approximation of what the improperly invested

funds would have earned if properly invested”). 

[8] Finally, we turn to the district court’s conclusion that

the recognized exceptions to Kuntz are inapplicable to this

case. While the district court was correct that Kayes v. Pacific

Lumber Co., 51 F.3d 1449 (9th Cir. 1995), is inapplicable

because it dealt with a statutory exception not at issue here,

the district court erred in distinguishing Amalgamated Clothing & Textile Workers Union, AFL-CIO v. Murdock, 861 F.2d

1406 (9th Cir. 1988). Although Vaughn does not allege selfdealing, the reasoning of Murdock supports the conclusion

that Vaughn has standing to bring this suit. In Murdock we

held that the plaintiffs had standing despite the fact that they

had received all of their actuarially vested benefits under an

7This requirement comes from two Fifth Circuit cases, Yancy v. Am.

Petrofina, Inc., 768 F.2d 707 (5th Cir. 1985), and Sommers Drug Stores

Co. Employee Profit Sharing Trust v. Corrigan, 883 F.2d 345 (5th Cir.

1989). 

6704 VAUGHN v. BAY ENVIRONMENTAL MANAGEMENT
ERISA employee benefit plan. In support of our holding we

noted that the Murdock plaintiffs, unlike those in Kuntz,

sought equitable relief. Murdock, 861 F.2d at 1411. Next, we

reasoned that “granting plaintiffs standing to seek a constructive trust remedy . . . is the only means available to give effect

to the goals of ERISA,” including the “overriding goal[ ] of

. . . prevent[ing] the misuse and mismanagement of plan

assets by fiduciaries.” Id. (citing Russell, 473 U.S. at 140-43

& n.8). One way in which Congress sought to achieve that

goal was to impose a statutory duty of loyalty on plan fiduciaries. See id. at 1416 (distinguishing this core duty from the

regulatory requirement at issue in Kuntz). We reasoned that

these considerations counseled in favor of permitting the

establishment of a constructive trust in which the ill-gotten

profits would be deposited. We directed that the contents of

the trust should be considered “equitably vested benefits” and

“the plan should be viewed as continuing to exist for the purpose of distributing the equitably vested benefits.” Id. at 1419.

Accordingly, we held that plaintiffs had standing under

ERISA. Id.

[9] Like the plaintiffs in Murdock, Vaughn seeks an equitable remedy, the establishment of a trust for benefits owing to

the Plan participants. More importantly, his claim is based on

an allegation that the Plans’ fiduciaries mismanaged the

Plans’ assets and, in so doing, breached their statutorilyimposed fiduciary duties. In this sense, Vaughn’s claim is

similar to that of the Murdock plaintiffs and Murdock’s

rationale—that ERISA’s goals can be effectuated only if

plaintiffs have standing—applies. 

[10] Our holding that Vaughn has standing is consistent

with that of every Circuit Court of Appeals to have considered

the issue to date.8 The leading case on this issue is the Seventh

8All of these cases were decided after the district court issued its order

in the present case. The district court made its decision without the benefit

of these appellate courts’ reasoning. 

VAUGHN v. BAY ENVIRONMENTAL MANAGEMENT 6705
Circuit case Harzewski v. Guidant Corp. The Harzewski

plaintiffs were former employees who had cashed out their

individual accounts under a defined contribution plan. 489

F.3d at 801. They brought suit for breach of fiduciary duty,

alleging that the pension plan fiduciaries acted imprudently by

not disposing of certain stock that the fiduciaries knew was

overvalued as a result of fraud by the company’s management. See id. at 807. The district court dismissed the complaint for lack of standing, concluding that the plaintiffs were

not participants because they had already received the full

benefit available to them under the plan. Id. at 801. 

The Seventh Circuit reversed, reasoning that if the plan

documents, in conjunction with the statutory requirements of

ERISA, entitle the former employee to the relief sought, the

suit is for benefits and the plaintiff has standing. Id. at 804.

A plaintiff seeking extra-contractual damages, on the other

hand, does not have standing. Id. Noting that “[t]he benefit in

a defined-contribution pension plan is . . . 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,” the Seventh Circuit concluded that a lawsuit to recover

benefits lost as a result of plan mismanagement was a suit for

benefits and not for damages. Id. at 804-05. 

Since Harzewski was decided, five other circuits have held

that former employees who have cashed out their individual

accounts but allege that they are entitled to additional benefits

as a result of a breach of fiduciary duty have standing as “participants” under ERISA, see footnote 1 supra, and the

Supreme Court has cited the Seventh Circuit case with

approval, see LaRue, 128 S. Ct. at 1026 n.6.9 This subsequent

9LaRue does not control the outcome of this case because it did not

address the meaning of “participant” or the distinction between benefits

and damages. It is nevertheless helpful in several respects. First, it establishes that precedent from cases involving defined benefit plans is not

6706 VAUGHN v. BAY ENVIRONMENTAL MANAGEMENT
activity further persuades us that our holding is correct. Nevertheless, we briefly address Defendants’ additional arguments in support of their position that Vaughn is not a

“participant” within the meaning of ERISA. 

[11] First, the fact that Vaughn did not assert a claim for

benefits under ERISA § 502(a)(1)(B), 29 U.S.C.

§ 1132(a)(1)(B), is not an admission that his claim is not for

benefits. That provision provides that “[a] civil action may be

brought . . . by a participant . . . to recover benefits due to him

under the terms of his plan . . . .” Id. However, whereas

claims under ERISA § 502(a)(2) can be brought against any

fiduciary, “the defendant [in an action brought under

§ 502(a)(1)(B)] is the plan itself (or plan administrators in

their official capacities only).” Graden, 496 F.3d at 301 (citation omitted); accord Everhart v. Allmerica Fin. Life Ins. Co.,

275 F.3d 751, 754 (9th Cir. 2001) (citations omitted). In this

case, the Plans no longer exist and the allegedly imprudent

automatically applicable in cases involving defined contribution plans. See

LaRue, 128 S. Ct. at 1025. Second, it specifically distinguished LaRue’s

claim from that of the Russell plaintiff because the latter “received all of

the benefits to which she was contractually entitled.” Id. at 1024. Third,

the Court rejected the employer’s argument that the distribution rendered

the case moot and cited Harzewski for the proposition that a “plan ‘participant,’ as defined by § 3(7) of ERISA, 29 U.S.C. § 1002(7), may include

a former employee with a colorable claim for benefits.” Id. at 1026 n.6.

It follows from the conclusion that LaRue’s claim is not moot that he has

standing as a former employee with a colorable claim for benefits. See

U.S. Parole Comm’n v. Geraghty, 445 U.S. 388, 397 (1980) (“[M]ootness

[is] the ‘doctrine of standing set in a time frame: The requisite personal

interest that must exist at the commencement of the litigation (standing)

must continue throughout its existence (mootness).’ ” (quoting Henry

Monaghan, Constitutional Adjudication: The Who and When, 82 Yale L.J.

1363, 1384 (1973))). However, because this statement is found in a footnote and the Court stated that the “withdrawal of funds from the Plan may

have relevance to the proceedings on remand” without indicating what that

relevance might be, we decline to read LaRue as dispositive on the question of standing. But see In re Mutual Fund Inv. Litig., 529 F.3d at 215

(treating LaRue as controlling). 

VAUGHN v. BAY ENVIRONMENTAL MANAGEMENT 6707
investments were the result of actions by the trustees and

investment advisors, not the plan administrator. As a result,

Vaughn could not have brought an action under

§ 502(a)(1)(B) because the proper defendants could not have

been named under that subsection. 

[12] Second, ERISA’s definition of “accrued benefit” does

not defeat Vaughn’s claim. Vaughn does not deny that he

received his “accrued benefit,” defined as “the balance of the

individual’s account.” 29 U.S.C. § 1002(23)(B). He argues,

however, that as a result of the fiduciary breach, the accrued

benefit was not the full benefit due. Accordingly, the definition of “accrued benefit” is irrelevant to the disposition of this

case. 

[13] Third, Defendants’ reliance on the Department of

Labor’s regulation, 29 C.F.R. § 2510.3-3(d)(2)(ii)(B), is misplaced.10 The regulation’s purpose is to clarify whether a plan

is subject to ERISA. It does not purport to provide an allpurpose definition of “participant.” See Gilbert v. Alta Health

& Life Ins. Co., 276 F.3d 1292, 1303 (11th Cir. 2001) (noting

that the regulation “does not speak to the . . . issue of who

may or may not be a . . . participant of a plan once it is

deemed an ERISA plan”). Accordingly, “this regulation has

no relevance to the issue at hand.” Id.

[14] Fourth, Mertens v. Hewitt Assocs., 508 U.S. 248

(1993), and Ariz. State Carpenters Pension Trust Fund v. Citibank, 125 F.3d 715 (9th Cir. 1997), do not stand for the proposition that payments by a fiduciary to a plan under ERISA

§ 409 cannot constitute benefits. Although both opinions use

the word “damages” to describe the award sought, neither

10The regulation states that “[a]n individual is not a participant covered

under an employee pension plan . . . if . . . [t]he individual has received

from the plan a lump-sum distribution . . . of cash or other property which

represents the balance of his or her credit under the plan.” 29 C.F.R.

§ 2510.3-3(d)(2)(ii)(B). 

6708 VAUGHN v. BAY ENVIRONMENTAL MANAGEMENT
case considered the distinction between benefits and damages.

Accordingly, these cases are irrelevant to the one at hand. See

Sommers Drug Stores, 883 F.2d at 349 (noting that although

“benefits” and “damages” are mutually exclusive for purposes

of determining whether a former employee is a participant in

an ERISA plan, the terms have overlapping meaning). 

[15] Fifth, we reject Defendants’ contention that even if

Vaughn’s claim were for benefits, it would not be for vested

benefits. It is true that the Supreme Court in Firestone

required that former employees “have a colorable claim to

vested benefits.” 489 U.S. at 117 (emphasis added and quotation omitted). But we agree with the Seventh Circuit that “in

context[,] it is apparent that all the Court meant was that the

former employee had to have an entitlement—had to show

that had it not been for the trustees’ breach of their fiduciary

duty he would have been entitled to greater benefits than he

received.” Harzewski, 489 F.3d at 806. Under this reading,

money not in the account at the time of distribution is still a

“vested benefit” if the plaintiff is entitled to it. 

[16] Finally, we reject Defendants’ suggestion that the

terms of the Retirement Plan preclude Vaughn’s claim.11 The

Plan summary outlines two situations that might have an

effect on the contributions made to an account or to an individual’s further participation in the Plans. Defendants rely on

the section stating that if an individual’s employment is terminated, she “will receive no further benefits.” This provision is

not applicable, however, because the distributions resulted

from the termination of the Plans, not from the termination of

employment. Accordingly, this case is governed by the section providing that “[i]f the Plan is terminated, then plan contributions will stop, and you will receive a total distribution

of your account.” As we have previously explained, Vaughn

does not deny that he received a total distribution of his

11Defendants only make this argument with respect to the Retirement

Plan, but the relevant language also appears in the Pension Plan summary.

VAUGHN v. BAY ENVIRONMENTAL MANAGEMENT 6709
account. Accordingly, the Retirement Plan summary is inapposite because it does not address cases, such as this one,

where the former employee alleges that his total distribution

did not reflect the full benefit to which he is entitled. 

Having considered and rejected each of Defendants’ arguments, we hold that former employees who have received a

full distribution of their account balances under a defined contribution pension plan have standing as plan participants

under ERISA to recover losses occasioned by a breach of

fiduciary duty that allegedly reduced the amount of their benefits. In addition to maintaining consistency among the circuits, this holding is necessary in order to give effect to one

of the primary goals of ERISA, “prevent[ing] the misuse and

mismanagement of plan assets by fiduciaries.” Murdock, 861

F.2d at 1411 (citing Russell, 473 U.S. at 140-43 & n.8). If former employees in Vaughn’s situation did not have standing

“an employer who had mismanaged individual account plan

assets [could] avoid liability by cashing out the participants.”

Graden, 496 F.3d at 302. This could not have been Congress’s intention, particularly since “ERISA’s legislative history indicates that its standing requirements should be

construed broadly to allow employees to enforce their rights.”

Id. (citing Leuthner v. Blue Cross and Blue Shield of Ne.

Penn., 454 F.3d 120, 128 (3d Cir. 2006) (citing S. Rep. No.

93-127, at 3 (1974), reprinted in 1974 U.S.C.C.A.N. 4639,

4871)). 

IV

The order of the district court is VACATED and the case

REINSTATED and REMANDED for further proceedings. 

6710 VAUGHN v. BAY ENVIRONMENTAL MANAGEMENT