Jonathan M. Korn 

BLANK ROME LLP 

301 Carnegie Center, 3rd Floor 

Princeton, NJ 08540 

(609) 750-7700 (Phone) 

(609) 750-7701 (Fax) 

Korn@BlankRome.com 

James N. Benedict (Pro Hac Vice)

Sean M. Murphy (Pro Hac Vice) 

Robert C. Hora (Pro Hac Vice)

MILBANK, TWEED, HADLEY & McCLOY LLP 

1 Chase Manhattan Plaza 

New York, NY 10005 

(212) 530-5000 (Phone) 

(212) 530-5219 (Fax) 

Attorneys for Defendants 

UNITED STATES DISTRICT COURT 

DISTRICT OF NEW JERSEY

MARY ANN SIVOLELLA, for the use and benefit of the 

EQ/Common Stock Index Portfolio, the EQ/Equity Growth 

PLUS Portfolio, the EQ/Equity 500 Index Portfolio, the 

EQ/Large Cap Value PLUS Portfolio, the EQ/Global MultiSector Equity Portfolio, the EQ/Mid Cap Value PLUS 

Portfolio, the EQ/GAMCO Small Company Value, and the 

EQ/Intermediate Government Bond Index Portfolio, 

 Plaintiff, 

vs. 

AXA EQUITABLE LIFE INSURANCE COMPANY 

and AXA EQUITABLE FUNDS MANAGEMENT 

GROUP, LLC, 

 Defendants. 

Civil Action No. 3:11-cv-04194 (PGS) 

and 

Civil Action No. 3:13-cv-00312 (PGS) 

GLENN D. SANFORD, et al., 

 Plaintiffs, 

vs. 

AXA EQUITABLE FUNDS MANAGEMENT 

GROUP, LLC, 

 Defendant. 

DEFENDANTS’ RESPONSE TO 

PLAINTIFFS’ OBJECTIONS TO 

MAGISTRATE JUDGE’S REPORT AND 

RECOMMENDATION THAT DISTRICT 

COURT GRANT DEFENDANTS’ 

MOTION TO STRIKE PLAINTIFFS’ 

DEMANDS FOR JURY TRIAL 

ORAL ARGUMENT REQUESTED

FILED ELECTRONICALLY

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TABLE OF CONTENTS 

TABLE OF AUTHORITIES ......................................................................................................... ii 

PRELIMINARY STATEMENT .....................................................................................................1

ARGUMENT ...................................................................................................................................3

I. MAGISTRATE JUDGE ARPERT CORRECTLY DETERMINED THAT 

SECTION 36(b) DOES NOT DEMONSTRATE ANY 

CONGRESSIONAL INTENT TO GRANT A RIGHT TO A JURY 

TRIAL. .....................................................................................................................3

A. The Reference To “Actual Damages” In Section 36(b) Does Not 

Afford A Right To A Jury Trial. ..................................................................4

B. The Reference To “Injunctive” Relief In Section 36(a) Of The 

Investment Company Act Does Not Indicate Congressional Intent 

To Provide A Right To A Jury Trial Under Section 36(b). .........................6

II. MAGISTRATE JUDGE ARPERT CORRECTLY CONCLUDED THAT 

THE SEVENTH AMENDMENT DOES NOT AFFORD A RIGHT TO A 

JURY TRIAL FOR SECTION 36(b) CLAIMS. .....................................................7

A. Plaintiffs Do Not Contest That Section 36(b) Claims Are Equitable 

In Nature. .....................................................................................................9

B. Plaintiffs’ Section 36(b) Claims Seek Equitable Restitution Under 

Great-West And Pereira. .............................................................................9

1. Plaintiffs Seek Equitable Restitution Under Great-West ...............10

2. Plaintiffs Seek Equitable Restitution Under Pereira. ....................13

3. Equitable Restitution Does Not Require A Constructive Trust 

Or Equitable Lien With Respect To A Segregated Fund. ..............14

CONCLUSION ..............................................................................................................................17

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TABLE OF AUTHORITIES 

Page(s) 

CASES

ACS HR Solutions, LLC v. Bonds, 

No. 10-cv-4179, 2012 WL 3647399 (D.N.J. Aug. 22, 2012) ..................................................15 

Blue Cross & Blue Shield of Minn. v. Wells Fargo Bank, N.A., 

No. 11-2529, 2013 WL 2434875 (D. Minn. June 4, 2013)......................................................14 

Brosted v. Unum Life Ins. Co. of Am., 

421 F.3d 459 (7th Cir. 2005) ...................................................................................................16 

Chauffeurs, Teamsters & Helpers, Local No. 391 v. Terry, 

494 U.S. 558 (1990) .........................................................................................................8, 9, 12 

Dairy Queen Inc. v. Wood, 

369 U.S. 469 (1962) .................................................................................................................11 

Feltner v. Columbia Pictures Television, Inc., 

523 U.S. 340 (1998) .......................................................................................................2, 3, 4, 5 

Great-West Life & Annuity Ins. Co. v. Knudson, 

534 U.S. 204 (2002) ......................................................................................................... passim 

Hatco Corp. v. W.R. Grace & Co., 

59 F.3d 400 (3d Cir. 1995).........................................................................................................8 

In re Evangelist, 

760 F.2d 27 (1st Cir. 1985) ..................................................................................................4, 12 

In re Gartenberg, 

636 F.2d 16 (2d Cir. 1980).............................................................................................4, 12, 14 

Jones v. Harris Assocs. L.P., 

559 U.S. 335 (2010) ...............................................................................................................7, 9 

Kamen v. Kemper Fin. Servs., Inc., 

659 F. Supp. 1153 (N.D. Ill. 1987) ............................................................................................4 

Kamen v. Kemper Fin. Servs., Inc., 

908 F.2d 1338 (7th Cir. 1990) .............................................................................................4, 12 

Krinsk v. Fund Asset Mgmt., Inc., 

875 F.2d 404 (2d Cir. 1989)...............................................................................................11, 12 

Nat’l Sec. Sys., Inc. v. Iola, 

700 F.3d 65 (3d Cir. 2012).................................................................................................12, 16 

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Pereira v. Farace, 

413 F.3d 330 (2d Cir. 2005)............................................................................................. passim

Schuyt v. Rowe Price Prime Reserve Fund, Inc., 

835 F.2d 45 (2d Cir. 1987).......................................................................................................11 

Skretvedt v. E.I. DuPont De Nemours, 

372 F.3d 193 (3d Cir. 2004).....................................................................................................16 

Soley v. Wasserman, 

No. 08-9262, 2013 WL 1655989 (S.D.N.Y. Apr. 17, 2013) ...................................................14 

Stoneback v. ArtsQuest, 

No. 12-3286, 2012 U.S. Dist. LEXIS 149897 (E.D. Pa. Oct. 17, 2012) ...................................6 

Strom v. Goldman Sachs & Co., 

202 F.3d 138 (2d Cir. 1999)...............................................................................................13, 14 

United States ex rel. Drakeford v. Tuomey Healthcare Sys., Inc., 

675 F.3d 394 (4th Cir. 2012) ...................................................................................................16 

United States v. Gregg, 

226 F.3d 253 (3rd Cir. 2000) .....................................................................................................7 

United States v. Lane Labs-USA Inc., 

427 F.3d 219 (3rd Cir. 2005) ...................................................................................................16 

Unum Life Ins. Co. of Amer. v. Lynch, 

No. 04-cv-9007, 2006 WL 266562 (S.D.N.Y. Jan. 31, 2006) .................................................15 

Weissman v. Alliance Capital Mgmt. Corp., 

No. 84 Civ. 8904, 1985 U.S. Dist. LEXIS 13392 (S.D.N.Y. Nov. 27, 1985) ...........................4 

CONSTITUTIONAL PROVISIONS

U.S. Const. amend VII ........................................................................................................... passim 

STATUTES

15 U.S.C. § 80a-35(b) ......................................................................................................................6 

RULES

Local Rule 72.1 ............................................................................................................................1, 3 

OTHER AUTHORITIES

Restatement (Third) of Restitution and Unjust Enrichment (2011)...............................................17 

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S. Rep. No. 91-184, 91st Cong., 2d Sess. (1969) ............................................................................6 

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 Defendants AXA Equitable Life Insurance Company and AXA Equitable Funds 

Management Group, LLC (together, “Defendants”) respectfully submit this Response to 

Plaintiffs’ Objections to Magistrate Judge Arpert’s Report and Recommendation that the Court 

grant Defendants’ Motion To Strike Plaintiffs’ Demands For A Jury Trial.1

PRELIMINARY STATEMENT 

 No court has ever held in the forty-year history of Section 36(b) that there is a right to a 

jury trial for Section 36(b) claims. To the contrary, as indicated in Defendants’ prior briefing on 

this Motion, at least nine courts (including three Courts of Appeal) have found, in seventeen 

separate decisions, that there is no such right.2

 In accord with this well-settled precedent, 

Magistrate Judge Arpert recommended in his Report that Defendants’ Motion To Strike 

Plaintiffs’ Demands For A Jury Trial be granted. 

Plaintiffs’ Objection does not raise any new arguments.3 Each of the arguments in 

Plaintiffs’ Objection was previously asserted by Plaintiffs in their Opposition Brief and/or at oral 

 

1

 As used herein: “Motion” refers to the Motion to Strike Plaintiffs’ Demands For A Jury Trial, Sivolella 

v. AXA Equitable Life Ins. Co., et al., Civ. No. 11-04194 (D.N.J.), Sanford, et al. v. AXA Equitable Funds 

Mgm’t Group, LLC, Civ. No. 13-00312 (D.N.J.), filed Feb. 22, 2013 (Sivolella Dkt. No. 42) (Sanford Dkt. 

No. 7); “Opposition Brief” and “Opp. Br.” refer to the Brief In Opposition To Defendants’ Motion To 

Strike Plaintiffs’ Demand For Jury Trial, filed Mar. 18, 2013 (Sivolella Dkt. No. 51) (Sanford Dkt. No 

15); “Reply Brief” and “Reply Br.” refer to the Defendants’ Reply Memorandum of Law In Support Of 

Their Motion To Strike Plaintiffs’ Demands For A Jury Trial, filed Apr. 1, 2013 (Sivolella Dkt. No. 53) 

(Sanford Dkt. No. 17); “Report” refers to the Report and Recommendation, filed July 3, 2013 (Sivolella 

Dkt. No. 62) (Sanford Dkt. No. 23); “Objection” and “Obj.” refer to Objections To Magistrate Judge’s 

Report And Recommendation That District Court Grant Defendants’ Motion To Strike Plaintiffs’ 

Demand For Jury Trial, filed July 12, 2013 (Sivolella Dkt. No. 63) (Sanford Dkt. No. 24); and 

“Complaints” refers, together, to the Second Amended Complaint and Jury Demand filed on April 15, 

2013 (Sivolella Dkt. No. 56) and the First Amended Complaint and Jury Demand filed on April 15, 2013 

(Sanford Dkt. No. 20).

2 See Defendants’ Memorandum of Law In Support Of Their Motion To Strike Plaintiffs’ Demands For A 

Jury Trial, filed Feb. 22, 2013 (Sivolella Dkt. No. 42-1; Sanford Dkt. No. 7-1), at note 5. 

3

 Plaintiffs’ Objection also does not appear to comply with the mandate under Local Rule 72.1 that 

objections to a magistrate judge’s report and recommendation “specifically identify the portions of the 

proposed findings, recommendations or report to which objection is made and the basis of such 

objection.” Local Rule 72.1(c)(2). Plaintiffs generically state that their “primary objection to the 

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argument before Magistrate Judge Arpert, and each of those arguments was squarely rejected in 

Magistrate Judge Arpert’s Report. Plaintiffs claim that their “primary objection” is that 

Magistrate Judge Arpert “fail[ed] to adequately analyze” two cases: Great-West Life & Annuity 

Ins. Co. v. Knudson, 534 U.S. 204 (2002), and Pereira v. Farace, 413 F.3d 330 (2d Cir. 2005). 

Plaintiffs fail to identify any “inadequacies” in Magistrate Judge Arpert’s analysis of Great-West 

and Pereira and, instead, essentially “cut and paste” the same arguments they made in their 

Opposition Brief. Plaintiffs’ effort to take a second bite at the apple is unavailing. 

Faced with a sea of unfavorable precedent, Plaintiffs admitted at oral argument before 

Magistrate Judge Arpert that they “should definitely lose this [M]otion” unless Great-West or 

Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340 (1998) somehow changed the legal 

landscape with respect to the availability of jury trials for Section 36(b) claims. See Tr. at 27.4

 

As Magistrate Judge Arpert concluded, Great-West and Feltner did no such thing, and neither 

these nor any other cases have overruled or otherwise undermine the seventeen decisions finding 

that there is no right to a jury trial for Section 36(b) claims. 

In accord with this precedent, Magistrate Judge Arpert correctly concluded that (1) there 

is nothing in the statutory language of Section 36(b) or its legislative history that affords a right 

to a jury trial for Section 36(b) claims, and (2) the Seventh Amendment does not afford such a 

right. Significantly, as Magistrate Judge Arpert noted in his Report, Plaintiffs admitted at oral 

argument that their Section 36(b) claims seek nothing more than “return of the fees” (Tr. at 

 

[Report] is that it fails to adequately analyze the import of [a Supreme Court decision and a Second 

Circuit decision],” but the vast majority of Plaintiffs’ Objection has nothing to do with either of these two 

decisions, and merely reasserts (in some cases verbatim) the arguments Plaintiffs raised in their 

Opposition Brief. Nevertheless, in an abundance of caution, Defendants respond herein to each of the 

arguments reasserted in Plaintiffs’ Objection. 

4

 “Tr.” refers to the transcript of the oral argument held before Magistrate Judge Arpert on May 17, 2013 

on Defendants’ Motion to Strike Plaintiffs’ Demands For A Jury Trial. The transcript is attached as 

Exhibit A to the Declaration of Jonathan M. Korn, filed contemporaneously herewith. 

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28)—this is the prototypical form of equitable restitution described in Great-West, and affords 

no right to a jury trial. After analyzing Great-West and Pereira, Magistrate Judge Arpert 

properly concluded that “Plaintiffs’ claim is for equitable restitution and, as a result, not triable 

to a jury.” Report at 10. Plaintiffs’ Objection fails to set forth any reason for the Court to reject 

Magistrate Judge Arpert’s recommendation that the Court grant Defendants’ Motion To Strike 

Plaintiffs’ Demands For A Jury Trial.5

ARGUMENT 

I. MAGISTRATE JUDGE ARPERT CORRECTLY DETERMINED THAT 

SECTION 36(b) DOES NOT DEMONSTRATE ANY CONGRESSIONAL 

INTENT TO GRANT A RIGHT TO A JURY TRIAL. 

In Feltner, the Supreme Court reiterated the well-settled principle that before courts 

inquire “into the applicability of the Seventh Amendment,” they must first consider whether 

there is “‘any congressional intent to grant . . . the right to a jury trial.’” Feltner, 523 U.S. at 345 

(quoting Tull v. United States, 481 U.S. 412, 417 n.3 (1987)). This is not in dispute. See Obj. at 

5. Plaintiffs contend, however, that the statutory text of Section 36(b) “unambiguously” confers 

a right to trial by jury. Id. at 7. Plaintiffs are incorrect. Magistrate Judge Arpert, following a 

long line of judicial precedent, rejected each of the same arguments Plaintiffs now reassert in 

their Objection. Namely, Magistrate Judge Arpert correctly found that the reference to “actual 

damages” in Section 36(b) does not afford a right to a jury trial (citing three Court of Appeals 

decisions that reached this same conclusion) and that Feltner in no way changed this result. 

Magistrate Judge Arpert ultimately concluded that “the constitutional issue cannot be resolved by 

resort to the statute.” Report at 5. Plaintiffs’ Objection identifies no reason for the Court to 

reject Magistrate Judge Arpert’s conclusion. 

 

5

 Local Rule 72.1 provides that “[a] Judge shall make a de novo determination of those portions to which 

objection is made and may accept, reject, or modify, in whole or in part, the findings or recommendations 

made by the Magistrate Judge.” Local R. 72.1(c)(2). However, even under a de novo standard of review, 

Plaintiffs identify no basis for rejecting any part of the Report. 

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A. The Reference To “Actual Damages” In Section 36(b) Does Not 

Afford A Right To A Jury Trial. 

Plaintiffs contend that the reference in Section 36(b) to the phrase “actual damages” 

“constitutes an unambiguous expression of congressional intent to afford plaintiffs a right to trial 

by jury.” Obj. at 7. However, as Magistrate Judge Arpert recognized, three Courts of Appeal 

have “undertook this same statutory inquiry,” and “each one determined that the language of 

Section 36(b) was not dispositive of the issue.” See Report at 4; In re Evangelist, 760 F.2d 27, 

30 (1st Cir. 1985) (“The simple use of the word ‘damages,’ in light of the other evidence of 

Congressional intent, is not sufficient to show that Congress intended to create an action ‘at law’ 

. . . .”); In re Gartenberg, 636 F.2d 16, 17-18 (2d Cir. 1980) (Section 36(b) is “silent” on the 

“jury-non-jury issue”); Kamen v. Kemper Fin. Servs., Inc., 908 F.2d 1338, 1351 (7th Cir. 1990) 

(“adopt[ing] both the holding and rationale of Evangelist”), rev’d on other grounds, 500 U.S. 90 

(1991).6

 Absent controlling Third Circuit precedent to the contrary, Magistrate Judge Arpert 

found these decisions persuasive. Report at 4. 

Contrary to Plaintiffs’ contention, the Supreme Court’s decision in Feltner (a copyright 

case) in no way overrules or undermines this precedent. As Magistrate Judge Arpert recognized, 

Feltner has no bearing on whether the statutory text of Section 36(b) affords a right to a jury 

trial. Report at 4-5 (“The Court is not swayed by Plaintiffs’ argument . . . that the Supreme 

 

6 See also Kamen v. Kemper Fin. Servs., Inc., 659 F. Supp. 1153, 1165 n.19 (N.D. Ill. 1987) 

(plaintiff’s argument that the reference in Section 36(b) to “damages” renders Section 36(b) 

claims actions at law “has been rejected by every court that has considered it”); Weissman v. 

Alliance Capital Mgmt. Corp., No. 84 Civ. 8904, 1985 U.S. Dist. LEXIS 13392, at *6 n.3 

(S.D.N.Y. Nov. 27, 1985) (Section 36(b)’s reference to “actual damages” does not afford a right 

to a jury trial “for substantially the same reasons set forth” in Gartenberg, 487 F. Supp. 999 

(S.D.N.Y. 1980) and Evangelist); Gartenberg, 487 F. Supp. at 1006 (“[G]iven the repeated 

statement in the legislative history that actions under § 36(b) are equitable, to be administered on 

equitable standards, it would seem impossible to conclude from the use of the word ‘damages’ 

that Congress thereby provided for a trial by jury.”). 

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Court’s recent decision in Feltner has somehow ‘changed the analytical framework for the 

evaluation of a party’s entitlement to a jury.’”). 

In Feltner, the Court held that a plaintiff seeking statutory damages under the Copyright 

Act of 1976 has a Seventh Amendment right to a jury trial because copyright actions have been 

tried to juries for over 200 years. Feltner, 523 U.S. at 350. In its discussion of why the statutory 

damages set forth in the Copyright Act did not afford a right to a jury trial, the Supreme Court 

distinguished statutory damages from “actual damages” under the Copyright Act and noted that 

actual damages under the Copyright Act “generally are thought to constitute legal relief.” Id. at 

346. Plaintiffs’ contention that “Feltner requires Section 36(b) to be construed to afford them a 

right to a jury trial” improperly attempts to take Feltner out of its historical, copyright context. 

Obj. at 8; Report at 4 (“Plaintiffs cite Feltner for the proposition that it is ‘beyond dispute that a 

plaintiff who seeks to recover actual damages is entitled to a jury trial.’ This is not a correct 

statement or application of the law as it relates to Section 36(b). In the first instance, Plaintiffs’ 

quote is taken out of context. . . . Second, and more importantly, the Feltner Court did not base 

its holding on the language of [Section 36(b)].”) (internal citations omitted)). 

Furthermore, Plaintiffs ignore the other precedent cited in Defendants’ prior briefing 

(including from the Supreme Court and the Third Circuit) that indicates that mere references to 

“actual damages” in statutory text do not as a matter of law demonstrate congressional intent to 

grant a right to a jury trial. Reply Br. at 4. For instance, in City of Monterey v. Del Monte Dunes 

at Monterey, Ltd. (a Supreme Court case decided after Feltner), the Court refused to find a 

statutory right to a jury trial under 42 U.S.C. § 1983, even though the statute expressly authorizes 

a party to seek relief through an “action at law.” 526 U.S. 687, 707-708 (1999). Similarly, in 

Pichler v. UNITE, the Third Circuit held that the Driver’s Privacy Protection Act of 1994 does 

not confer a statutory right to a jury trial despite authorizing remedies that include “actual 

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damages” and “punitive damages.” 542 F.3d 380, 386 n.7, 387 (3rd Cir. 2008); see also 

Stoneback v. ArtsQuest, No. 12-3286, 2012 U.S. Dist. LEXIS 149897, at *15-17 (E.D. Pa. Oct. 

17, 2012) (Pennsylvania’s whistleblower law does not confer a statutory right to a jury trial even 

though it provides for “actual damages”). These cases provide even further support for 

Magistrate Judge Arpert’s conclusion that the reference to “actual damages” in Section 36(b) 

does not afford a right to trial by jury. Plaintiffs offer no legitimate basis to disturb this correct 

determination. 

B. The Reference To “Injunctive” Relief In Section 36(a) Of The 

Investment Company Act Does Not Indicate Congressional Intent To 

Provide A Right To A Jury Trial Under Section 36(b). 

Plaintiffs also argue that because the text of Section 36(a) of the Investment Company 

Act refers to “injunctive” relief, while Section 36(b) does not contain comparable references, 

Congress must have intended for Section 36(b) to afford a right to a jury trial. This is incorrect.7

 

Section 36(b) specifically refers to the “court” as the arbiter of Section 36(b) claims: (1) 

“approval by the board of directors of . . . such compensation or payments . . . shall be given 

such consideration by the court as is deemed appropriate under all the circumstances”; and (2) 

“[n]o finding by a court with respect to a breach of fiduciary duty under this subsection shall be a 

basis for . . . [a violation of other securities laws or injunctive relief by the Securities and 

Exchange Commission].” 15 U.S.C. §§ 80a-35(b)(2), (b)(6) (emphasis added). 

It is clear from the legislative history of Section 36(b) that these references to “court” in 

the statutory text were intended to refer to a judge, and not to a jury. The legislative history 

repeatedly refers to Section 36(b) as authorizing an “equitable” action and contains no reference 

to a right to a jury trial. S. Rep. No. 91-184, 91st Cong., 2d Sess. (May 21, 1969), reprinted in 

 

7

 Although Magistrate Judge Arpert did not separately address this argument in his Report, he apparently 

rejected it by concluding that “the constitutional issue cannot be resolved by resort to the statute.” Report 

at 5. 

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1970 U.S.C.C.A.N. 4897 (describing the bill adding Section 36(b) as amending the Investment 

Company Act to “define the equitable standards governing relationships between investment 

companies and their investment advisers”) (emphasis added). For instance, the Senate Report 

submitted with the bill that added Section 36(b) to the Investment Company Act states that 

“Section 36(b) authorizes the Commission and also a shareholder acting on behalf of the fund to 

institute an equitable action involving a claim of breach of fiduciary duty.” Id. at 4910 

(emphasis added). The Report goes on to note that “section 36(b) provides for an equitable 

action for breach of fiduciary duty.” Id. at 4911 (emphasis added); see also Jones v. Harris 

Assocs. L.P., 559 U.S. 335, 352 (2010) (“the standard for fiduciary breach under § 36(b) does not 

call for judicial second-guessing of informed board decisions”) (emphasis added). 

To the extent Plaintiffs suggest that this legislative history is irrelevant, they are 

incorrect. Plaintiffs note that “legislative history cannot prevail over explicit statutory language” 

(Obj. at 9), but for the reasons stated above and in Magistrate Judge Arpert’s Report, there is no 

“explicit statutory language” in Section 36(b) that authorizes a right to a jury trial. See Report at 

3-5 (“[T]he constitutional issue cannot be resolved by resort to the statute.”); see also United 

States v. Gregg, 226 F.3d 253, 257 (3rd Cir. 2000) (“Where the statutory language does not 

express Congress’s intent unequivocally, a court traditionally refers to the legislative history . . . 

.”). The legislative history confirms that Section 36(b) demonstrates no congressional intent to 

grant a right to jury trials for Section 36(b) claims. 

II. MAGISTRATE JUDGE ARPERT CORRECTLY CONCLUDED THAT 

THE SEVENTH AMENDMENT DOES NOT AFFORD A RIGHT TO A 

JURY TRIAL FOR SECTION 36(b) CLAIMS. 

Magistrate Judge Arpert correctly concluded that there is no right to a jury trial for 

Section 36(b) claims under the Seventh Amendment. Report at 5-10. Where there is no 

congressional intent to grant a right to a jury trial demonstrated in the statute (as is the case here), 

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there only can be a right to a jury trial if it is constitutionally protected by the Seventh 

Amendment. The right to a jury trial is protected by the Seventh Amendment “when the claim is 

a legal one, but not if it is equitable.” Hatco Corp. v. W.R. Grace & Co., 59 F.3d 400, 411 (3d 

Cir. 1995). In deciding whether a claim is legal or equitable, a court must “examine both the 

nature of the issues involved and the remedy sought.” Chauffeurs, Teamsters & Helpers, Local 

No. 391 v. Terry, 494 U.S. 558, 565 (1990). Specifically, the court must (1) “compare the 

statutory action to 18th-century actions brought in the courts of England prior to the merger of the 

courts of law and equity” and (2) “examine the remedy sought and determine whether it is legal 

or equitable in nature.” Id. These basic principles are not in dispute. See Obj. at 10-11. 

With respect to the first prong of the Seventh Amendment test, Plaintiffs do not dispute 

that Section 36(b) claims for breaches of fiduciary duty are historically equitable in nature. With 

respect to the second prong, Plaintiffs argue that under Great-West and Pereira, their Section 

36(b) claims seek “legal restitution” rather than “equitable restitution” and, therefore, are actions 

at law protected by the Seventh Amendment. Magistrate Judge Arpert carefully analyzed and 

then rejected this argument. See Report at 6-10. Plaintiffs admitted at oral argument that their 

Section 36(b) claims seek nothing more than “the return of the fees.” Tr. at 28 (“MR. LAKIND: 

Your Honor, I do concede that the damages are limited to the return of the fees.”). As Magistrate 

Judge Arpert concluded, under the standards articulated in Great-West and Pereira, this is 

equitable restitution. Report at 10 (“Under Great-West and Pereira, Plaintiffs’ claim is for 

equitable restitution . . . .”). Plaintiffs’ Objection identifies no reason for the Court to reject 

Magistrate Judge Arpert’s conclusion. 

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A. Plaintiffs Do Not Contest That Section 36(b) Claims Are Equitable In 

Nature. 

Plaintiffs concede that the first prong of the Seventh Amendment test weighs in favor of 

finding that there is no right to a jury trial for Section 36(b) claims. Section 36(b) “impose[s] 

upon investment advisers a ‘fiduciary duty’ with respect to compensation received from a mutual 

fund.” Jones, 559 U.S. at 340. As Magistrate Judge Arpert explained, “‘breach of fiduciary duty 

claims were historically within the jurisdiction of the equity courts.’” Report at 6 (quoting 

Pereira, 413 F.3d at 338). Magistrate Judge Arpert also noted that “neither Party appears to 

dispute” that “it has been traditionally understood that Section 36(b) claims would be heard by a 

court of equity.” Id. at 6. Plaintiffs raise no arguments in their Objection with respect to 

Magistrate Judge Arpert’s conclusion that Section 36(b) claims are equitable in nature. 

Accordingly, it is undisputed that the first prong of the Seventh Amendment test weighs in favor 

of a finding that Section 36(b) claims are equitable and afford no right to a jury trial. 

B. Plaintiffs’ Section 36(b) Claims Seek Equitable Restitution Under 

Great-West And Pereira. 

After analyzing both Great-West and Pereira, Magistrate Judge Arpert properly 

concluded that Plaintiffs seek “equitable restitution” under the standards articulated and applied 

in those two cases. See Report at 7-10 (“Plaintiffs’ remedy is for equitable restitution.”). 

Plaintiffs identify no reason for the Court to reject Magistrate Judge Arpert’s analysis and 

conclusion.8

 

 

8

 Plaintiffs devote several pages of their Objection to a discussion of Terry, but provide no explanation of 

how Terry is in any way inconsistent with Magistrate Judge Arpert’s Report. Obj. at 10-13. In Terry, a 

group of employees sought compensatory damages for lost wages and health benefits in a suit alleging 

that the employees’ union had breached its duty of fair representation. Terry, 494 U.S. at 562-63, 570 

(“[T]he only remedy sought is a request for compensatory damages representing backpay and benefits.”). 

The Court held that the employees were entitled to a jury trial under the Seventh Amendment because 

“[t]he backpay sought by respondents is not money wrongfully held by the Union, but wages and benefits 

they would have received from [the employer] had the Union processed the employees’ grievances 

properly” and “[s]uch relief is not restitutionary.” Id. at 570-71 (emphasis added). Here, in contrast, 

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1. Plaintiffs Seek Equitable Restitution Under Great-West

In Great-West, the Supreme Court distinguished between “legal restitution” and 

“equitable restitution” in the context of a claim asserted under the Employee Retirement Income 

Security Act of 1974 (“ERISA”). Great-West, 534 U.S. at 212-14. The Court explained that 

restitution is an equitable remedy when the action seeks “not to impose personal liability on the 

defendant, but to restore to the plaintiff particular funds or property in the defendant’s 

possession.” Great-West, 534 U.S. at 214 (emphasis added). In contrast, restitution is a legal 

remedy when it seeks the recovery of “money to pay for some benefit the defendant had received 

from [plaintiff],” as such claims are “viewed essentially as actions at law for breach of contract.” 

Id. at 213. 

In Great-West, the Court dismissed the ERISA claim after concluding that the claim and 

remedy at issue were not equitable in nature and therefore were not authorized by the relevant 

ERISA provision. Id. at 212-215. The petitioners in that case (an employer, insurance company, 

and employee benefits plan) sought payment from the respondents pursuant to a “reimbursement 

provision” in the respondents’ employer-sponsored benefits plan. Id. at 206-209. The Court 

concluded that the petitioners sought legal restitution—not equitable restitution—because the 

funds at issue were never in the respondents’ possession and the petitioners’ claim was, instead, 

premised on a contractual right under the plan’s reimbursement provision to recover money to 

pay for a benefit the petitioners had conferred on the respondents. Id. (“Here, the funds to which 

petitioners claim an entitlement under the Plan’s reimbursement provision—the proceeds from 

the settlement of respondents’ tort action—are not in respondents’ possession.”) (emphasis 

 

Plaintiffs admit that they seek restitution. Obj. at 16 (arguing that Plaintiffs seek “legal restitution”) 

(emphasis added). In any event, unlike the wages and benefits at issue in Terry, which were never in the 

defendants’ possession, Plaintiffs have conceded that what they really seek in this case is the “return of 

the fees” that were paid to Defendants. Tr. at 28. Accordingly, the holding in Terry supports Magistrate 

Judge Arpert’s finding that the remedy Plaintiffs seek is equitable, and not legal. 

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added). The Court further explained that “[t]he basis for petitioners’ claim is not that 

respondents hold particular funds that, in good conscience, belong to petitioners, but that 

petitioners are contractually entitled to some funds for benefits that they conferred.” Id. at 214. 

Applying the standards in Great-West, Magistrate Judge Arpert found that the relief 

sought by Plaintiffs is “equitable restitution.” Report at 7-10. Specifically, Magistrate Judge 

Arpert explained, “Plaintiffs here are not seeking ‘some funds,’ but rather the funds allegedly 

charged and retained by Defendants. In other words, Plaintiffs seek ‘particular funds [held by 

Defendants] that, in good conscience, belong to [Plaintiffs].’” Report at 9 (quoting Great-West) 

(internal citations omitted). 

Plaintiffs contend that their “complaints simply seek awards of ‘compensatory damages’ 

and ‘legal restitution’ against AXA.” Obj. at 16. This is not true,9

 and this same argument was 

considered and rejected by Magistrate Judge Arpert. Report at 9. Plaintiffs’ Complaints seek 

“repayment of all unlawful and/or excessive fees paid to [Defendants]” (Complaints, Prayer for 

Relief ¶ B) and, as noted, Plaintiffs admitted at oral argument that their “damages are limited to 

the return of the fees” (Tr. at 28). 

Furthermore, as Magistrate Judge Arpert explained, it is irrelevant that Plaintiffs’ 

Complaints purport to seek “compensatory damages” because “Plaintiffs’ choice of words must . 

. . be compared to the actual relief they seek.” Report at 8-9; see also Dairy Queen Inc. v. Wood, 

369 U.S. 469, 477-78 (1962) (“[T]he constitutional right to trial by jury cannot be made to 

depend upon the choice of words used in the pleadings.”); Schuyt v. Rowe Price Prime Reserve 

Fund, Inc., 835 F.2d 45, 46 (2d Cir. 1987) (“The mere fact that Schuyt has designated the relief 

she seeks as ‘damages’ does not mean that she is automatically entitled to a jury trial.”); Krinsk 

v. Fund Asset Mgmt., Inc., 875 F.2d 404, 414 (2d Cir. 1989) (“Although Krinsk insists his claim 

 

9

 The term “legal restitution” appears nowhere in either of the two Complaints. 

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was for damages, a claim under section 36(b), even when labeled as one for damages, ordinarily 

should be treated as an equitable claim not for a jury.”). Here, the actual relief Plaintiffs seek “is 

disgorgement of the excessive fees they claim were collected by Defendants.” Report at 9. As 

Magistrate Judge Arpert concluded, “[t]his is equitable restitution.” Id. at 9; see also Nat’l Sec. 

Sys., Inc. v. Iola, 700 F.3d 65, 101 (3d Cir. 2012) (“It is undisputed that restitution of ill-gotten 

commissions is an equitable remedy.”). 

The standards set forth in Great-West for distinguishing between legal and equitable 

restitution reinforce what at least nine courts have already confirmed: Section 36(b) claims are 

equitable and, therefore, afford no right to a jury trial. Contrary to what Plaintiffs contend, the 

cases that have found (without exception) that Section 36(b) claims are equitable are still good 

law despite that they pre-date Great-West. These cases were not, as Plaintiffs argue, “premised” 

on the notion that restitution is always an equitable remedy. Obj. at 18. The first of these cases 

recognized that restitution may not be an “exclusively equitable remedy.” Gartenberg, 487 F. 

Supp. at 1006. Furthermore, the rationale articulated in these cases is entirely consistent with the 

standard for equitable restitution set forth in Great-West. See, e.g., In re Gartenberg, 636 F.2d at 

18 (finding that plaintiffs sought an equitable remedy because the issue is “whether the Trust 

adviser violated its fiduciary obligations by charging an exorbitant fee” and “[i]f it did, the 

excessive portion of the fee must be returned”); In re Evangelist, 760 F.2d at 29 (“[T]he remedy 

Congress created—the payment of any excess fees to the company—is similar to the traditional 

equity remedy of an ‘accounting.’”); Kalish, 928 F.2d at 592 (noting that the return of 

“exorbitant” advisory fees is “restitutionary relief” that is “clearly equitable in nature regardless 

of whether it is called damages”).10

 

10 In their attempt to cast doubt on the long line of cases that have found that there is no right to a jury 

trial for Section 36(b) claims, Plaintiffs make reference to the Seventh Circuit’s statement in Kamen v. 

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2. Plaintiffs Seek Equitable Restitution Under Pereira. 

Far from helping Plaintiffs, the Second Circuit’s decision in Pereira confirms that the 

relief Plaintiffs seek is equitable restitution. After analyzing Pereira, Magistrate Judge Arpert 

concluded that “[t]he designation of the relief Plaintiffs seek as equitable is, moreover, consistent 

with Pereira’s interpretation of Great-West—that a ‘defendant must possess the funds at issue for 

the remedy of equitable restitution to lie against them.’” Report at 9-10 (quoting Pereira, 413 

F.2d at 341) (emphasis added). 

In Pereira, a bankruptcy trustee (acting on behalf of a defunct corporation) asserted a 

breach of fiduciary duty claim against the corporation’s former officers and directors based on 

allegations that they improperly used corporate assets. Pereira, 413 F.3d at 333. The Second 

Circuit addressed whether there was a right to a jury trial for the trustee’s claims. Id. at 333-41. 

Citing the distinction between legal and equitable restitution articulated in Great-West, the court 

held that because the funds at issue were never in the officers’ or directors’ possession, and only 

sought to recover funds attributable to the corporation’s loss, the trustee’s claim was for 

compensatory damages, rather than equitable restitution. Id. at 339-41. As Magistrate Judge 

Arpert explained, the Second Circuit held that “[b]ecause it was ‘undeniable [] that the Trustee 

seeks only to recover funds attributable to [the company’s] losses, not the director’s unjust gain,’ 

the claims were for compensatory damages and, thus, triable to a jury.” Report at 8 (quoting 

Pereira, 413 F.3d at 341) (emphasis added). Here, in contrast, and as Magistrate Judge Arpert 

recognized, the Plaintiffs seek to recover the allegedly excessive fees that were paid to 

 

Kemper Financial Services, Inc. that Terry “appears to call into question the foundation for Evangelist 

and similar holdings about § 36(b).” Obj. at 19. Plaintiffs made this same unavailing argument in their 

Opposition Brief. Opp. Br. at 23-24. Far from undermining the Section 36(b) case law, the Seventh 

Circuit in Kamen expressly adopted “both the holding and the rationale” of Evangelist, in which the First 

Circuit squarely held that there is no right to a jury trial on Section 36(b) claims. Kamen, 908 F.2d at 

1351. In so ruling, the court distinguished Terry, both on its facts and based on the different relief sought 

in that case. Id. 

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Defendants. See Report at 8-9; Complaints, Prayer for Relief ¶ B (seeking “repayment of all 

unlawful and/or excessive fees paid to [Defendants]”).11 Accordingly, Pereira is entirely 

consistent with Magistrate Judge Arpert’s conclusion that the Plaintiffs seek equitable 

restitution.12 

3. Equitable Restitution Does Not Require A Constructive Trust Or 

Equitable Lien With Respect To A Segregated Fund. 

Plaintiffs appear to argue that equitable restitution is only available where the funds 

sought to be recovered are held in a segregated account that could be subject to a constructive 

trust or equitable lien. Obj. at 20-22. Plaintiffs raised this same argument before Magistrate 

Judge Arpert, and Magistrate Judge Arpert rejected it. See Opp. Br. at 21-22; Report at 10; Tr. at 

 

11 Plaintiffs note that in Pereira, the Second Circuit suggested that Great-West “cuts across the grain” of 

the court’s prior decision in Strom v. Goldman Sachs & Co., 202 F.3d 138 (2d Cir. 1999) and noted that 

“several courts have already agreed that Great-West has overruled our decision in Strom.” Obj. at 15 

(citing Pereira, 413 F.3d at 339-40). These comments in Pereira are irrelevant. In Strom, the Second 

Circuit found that the monetary relief sought by plaintiffs was equitable “even though the defendant did 

not actually possess the funds in question.” Pereira, 413 F.3d at 339 (citing Strom, 202 F.3d at 144). In 

contrast, Section 36(b) claims seek the return of fees that were paid to an investment adviser. See, e.g., In 

re Gartenberg, 636 F.2d at 18 (finding that the issue is “whether the Trust adviser violated its fiduciary 

obligations by charging an exorbitant fee” and “[i]f it did, the excessive portion of the fee must be 

returned”); Kalish, 928 F.2d at 592 (noting that the return of “exorbitant” advisory fees is “restitutionary 

relief”). 

12 Plaintiffs cite Blue Cross & Blue Shield of Minn. v. Wells Fargo Bank, N.A., No. 11-2529, 2013 WL 

2434875 (D. Minn. June 4, 2013) and Soley v. Wasserman, No. 08-9262, 2013 WL 1655989 (S.D.N.Y. 

Apr. 17, 2013), apparently for their proposition that under Pereira, Plaintiffs are entitled to a jury trial. 

Each of these cases is inapposite. In Blue Cross & Blue Shield, the court found that the plaintiffs were 

entitled to a jury trial for certain breach of fiduciary duty claims because the “damages sought by 

Plaintiffs . . . are, at their core, compensatory in nature; and compensatory damages are ‘the classic form 

of legal relief.’” Blue Cross & Blue Shield of Minn., 2013 WL 243875, at *2. Here, in contrast, Plaintiffs 

seek restitution and, as Magistrate Judge Arpert explained, Plaintiffs’ mere labeling of their relief as 

“compensatory damages” does not defeat that the “actual relief” Plaintiffs seek is equitable restitution. 

Report at 8-9. Likewise, in Soley, the court looked beyond the mere labels in the complaint and found 

that the plaintiff’s claim for breach of fiduciary duty sought compensatory damages because “(1) Soley 

seeks to impose personal liability on Wasserman, rather than seeking return of particular funds in 

Wasserman’s possession, and (2) Soley measures her damages based on her losses, and not merely on 

Wasserman’s gain.” Soley, 2013 WL 1655989, at *2. Here, in contrast, Plaintiffs (1) seek the return of 

particular funds in Defendants’ possession and (2) restitution measured by Defendants’ gain. See 

Complaints, Prayer for Relief ¶ B (seeking “repayment of all unlawful and/or excessive fees”); Tr. at 28 

(conceding that Plaintiffs seek only “return of the fees”). 

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32-33 (“THE COURT: You mean to suggest that . . . to recover the particular funds, that AXA 

would have to have the fees that were charged and paid by the funds sitting in some segregated 

account, unique to those charges of those particular funds in order to make this equitable 

restitution versus legal? MR. LAKIND: Yes, Your Honor. THE COURT: As opposed to in 

their general coffers? MR LAKIND: Right. . . . .”). 

As Magistrate Judge Arpert explained, “the funds Plaintiffs seek need not be marked with 

a red ‘X’. It is enough that they can be clearly traced to the excessive fees allegedly charged by 

Defendants. Because they can, Plaintiffs’ remedy is for equitable restitution.” Report at 10. 

This conclusion is consistent with Great-West, as well as subsequent cases. In Great-West, the 

Court indicated that equitable restitution is available so long as the “money or property identified 

as belonging in good conscience to the plaintiff could clearly be traced to particular funds or 

property in the defendant’s possession.” Great-West, 534 U.S. at 213 (emphasis added). 

Judge Cavanaugh of the District of New Jersey has held that there is no requirement 

under Great-West that the funds “improperly” transferred to a defendant be held in a segregated 

account in order for equitable restitution to lie. ACS HR Solutions, LLC v. Bonds, No. 10-cv4179, 2012 WL 3647399, at *3-4 (D.N.J. Aug. 22, 2012). In Bonds, the plaintiff sought 

equitable restitution to recover retirement fund benefits that had been distributed to the defendant 

by mistake. Id. at *1. Citing Great-West, the defendant argued that because the funds at issue 

had been co-mingled with other funds in the defendant’s account, equitable restitution was not 

available. Id. at *3. Judge Cavanaugh rejected this argument, explaining that “the court is 

sufficiently convinced that the funds improperly given to Defendant are fairly traceable through 

Defendant’s accounts, equipment, and real property.” Id. at *4. Judge Cavanaugh ultimately 

found that “[t]he fact that some of [the] funds have been co-mingled with funds not traceable to 

the improper payments does not destroy Plaintiff’s case for [equitable] restitution.” Id. Other 

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courts have also concluded that there is no requirement under Great-West that the funds be held 

in a segregated account. See Unum Life Ins. Co. of Amer. v. Lynch, No. 04-cv-9007, 2006 WL 

266562, at *3 (S.D.N.Y. Jan. 31, 2006) (applying Great-West and holding that although 

“[plaintiff] may have commingled [the] funds with other money which she spent,” this “should 

not limit a Court of Equity from ordering equitable restitution”); see also Nat’l Sec. Sys., Inc. v. 

Iola, 700 F.3d 65, 101-102 (3d Cir. 2012) (“It is undisputed that restitution of ill-gotten 

commissions is an equitable remedy” and it was irrelevant that “a portion of [the] commissions” 

had been transferred to a third-party.); United States v. Lane Labs-USA Inc., 427 F.3d 219, 231 

(3rd Cir. 2005) (restitution was equitable because it sought funds that were “directly traceable to 

the [defendants’] offensive conduct”). 

Plaintiffs are also incorrect in their suggestion that equitable restitution requires a 

“constructive trust” or “equitable lien” that would give Plaintiff a “priority claim” over 

Defendants’ “general creditors.” Obj. at 21-22. Money judgments always have been available 

for restitution, and Great-West did nothing to change this. Skretvedt v. E.I. DuPont De Nemours, 

372 F.3d 193, 212-13 (3d Cir. 2004) (Great-West is not a “per se pronouncement that where a 

plaintiff seeks an award that ultimately involves money . . . such an award is a claim for legal 

relief.”); Lane Labs-USA Inc., 427 F.3d at 231 (finding that the “reimbursement of the money 

consumers paid Appellants for products that violated the FDCA” qualified as equitable 

restitution); United States ex rel. Drakeford v. Tuomey Healthcare Sys., Inc., 675 F.3d 394, 403 

n.15 (4th Cir. 2012) (“[A] money damages award may be a form of equitable relief if it is 

restitutionary.”) (internal quotation marks omitted); Brosted v. Unum Life Ins. Co. of Am., 421 

F.3d 459, 466 (7th Cir. 2005) (“[R]estitution may be in the form of monetary relief.”) (internal 

quotation marks omitted). 

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Plaintiffs cite no authority for the proposition that equitable restitution only applies where 

there is a segregated fund over which a plaintiff could obtain a constructive trust or equitable 

lien. In Sereboff v. Mid Atlantic Medical Services, Inc., a case cited by Plaintiffs, the Court 

merely noted that in Great-West, the Court “examined cases and secondary legal materials to 

determine if the relief would have been equitable ‘[i]n the days of the divided bench,’” and 

explained that, historically, “one feature of equitable restitution was that it sought to impose a 

constructive trust or equitable lien on ‘particular funds or property in the defendant’s 

possession.’” 547 U.S. 356, 362 (2006). Plaintiffs’ citation to the Restatement (Third) of 

Restitution and Unjust Enrichment is equally unavailing. Although the Restatement notes that 

“[i]f restitution to the claimant is accomplished exclusively by a judgment for money, without 

resort to any of the ancillary remedial devices traditionally available in equity but not at law, the 

remedy is presumptively legal,” the Restatement explains that this presumption is a mere 

“tautology” and an “[e]lementary generalization” of “limited utility.” Restatement (Third) of 

Restitution and Unjust Enrichment § 4 cmt. d (2011); see also id. (while damages are 

traditionally thought of as a legal remedy, “[t]his does not mean that any remedy by which the 

defendant is required to pay money is necessarily legal rather than equitable”). Accordingly, 

Magistrate Judge Arpert properly concluded that there is no requirement that the funds sought by 

Plaintiffs be held in a segregated account in order to find that Plaintiffs’ Section 36(b) claims 

seek equitable restitution. 

CONCLUSION 

For the foregoing reasons, Defendants respectfully request that the Court grant 

Defendants’ Motion to Strike Plaintiffs’ Demands For A Jury Trial. 

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Dated: July 26, 2013 

BLANK ROME LLP 

By: /s/ Jonathan M. Korn 

Jonathan M. Korn 

301 Carnegie Center, 3rd Floor 

Princeton, NJ 08540 

 MILBANK, TWEED, HADLEY & MCCLOY LLP 

James N. Benedict (pro hac vice) 

Sean M. Murphy (pro hac vice) 

Robert C. Hora (pro hac vice) 

1 Chase Manhattan Plaza 

New York, NY 10005-1413 

(212) 530-5000 

Attorneys for Defendants 

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