Source: http://www2.bloomberglaw.com/public/desktop/document/LaRue_v_DeWolff_Boberg__Assocs_450_F3d_570_4th_Cir_2006_Court_Opi
Timestamp: 2013-05-25 00:29:35
Document Index: 166330458

Matched Legal Cases: ['§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1144', '§\n1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1109', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§\n1132', '§ 1132', '§ 1132', '§ 197', '§ 861', '§\n1132', '§ 1132', '§ 1132', '§ 1132', '§ 1132', '§\n1132', '§ 1132', '§ 1109']

LaRue v. DeWolff, Boberg & Assocs., 450 F.3d 570, 38 EBC 1001 (4th Cir. 2006), Court Opinion
LaRue v. DeWolff, Boberg & Assocs., 450 F.3d 570, 38 EBC 1001 (4th Cir. 2006)
F.3d United States Court of Appeals, Fourth Circuit.
James LaRUE, Plaintiff-Appellant, v. DeWOLFF, BOBERG & ASSOCIATES,
INCORPORATED; DeWolff, Boberg & Associates, Incorporated, Employees'
Savings Plan, Defendants-Appellees.
ERISA — PROTECTION OF RIGHTS [1] Fiduciary Responsibility — Fiduciary Duties — In General ►20.2005 [Show Topic Path]
Tax code Section 401(k) plan participant has no remedy under ERISA Section 502(a)(2) in his claim that plan fiduciaries breached their duties by failing to implement investment strategy he selected for his plan account, where Section 502(a)(2) provides remedies for entire plan and not for individual plan participants, since participant does not seek appropriate relief under Section 502(a)(2) in that it is difficult to characterize relief he seeks as anything other than personal given that measure of recovery is loss suffered by him alone.
ERISA — PROTECTION OF RIGHTS [2] Fiduciary Responsibility — Fiduciary Duties — In General ►20.2005 [Show Topic Path]
Tax code Section 401(k) plan participant has no remedy under ERISA Section 502(a)(3) in his claim that plan fiduciaries breached their duties by failing to implement investment strategy he selected for his plan account, where Section 502(a)(3) provides for “equitable”
relief and participant argues that he seeks restitution for alleged loss to his plan accounts, which he argues is form of equitable relief, since participant does not seek equitable relief in that he has not alleged that money owed to him is in fiduciaries' possesion, and since participant gauges his recovery not by value of fiduciaries' nonexistent gain, but by value of his own loss, which is measure that is traditionally legal not equitable.
Carolina, David C. Norton, J.
[*571] ARGUED: Robert Edward Hoskins, Foster Law Firm, L.L.P., Greenville,
South Carolina, for Appellant. Thomas Peter Gies, Crowell & Moring,
L.L.P., Washington, D.C., for Appellees. ON BRIEF: Rebecca Lee, Crowell
& Moring, L.L.P., Washington, D.C., for Appellees.
Before WILKINSON and TRAXLER, Circuit Judges, and RICHARD L. WILLIAMS,
which Judge TRAXLER and Senior Judge WILLIAMS joined.
The plaintiff in this case alleges that defendant fiduciaries breached
their duty to him by failing to implement the investment strategy he had
selected for his employee
[*572] retirement account. Relying on two separate provisions of the Employee
Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1132(a)(2)
and 1132(a)(3) (2000), he seeks recovery of the amount by which his
account would have appreciated had defendants followed his instructions.
The district court concluded that his complaint did not request a form of
relief available under ERISA, and it therefore granted defendants' motion
We affirm. Section 1132(a)(2) provides remedies only for entire plans,
not for individuals. And while § 1132(a)(3) does in some cases furnish
individualized remedies, the Supreme Court's decisions in Mertens v.
Hewitt Associates, 508 U.S. 248, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993),
and Great-West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204,
122 S.Ct. 708, 151 L.Ed.2d 635 (2002), compel the conclusion that it does
not supply one here. Plaintiff has alleged no unjust enrichment, unlawful
possession, or self-dealing on the part of defendants, and the remedy he
seeks falls outside the scope of the "equitable relief" that § 1132(a)(3)
DeWolff, Boberg & Associates, Inc. is a nationwide management
consulting firm organized under the laws of South Carolina. It
administers, and is thus a fiduciary of, an ERISA-regulated 401(k)
retirement savings plan in which its current and former employees
participate. The plan permits participants who so desire to manage their
own accounts by selecting from a menu of various investment options.
Plaintiff James LaRue has participated in this 401(k) plan since 1993.
He alleges that in 2001 and 2002, he directed DeWolff to make certain
changes to the investments in his plan account, but that these directions
were never carried out. In 2004, he brought suit against DeWolff and the
plan, claiming that this omission amounted to a breach of fiduciary duty.
[fn*] According to the complaint, his "interest in the plan ha[d] been
depleted approximately $150,000.00" as a result of defendants' failure to
follow his instructions. To recover for this loss, the complaint sought
"appropriate `make whole' or other equitable relief pursuant to [
29 U.S.C. § 1132(a)(3)]."
Defendants subsequently filed a Rule 12(c) motion for judgment on the
pleadings, contending that plaintiff's requested remedy was not available
under § 1132(a)(3). The district court agreed, and thereafter dismissed
the case with prejudice.
Plaintiff appeals. We review de novo a district court's decision to
grant judgment on the pleadings. See Burbach Broad. Co. of Del. v. Elkins
Radio Corp., 278 F.3d 401, 405-06 (4th Cir. 2002).
In enacting ERISA, Congress sought to uniformly regulate the wide
universe of employee benefit plans. See Aetna Health Inc. v. Davila,
542 U.S. 200, 208, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004). A salient
feature of this effort was the careful delineation of civil remedies
available to litigants seeking to enforce their rights under such plans.
See id. at 208-09, 124 S.Ct. 2488. Congress broadly preempted previously
available state-law causes of action, see 29 U.S.C. § 1144(a), and set
forth in a single section of ERISA the exclusive list of civil actions
available to parties aggrieved by a statutory violation, see id. §
1132(a); see also Ingersoll-Rand Co. v.
[*573] McClendon, 498 U.S. 133, 144, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990).
Section 1132(a) stops short of providing ERISA complainants with a full
arsenal of relief. ERISA is "an enormously complex and detailed statute
that resolve[s] innumerable disputes between powerful competing interests
— not all in favor of potential plaintiffs." Mertens v. Hewitt Assocs.,
508 U.S. 248, 262, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993). Its civil
enforcement provision in particular attempts to settle "a tension between
the primary ERISA goal of benefiting employees and the subsidiary goal of
containing pension costs." Id. at 262-63, 113 S.Ct. 2063 (internal
quotation marks and alterations omitted). Congress has consequently made
various "policy choices" resulting in "the inclusion of certain remedies
and the exclusion of others." Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41,
54, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987).
Interpretation of § 1132(a) is therefore no easy task. As the Supreme
Court's ERISA decisions have repeatedly cautioned, "vague notions of a
statute's `basic purpose' are . . . inadequate to overcome the words of
its text regarding the specific issue under consideration." Great-West
Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 220, 122 S.Ct. 708,
151 L.Ed.2d 635 (2002) (internal quotation marks omitted); Mertens,
508 U.S. at 261, 113 S.Ct. 2063 (same). Section 1132(a) represents an
"interlocking, interrelated, and interdependent remedial scheme" that
"provide[s] strong evidence that Congress did not intend to authorize
other remedies that it simply forgot to incorporate expressly." Mass.
Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 146, 105 S.Ct. 3085,
87 L.Ed.2d 96 (1985).
With these constraints in mind, we consider whether the statute's text
provides the particular relief at issue here.
[1] Plaintiff first suggests that remuneration of his plan account finds
express authorization in the text of 29 U.S.C. § 1132(a)(2). That
subsection allows for a civil action "by a participant, beneficiary or
fiduciary for appropriate relief under section 1109 of this title."
Section 1109, in turn, provides that
[a]ny person who is a fiduciary with respect to a
plan who breaches any of the responsibilities,
obligations, or duties imposed upon fiduciaries by
this subchapter shall be personally liable to make
good to such plan any losses to the plan resulting
from each such breach, and to restore to such plan
any profits of such fiduciary which have been made
through use of assets of the plan by the fiduciary,
and shall be subject to such other equitable or
remedial relief as the court may deem
appropriate. . . .
Plaintiff's argument regarding the applicability of § 1132(a)(2) is
made for the first time on appeal. Even if the argument were not
therefore waived, see, e.g., Jones v. Liberty Mut. Ins. Co. (In re
Wallace & Gale Co.), 385 F.3d 820, 835 (4th Cir. 2004), he could not
succeed on the merits. Recovery under this subsection must "inure□ to the
benefit of the plan as a whole," not to particular persons with rights
under the plan. Russell, 473 U.S. at 140, 105 S.Ct. 3085 (emphasis
added); see also Coyne & Delany Co. v. Blue Cross & Blue Shield of
Va., Inc., 102 F.3d 712, 714 (4th Cir. 1996). "A fair contextual reading
of the statute makes it abundantly clear that its draftsmen were
primarily concerned with the possible misuse of plan assets, and with
remedies that would protect the entire plan, rather than with the rights
of an individual beneficiary." Russell, 473 U.S. at 142, 105 S.Ct. 3085
[*574] It is difficult to characterize the remedy plaintiff seeks as anything
other than personal. He desires recovery to be paid into his plan
account, an instrument that exists specifically for his benefit. The
measure of that recovery is a loss suffered by him alone. And that loss
itself allegedly arose as the result of defendants' failure to follow
plaintiff's own particular instructions, thereby breaching a duty owed
We are therefore skeptical that plaintiff's individual remedial
interest can serve as a legitimate proxy for the plan in its entirety, as
§ 1132(a)(2) requires. To be sure, the recovery plaintiff seeks could be
seen as accruing to the plan in the narrow sense that it would be paid
into plaintiff's personal plan account, which is part of the plan. But
such a view finds no license in the statutory text, and threatens to
undermine the careful limitations Congress has placed on the scope of
ERISA relief.
This case is much different from a § 1132(a)(2) action in which an
individual plaintiff sues on behalf of the plan itself or on behalf of a
class of similarly situated participants. See Smith v. Sydnor,
184 F.3d 356, 363 (4th Cir. 1999); see also In re Schering-Plough Corp.
ERISA Litig., 420 F.3d 231, 233, 235 (3d Cir. 2005); Kuper v. Iovenko,
66 F.3d 1447, 1452-53 (6th Cir. 1995). In such a case, the "remedy will
undoubtedly benefit [the plaintiff] and other participants in the
[p]lan," but "it does not solely benefit the individual participants."
Smith, 184 F.3d at 363 (emphasis added); see also Roth v. Sawyer-Cleator
Lumber Co., 61 F.3d 599, 605 (8th Cir. 1995) (permitting recovery for
losses to the plan but not losses to the individual plaintiff
beneficiaries for defendants' alleged breach of fiduciary duty). Here, by
contrast, plaintiff seeks to particularize the recovery to himself.
Section 1132(a)(2) is not a proper avenue for him to obtain such relief.
[2] We thus turn to plaintiff's second theory of relief, which relies on a
different ERISA remedial provision, 29 U.S.C. § 1132(a)(3). That section
authorizes a civil action
enforce any provisions of this subchapter or the
Plaintiff contends that the "make whole" relief he seeks constitutes one
of the forms of "other appropriate equitable relief" that the provision
In construing the scope of § 1132(a)(3), the Supreme Court has stressed
that the term "equitable" is one of limitation. In Mertens v. Hewitt
Associates, the Court held that the phrase "equitable relief" refers only
to "those categories of relief that were typically available in equity"
in the days of the divided bench. 508 U.S. at 256, 113 S.Ct. 2063; see
also Sereboff v. Mid Atl. Med. Servs., Inc., ___ U.S. ___, ___,
126 S.Ct. 1869, 1873, 164 L.Ed.2d 612, ___ (2006). The Court reasoned that
other sections of ERISA expressly refer to "equitable or remedial
relief," 29 U.S.C. § 1109(a), and "legal or equitable relief," e.g., id.
§ 1132(g)(2)(E), thereby demonstrating that "equitable relief" connotes
only a subset of the full palliative spectrum. See Mertens,
508 U.S. at 258, 113 S.Ct. 2063. The Court refused to "read the statute to
render the modifier superfluous," id., a construction that would
undermine Congress's exclusive remedial scheme by opening a back door
through which uninvited remedies might enter, id. at 257, 113 S.Ct. 2063.
[*575] The particular definition of "equitable" that the Court has adopted
finds support in a well-known principle of statutory construction. "The
maxim noscitur a sociis, that a word is known by the company it keeps,
while not an inescapable rule, is often wisely applied where a word is
capable of many meanings in order to avoid the giving of unintended
breadth to the Acts of Congress." Jarecki v. G.D. Searle & Co.,
367 U.S. 303, 307, 81 S.Ct. 1579, 6 L.Ed.2d 859 (1961). Section 1132(a)(3)
expressly mentions the right to "enjoin" certain acts or practices "or .
. . to obtain other appropriate equitable relief" (emphasis added). The
understanding of what "equitable" means in this context is necessarily
informed by its association with injunctive relief, the quintessential
exemplar of a remedy that equity alone would typically provide.
Determining the applicability of § 1132(a)(3) therefore requires a
court to examine whether the form of relief a plaintiff seeks is, like an
injunction, historically one that a court of equity rather than a court
of law would have granted. See Sereboff, 126 S.Ct. at 1874. The Supreme
Court has, in addition to injunctions, listed mandamus and restitution as
examples of traditional equitable remedies. See Mertens, 508 U.S. at 256,
113 S.Ct. 2063. Subsequent decisions of both the Supreme Court and this
court have been wary of expanding the list beyond these archetypes and
their closely related kin. See, e.g. Varity Corp. v. Howe, 516 U.S. 489,
495, 515, 116 S.Ct. 1065, 134 L.Ed.2d 130 (1996) (reinstatement to a
plan); Griggs v. E.I. Dupont de Nemours & Co., 385 F.3d 440, 449 (4th
Cir. 2004) (rescission); Denny's, Inc. v. Cake, 364 F.3d 521, 526 n. 6
(4th Cir. 2004) (declaratory relief incident to an injunction).
Mertens and its progeny compel the conclusion that the remedy plaintiff
desires falls outside the scope of § 1132(a)(3). As in Mertens, although
he "often dance[s] around the word," what plaintiff "in fact seek[s] is
nothing other than compensatory damages — monetary relief for all losses
. . . sustained as a result of the alleged breach of fiduciary duties."
508 U.S. at 255, 113 S.Ct. 2063. "Money damages are, of course, the
classic form of legal relief," id., and have therefore remained
conspicuously absent from the list of traditional equitable remedies
available under § 1132(a)(3), id. at 256.
While that list does include "restitution," id., this form of recovery
is not so broad as to include the compensatory relief that plaintiff
seeks. As the Supreme Court explained in Great-West Life & Annuity
Insurance Co. v. Knudson, "not all relief falling under the rubric of
restitution is available in equity." 534 U.S. at 212, 122 S.Ct. 708. In
particular, "for restitution to lie in equity," as opposed to at law, "the
action generally must seek not to impose personal liability on the
defendant, but to restore to the plaintiff particular funds or property
in the defendant's possession." Id. at 214, 122 S.Ct. 708; see also id. at
214, 122 S.Ct. 708 n. 2 (noting a single "limited exception" applicable to
"an accounting of profits").
The Supreme Court's most recent § 1132(a)(3) decisions demonstrate how
the absence of unjust possession is fatal to an equitable restitution
claim. In Knudson, the Court denied a restitutionary remedy under §
1132(a)(3) where "`the funds to which petitioners claimed an entitlement'
were not in Knudson's possession, but had instead been placed in a
`Special Needs Trust' under California law." Sereboff, 126 S.Ct. at 1874
(quoting Knudson, 534 U.S. at 207, 214, 122 S.Ct. 708) (internal
alterations omitted). More recently in Sereboff v. Mid Atlantic Medical
Services, Inc., the Court allowed a claim for equitable
[*576] restitution to proceed where "Mid Atlantic sought specifically
identifiable funds that were within the possession and control of the
Sereboffs." Id. (internal quotation marks omitted). The Court in
Sereboff reaffirmed the possession requirement it had announced in
Knudson, but found that the "impediment to characterizing the relief in
Knudson as equitable [was] not present" in the Sereboffs' case. Id.
The impediment is, however, present in this case, and it precludes
plaintiff from recovering under an equitable restitution theory. Plaintiff
does not allege that funds owed to him are in defendants' possession, but
instead that these funds never materialized at all. He therefore gauges
his recovery not by the value of defendants' nonexistent gain, but by the
value of his own loss — a measure that is traditionally legal, not
equitable. See, e.g., Kerr v. Charles F. Vatterott & Co., 184 F.3d 938,
944 (8th Cir. 1999); see also Sereboff, 126 S.Ct. at 1874 (claim may be
characterized as legal if plaintiff does not "seek to recover a
particular fund from the defendant"). Thus, at core, he seeks "to obtain a
judgment imposing a merely personal liability upon the defendant[s] to
pay a sum of money." Knudson, 534 U.S. at 213, 122 S.Ct. 708 (internal
quotation marks omitted). As Knudson explained, historically "[s]uch
claims were viewed essentially as actions at law," and they are therefore
unavailable under § 1132(a)(3). Id.
Plaintiff attempts to avoid this conclusion by arguing that his
requested "make whole" relief represents something entirely different
from the types of remedies that we or the Supreme Court have here-to-fore
considered in the context of § 1132(a)(3). In particular, he emphasizes
that this case involves a situation where a participant or beneficiary is
suing a fiduciary for a breach of fiduciary duty. In his view, the scope
of "equitable" remedies available in such a case is broader than when a
fiduciary sues a beneficiary (as was the case in Knudson and Sereboff) or
when a beneficiary sues a non-fiduciary (as was the case in Mertens).
Unlike either of those scenarios, the argument goes, this case can be
analogized to a common law breach-of-trust action by a beneficiary
seeking to recover lost trust profits, a remedy that trust treatises have
labeled "equitable." See Restatement (Second) of Trusts §§ 197, 205(c)
(1959); see also George Gleason Bogert & George Taylor Bogert, The Law
of Trusts & Trustees § 861 (rev.2d ed. 1995).
The governing precedent, however, does not point as plaintiff
suggests. In fact, Mertens squarely "rejected the claim that the special
equity-court powers applicable to trusts define the reach of [§
1132(a)(3)]." Knudson, 534 U.S. at 219, 122 S.Ct. 708; see Mertens,
508 U.S. at 256-57, 113 S.Ct. 2063. While the generally exclusive
jurisdiction of equity courts over breach-of-trust suits renders all
remedies in such cases "equitable" in the sense that a court of equity
has power to grant them, "equitable" in the context of § 1132(a)(3) has a
narrower meaning. Mertens, 508 U.S. at 256, 113 S.Ct. 2063. Under
Mertens, "the relevant question is . . . whether a given type of relief
was available in equity courts as a general rule," Rego v. Westvaco
Corp., 319 F.3d 140, 145 (4th Cir. 2003) (emphasis added), rather than
merely in the context of "the particular case at issue," Mertens,
508 U.S. at 256, 113 S.Ct. 2063. "Equitable relief" therefore does not
encompass the "many situations — not limited to those involving
enforcement of a trust — in which an equity court could," by virtue of
its jurisdiction over the claim at issue, "grant legal remedies which
would otherwise be beyond the scope of its authority." Id. (internal
[*577] That plaintiff can analogize this suit to a common law breach of trust
action therefore proves of no avail in characterizing the relief he seeks
as equitable. Plaintiff admits that he lacks support for the notion that
"make whole" relief was available in equity outside the context of
trusts. It is therefore impossible for us to conclude that such relief
"was available in equity courts as a general rule," Rego, 319 F.3d at 145.
The Sixth Circuit has reached a similar conclusion in a case presenting
facts nearly identical to those before us here. In Helfrich v. PNC Bank,
Kentucky, Inc., 267 F.3d 477 (6th Cir. 2001), a beneficiary of an
employee 401(k) plan sued a plan fiduciary for failing to comply with
written directions to roll over his assets into a specific set of mutual
funds. Id. at 479-80. The plaintiff asserted an entitlement to the
difference between the "amount he would have earned" had the fiduciary
followed his instructions and "the amount he in fact earned" as a result
of the fiduciary's alleged breach of duty. Id. at 480. The court
concluded that his requested remedy was unavailable under § 1132(a)(3).
Id. at 481-83. It found that the plaintiff could not style his relief as
"restitution" when he was measuring recovery by his own losses rather
than the defendant's gains, id. at 482-83, and it rejected a strict
congruence between § 1132(a)(3) and the common law of trusts, id. at 482
(citing Mertens, 508 U.S. at 256, 113 S.Ct. 2063). It therefore dismissed
the suit because "ERISA does not permit plan beneficiaries to claim money
damages from plan fiduciaries." Id. at 482.
As Helfrich shows, the fact that a plaintiff happens to be a
participant or beneficiary suing a fiduciary is entirely beside the point
in the § 1132(a)(3) inquiry; the status of the parties does not determine
the nature of the relief. Many other circuits, both before and after
Knudson, have likewise rejected the notion that whether a particular form
of relief is "equitable" depends on the identity of the parties. See
Pereira v. Farace, 413 F.3d 330, 340 (2d Cir. 2005); Calhoon v. Trans
World Airlines, Inc., 400 F.3d 593, 598 (8th Cir. 2005); Callery v. U.S.
Life Ins. Co. in the City of N.Y., 392 F.3d 401, 409 (10th Cir. 2004);
McLeod v. Oregon Lithoprint Inc., 102 F.3d 376, 378 (9th Cir. 1996);
Armstrong v. Jefferson Smurfit Corp., 30 F.3d 11, 13 (1st Cir. 1994); see
also Brosted v. Unum Life Ins. Co. of Am., 421 F.3d 459, 466 (7th Cir.
2005) (noting that compensatory damages are unavailable under §
1132(a)(3) in suit for breach of fiduciary duty); D'Amico v. CBS Corp.,
297 F.3d 287, 289, 292 n. 5 (3d Cir. 2002) (same). The teachings of
Mertens and Knudson obligate us to agree, and plaintiff's contrary
argument therefore fails to cast doubt upon our conclusion that the
compensatory relief he seeks is legal, not equitable.
Though Congress may one day take the remedial step plaintiff desires,
it has not yet done so. It is not difficult to imagine why. In crafting
ERISA, Congress sought a careful balance between the goals of "ensuring
fair and prompt enforcement of rights under a plan" on the one hand and
"encourag[ing] . . . the creation of such plans" on the other. Aetna
Health, 542 U.S. at 215, 124 S.Ct. 2488 (internal quotation marks
omitted). It would certainly be reasonable for Congress to have concluded
that imposing personal financial liability on fiduciaries under
circumstances such as this — where there was no unjust enrichment,
unlawful possession, or self-dealing — would seriously deter plan
formation and the service of qualified individuals and institutions as
fiduciaries. Compare, e.g., Mertens, 508 U.S. at 262-63,
[*578] 113 S.Ct. 2063 (discussing negative effects of expansive ERISA liability).
Congress's decision to omit such liability hardly leaves a plan
participant or beneficiary in plaintiff's position without recourse. He
could, for example, seek an injunction compelling compliance with his
investment instructions, see 29 U.S.C. § 1132(a)(3), or, under
appropriate circumstances, bring suit on the plan's behalf to remove the
fiduciary, see 29 U.S.C. § 1109(a). In Congress's view, such alternative
remedies are sufficient to keep fiduciaries from breaches of fiduciary
duty that result in no benefit whatsoever to themselves. We possess no
authority "to adjust the balance . . . that the text adopted by Congress
has struck." Mertens, 508 U.S. at 263, 113 S.Ct. 2063. Accordingly, we
[fn*] Accepting the allegations as pled, as we must, we shall assume
without deciding that defendants' alleged conduct amounted to a breach of