Opinion ID: 78061
Heading Depth: 1
Heading Rank: 4

Heading: The Former Employees Are Participants of the Plan Entitled To Sue for Breach of Fiduciary Duty.

Text: Our discussion about the standing of the former employees is divided in two parts. First, we discuss whether the status of the former employees as participants implicates the subject-matter jurisdiction of the district court or is a question about the merits of the action. Second, we discuss whether the former employees qualify as participants under ERISA. The latter issue turns on whether the former employees assert a claim for benefits or damages. The district court erroneously dismissed the former employees' complaint for lack of subject-matter jurisdiction. When a plaintiff makes a plausible argument that a federal statute creates his right to relief, the district court has subject-matter jurisdiction over that complaint. In Blue Cross & Blue Shield of Alabama v. Sanders, we explained that whether the plaintiff qualified as a fiduciary entitled to bring an action under section 1132(a)(3) of ERISA involved the merits of the case, not subject-matter jurisdiction, because the argument of the plaintiff in favor of fiduciary status was plausible. 138 F.3d 1347, 1351-53 & nn. 4 & 5 (11th Cir.1998). We relied on Bell v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946), for the proposition that a federal court may dismiss a federal question claim for lack of subject-matter jurisdiction only if: (1) `the alleged claim under the Constitution or federal statutes clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction'; or (2) `such a claim is wholly insubstantial and frivolous.' Sanders, 138 F.3d at 1352 (quoting Bell, 327 U.S. at 682-83, 66 S.Ct. at 776). Our decision in Sanders controls here. The former employees plausibly argue that they are participants entitled to sue for breach of fiduciary duty. Because the former employees' argument for participant status is plausible, the district court had subject-matter jurisdiction. Whether the former employees qualify as participants involves the merits of the appeal. The district court erred when it concluded that it lacked subject-matter jurisdiction over this complaint. The former employees argue that they qualify as participants because, under ERISA, their complaint asserts a claim for benefits instead of damages. We agree. A participant or beneficiary of a plan may bring a civil action for breach of fiduciary duty in the administration of the plan. 29 U.S.C. §§ 1109, 1132(a)(2). Because the former employees do not argue that they qualify as beneficiaries, they may sue for breach of fiduciary duty only if they qualify as participants of the plan. The Act defines the term participant with reference to entitlement to benefits: The term participant means any employee or former employee of an employer, or any member or former member of an employee organization, 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 members of such organization, or whose beneficiaries may be eligible to receive any such benefit. 29 U.S.C. § 1002(7). The Supreme Court has explained that the term `participant' is naturally read to mean either `employees in, or reasonably expected to be in, currently covered employment' or former employees who `have ... a reasonable expectation of returning to covered employment' or who have `a colorable claim' to vested benefits. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117, 109 S.Ct. 948, 958, 103 L.Ed.2d 80 (1989) (citations omitted) (omission in original). The former employees argue that they qualify as participants because they have a colorable claim to vested benefits. Whether the plaintiffs have a colorable claim to vested benefits depends on the distinction between benefits and damages. ERISA allows the recovery of benefits, but it does not allow suits for extracontractual damages. Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 146-48, 105 S.Ct. 3085, 3092-93, 87 L.Ed.2d 96 (1985). The district court concluded that the former employees asserted a claim for damages, not benefits, and did not qualify as participants based on the decision of the Fifth Circuit in Sommers Drug Stores Co. Employee Profit Sharing Trust v. Corrigan, 883 F.2d 345 (5th Cir.1989). The Sommers court stated that a plaintiff alleging that his benefits were wrongly computed has a claim for vested benefits but that a plaintiff who seeks the recovery for the trust of an unascertainable amount, with no demonstration that the recovery will directly effect payment to him, would state a claim for damages. Id. at 350. The district court reasoned that the former employees sought damages because their complaint did not seek a readily ascertainable amount that would directly effect a payment to the plaintiffs. The Third, Sixth, and Seventh Circuits have rejected the reasoning of the Fifth Circuit. In Harzewski v. Guidant Corp., Judge Posner explained that nothing in ERISA suggests that the term benefits encompasses only claims for an easily ascertainable amount. 489 F.3d 799, 807 (7th Cir.2007). Judge Posner instead concluded 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. Id. at 804-05. In Graden v. Conexant Systems Inc., the Third Circuit followed Harzewski and held that an employee qualifies as a participant when he sues for a decrease in the value of a defined contribution account caused by a violation of a fiduciary duty. 496 F.3d 291, 296-98 (3d Cir.2007). The Graden court explained that, for a defined contribution plan, ERISA imposes fiduciary duties on plan administrators, so part of a participant's entitlement is the value of his account unencumbered by any fiduciary impropriety. Id. at 297 (citation omitted). In Bridges v. American Electric Power Co., the Sixth Circuit relied on Harzewski and Graden and held that a former employee could sue to recover the decrease in value of his account in a defined contribution plan caused by a breach of fiduciary duty. 498 F.3d 442, 445 & n. 2 (6th Cir.2007). We agree with the Third, Sixth, and Seventh Circuits. A complaint for the decrease in value of a defined contribution account due to a breach of fiduciary duty is not for damages because it is limited to the difference between the benefits actually received and the benefits that would have been received if the plan management had fulfilled its statutory obligations. Because their complaint is for benefits, not damages, the former employees qualify as participants. The district court erred when it concluded that the former employees were not participants.