On February 22, 2008, the US Supreme Court handed down an ERISA decision that has the potential to create protections for a wide range of workplace benefits where none have existed . . . and it was a unanimous decision.
First, briefly, the alignment of justices is worth some mention. The outcome is unanimous, but there are three decisions. The majority opinion was written by Stevens and joined by Souter, Ginsburg, Breyer, and . . . Alito. Chief Justice Roberts wrote an opinion that concurred, in part, in the majority's reasoning and concurred in the judgment. Roberts' decision was joined by Kennedy. Last, Thomas wrote an opinion that Scalia joined - no surprise there - but it also concurred in the judgment.
ERISA was created under a very different healthcare and pension regime than we have today. Most of ERISA applies to defined benefit plans and provides a wide range of protections for them. It has weak to no remedies for the increasingly more prevalent defined contribution plans, for 401(k)s, and for a range of other benefits, such as health insurance.
What makes these weak to nonexisten ERISA remedies a problem is that ERISA also has far ranging preemption of any state law - defined broadly to include cases, statutes, and more. What this means is that what could be a state tort claim for medical malpractice or a breach of contract claim is preempted by ERISA - meaning you can only sue under ERISA.
But ERISA's remedies are so weak that this often means no remedy.
What this new case, LaRue v. DeWolff Boberg & Assocs. Inc does is interpret one of ERISA's remedies sections, § 502, to provide a remedy. While a modest change, the reasoning creates the possibility of applying it to other claims.
So this is what is important about this case. And the surprise of unanimity. Not really a surprise, given Justice Ginsberg's plea for such a change in the Davila case of a few years ago. That plea came in a concurrence in another unanimous ERISA case which found no meaningful remedy for plaintiffs who had suffered terrible injuries.
Here is a description of LaRue from the Supreme Court's summary. I don't expect it to be an easy read. You have to know ERISA and the way it has been interpreted to fully appreciate it, but it will give enough information for those who don't to see what the case means.
Petitioner, a participant in a defined contribution pension plan, alleged that the plan administrator’s failure to follow petitioner’s investment directions “depleted” his interest in the plan by approximately $150,000 and amounted to a breach of fiduciary duty under the Employee Retirement Income Security Act of 1974 (ERISA). The District Court granted respondents judgment on the pleadings, and the Fourth Circuit affirmed. Relying on Massachusetts Mutual Life Ins. Co. v. Russell, 473 U. S. 134 , the Circuit held that ERISA §502(a)(2) provides remedies only for entire plans, not for individuals.
Held: Although §502(a)(2) does not provide a remedy for individual injuries distinct from plan injuries, it does authorize recovery for fiduciary breaches that impair the value of plan assets in a participant’s individual account. Section 502(a)(2) provides for suits to enforce the liability-creating provisions of §409, concerning breaches of fiduciary duties that harm plans. The principal statutory duties imposed by §409 relate to the proper management, administration, and investment of plan assets, with an eye toward ensuring that the benefits authorized by the plan are ultimately paid to plan participants. The misconduct that petitioner alleges falls squarely within that category, unlike the misconduct in Russell. There, the plaintiff received all of the benefits to which she was contractually entitled, but sought consequential damages arising from a delay in the processing of her claim. Russell’s emphasis on protecting the “entire plan” reflects the fact that the disability plan in Russell, as well as the typical pension plan at that time, promised participants a fixed benefit. Misconduct by such a plan’s administrators will not affect an individual’s entitlement to a defined benefit unless it creates or enhances the risk of default by the entire plan. For defined contribution plans, however, fiduciary misconduct need not threaten the entire plan’s solvency to reduce benefits below the amount that participants would otherwise receive. Whether a fiduciary breach diminishes plan assets payable to all participants or only to particular individuals, it creates the kind of harms that concerned §409’s draftsmen. Thus, Russell’s “entire plan” references, which accurately reflect §409’s operation in the defined benefit context, are beside the point in the defined contribution context.
First, briefly, the alignment of justices is worth some mention. The outcome is unanimous, but there are three decisions. The majority opinion was written by Stevens and joined by Souter, Ginsburg, Breyer, and . . . Alito. Chief Justice Roberts wrote an opinion that concurred, in part, in the majority's reasoning and concurred in the judgment. Roberts' decision was joined by Kennedy. Last, Thomas wrote an opinion that Scalia joined - no surprise there - but it also concurred in the judgment.
ERISA was created under a very different healthcare and pension regime than we have today. Most of ERISA applies to defined benefit plans and provides a wide range of protections for them. It has weak to no remedies for the increasingly more prevalent defined contribution plans, for 401(k)s, and for a range of other benefits, such as health insurance.
What makes these weak to nonexisten ERISA remedies a problem is that ERISA also has far ranging preemption of any state law - defined broadly to include cases, statutes, and more. What this means is that what could be a state tort claim for medical malpractice or a breach of contract claim is preempted by ERISA - meaning you can only sue under ERISA.
But ERISA's remedies are so weak that this often means no remedy.
What this new case, LaRue v. DeWolff Boberg & Assocs. Inc does is interpret one of ERISA's remedies sections, § 502, to provide a remedy. While a modest change, the reasoning creates the possibility of applying it to other claims.
So this is what is important about this case. And the surprise of unanimity. Not really a surprise, given Justice Ginsberg's plea for such a change in the Davila case of a few years ago. That plea came in a concurrence in another unanimous ERISA case which found no meaningful remedy for plaintiffs who had suffered terrible injuries.
Here is a description of LaRue from the Supreme Court's summary. I don't expect it to be an easy read. You have to know ERISA and the way it has been interpreted to fully appreciate it, but it will give enough information for those who don't to see what the case means.
Petitioner, a participant in a defined contribution pension plan, alleged that the plan administrator’s failure to follow petitioner’s investment directions “depleted” his interest in the plan by approximately $150,000 and amounted to a breach of fiduciary duty under the Employee Retirement Income Security Act of 1974 (ERISA). The District Court granted respondents judgment on the pleadings, and the Fourth Circuit affirmed. Relying on Massachusetts Mutual Life Ins. Co. v. Russell, 473 U. S. 134 , the Circuit held that ERISA §502(a)(2) provides remedies only for entire plans, not for individuals.
Held: Although §502(a)(2) does not provide a remedy for individual injuries distinct from plan injuries, it does authorize recovery for fiduciary breaches that impair the value of plan assets in a participant’s individual account. Section 502(a)(2) provides for suits to enforce the liability-creating provisions of §409, concerning breaches of fiduciary duties that harm plans. The principal statutory duties imposed by §409 relate to the proper management, administration, and investment of plan assets, with an eye toward ensuring that the benefits authorized by the plan are ultimately paid to plan participants. The misconduct that petitioner alleges falls squarely within that category, unlike the misconduct in Russell. There, the plaintiff received all of the benefits to which she was contractually entitled, but sought consequential damages arising from a delay in the processing of her claim. Russell’s emphasis on protecting the “entire plan” reflects the fact that the disability plan in Russell, as well as the typical pension plan at that time, promised participants a fixed benefit. Misconduct by such a plan’s administrators will not affect an individual’s entitlement to a defined benefit unless it creates or enhances the risk of default by the entire plan. For defined contribution plans, however, fiduciary misconduct need not threaten the entire plan’s solvency to reduce benefits below the amount that participants would otherwise receive. Whether a fiduciary breach diminishes plan assets payable to all participants or only to particular individuals, it creates the kind of harms that concerned §409’s draftsmen. Thus, Russell’s “entire plan” references, which accurately reflect §409’s operation in the defined benefit context, are beside the point in the defined contribution context.
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