LaRue v. DeWolff, Boberg & Assoc.

The rights of individual workers to sue their employers for breach of fiduciary duty under the ERISA retirement plan law will be decided by the Court in the upcoming term. The law has typically been interpreted to permit such suits only when employers have injured all plan participants by misappropriation of funds or similar actions.

James LaRue participated in a 401(k) retirement savings plan administered by his employer, the management consulting firm DeWolff, Boberg & Associates. Employee benefit plans are regulated under a federal law, the Employee Retirement Income Security Act of 1974 (ERISA).

LaRue sought to exercise his option to make certain changes in his investment plan, but DeWolff neglected to make the changes. LaRue claimed that DeWolff's omission had cost him $150,000, and he sued the firm for breach of fiduciary duty, seeking to recover the money. In response, DeWolff argued that ERISA does not provide for the type of individual monetary award sought by LaRue.

Section 502(a)(2) allows plan participants to sue plan administrators for breach of fiduciary duty in order to "make good to such plan any losses to the plan resulting from each such breach."

DeWolff argued that LaRue's suit was not of the type contemplated by the text of ERISA because LaRue sued to recover losses caused to his own personal retirement plan rather than suing to vindicate the interests of the plan as a whole. LaRue countered by pointing to Section 502(a)(3), which allows plan participants to sue to obtain "other appropriate equitable relief."

The U.S. District Court held that LaRue was not entitled to relief under ERISA, and the U.S. Court of Appeals for the Fourth Circuit affirmed. The Fourth Circuit ruled that Section 502(a)(2) was concerned with protecting entire plans from misuse of plan assets and not with providing recovery for losses suffered by individual accounts.

The court also rejected LaRue's Section 502(a)(3) claim. It ruled that the phrase "equitable relief" rarely includes relief in the form of a monetary award and only when the money has been unjustly possessed by the defendant.

The Supreme Court backed the rights of individual workers to sue their employers for breach of fiduciary duty under the ERISA retirement plan law.

The law had typically been interpreted to permit such suits only when employers have injured all plan participants by misappropriation of funds or similar actions. James LaRue participated in a 401(k) retirement savings plan administered by his employer, the management consulting firm DeWolff, Boberg & Associates. Employee benefit plans are regulated under a federal law, the Employee Retirement Income Security Act of 1974 (ERISA).

LaRue sought to exercise his option to make certain changes in his investment plan, but DeWolff neglected to make the changes. LaRue claimed that DeWolff's omission had cost him $150,000, and he sued the firm for breach of fiduciary duty, seeking to recover the money. In response, DeWolff argued that ERISA does not provide for the type of individual monetary award sought by LaRue.

Section 502(a)(2) allows plan participants to sue plan administrators for breach of fiduciary duty in order to "make good to such plan any losses to the plan resulting from each such breach."

DeWolff argued that LaRue's suit was not of the type contemplated by the text of ERISA because LaRue sued to recover losses caused to his own personal retirement plan rather than suing to vindicate the interests of the plan as a whole. LaRue countered by pointing to Section 502(a)(3), which allows plan participants to sue to obtain "other appropriate equitable relief."

The U.S. District Court held that LaRue was not entitled to relief under ERISA, and the U.S. Court of Appeals for the Fourth Circuit affirmed. The Fourth Circuit ruled that Section 502(a)(2) was concerned with protecting entire plans from misuse of plan assets and not with providing recovery for losses suffered by individual accounts.

The court also rejected LaRue's Section 502(a)(3) claim. It ruled that the phrase "equitable relief" rarely includes relief in the form of a monetary award and only when the money has been unjustly possessed by the defendant.On Feb. 20, the high court overturned the appeals court decision. “Although § 502(a)(2) does not provide a remedy for individual injuries distinct from plan injuries, that provision does authorize recovery for fiduciary breaches that impair the value of plan assets in a participant’s individual account,” Justice John Paul Stevens wrote for the Court.Chief Justice John Roberts, joined by Justice Anthony Kennedy, authored a concurring opinion, in which he suggests that the Court’s decision might allow some employees to recast a benefits claim as a breach of fiduciary duty claim to circumvent many of the safeguards enacted by Congress to protect retirement plan administrators.

Justice Clarence Thomas, joined by Justice Antonin Scalia, also concurred.

Question presented: Whether ERISA provides private causes of action for plan participants alleging fiduciary breaches.