Erisa's Remedial Irony: Narrow Interpretation Paves the Way for Jury Trials in Suits for Breach of Fiduciary Duty Under Erisa

• Publication year: 2010

Georgia State University Law Review

Volume 26 j 1

Issue 3 Spring 2010

3-21-2012

ERISA's Remedial Irony: Narrow Interpretation Paves the Way for Jury Trials in Suits for Breach of Fiduciary Duty Under ERISA

Kris Alderman

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Recommended Citation

Alderman, Kris (2009) "ERISA's Remedial Irony: Narrow Interpretation Paves the Way for Jury Trials in Suits for Breach of Fiduciary Duty Under ERISA," Georgia State University Law Review: Vol. 26: Iss. 3, Article 1. Available at: http://digitalarchive.gsu.edu/gsulr/vol26/iss3/!

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ERISA'S REMEDIAL IRONY: NARROW INTERPRETATION PAVES THE WAY FOR JURY TRIALS IN SUITS FOR BREACH OF FIDUCIARY DUTY UNDER ERISA

Kris Alderman*

Introduction

When Eugene Scalia, son of Supreme Court Justice Antonin Scalia, filed an amicus brief arguing that monetary relief for a breach of fiduciary duty was "traditionally, typically, and exclusively" available in courts of equity, the suggestion was clear that the remedial provisions of the Employee Retirement Income Security Act (ERISA) of 1974 were capable of dividing even families. Through a series of opinions, two of which were written by Justice Scalia, the Supreme Court has narrowly construed the term "equitable" as used in ERISA's remedial provisions, by excluding money damages from that term's ambit.⁴ In the process, the Court paved the way for plaintiffs seeking money damages under ERISA § 502(a)(2) to exercise their Seventh Amendment right to a jury trial.⁵

' J.D. 2010, Georgia State University College of Law.

1. Employee Retirement Income Security Act (ERISA), Pub. L. No. 93^06, 88 Stat. 829 (1974) (codified as amended at 29 U.S.C. §§ 1001-1461 (2000)).

2. John H. Langbein, What ERISA Means by "Equitable": The Supreme Court's Trail of Error in Russell, Mertens, and Great-West, 103 colum. L. Rev. 1317, 1352 (2003) (citing Amended Brief of the Secretary of Labor as Amici Curiae Opposing the Motions to Dismiss at 51, In re Enron Corp., No. MDL 1446,2002 WL 32116900 (S.D. Tex. Mar. 28,2002)).

3. ERISA § 502 (codified as amended at 29 U.S.C. § 1132 (2000)).

4. Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002) (Scalia, J.); Mertens v. Hewitt Assocs., 508 U.S. 248 (1993) (Scalia, J.); Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134 (1985) (Stevens, J.). Also relevant to the trilogy of Russell, Mertens, and Great-West is Justice Scalia's dissenting opinion in Bowen v. Massachusetts, 487 U.S. 879, 913 (1988).

5. See generally Donald T. Bogan, ERISA: Re-Thinking Firestone in Light of Great-West— Implications for Standard of Review and the Right to a Jury Trial in Welfare Benefit Claims, 37 J. marshall L. Rev. 629 (2004); Mark D. DeBofsky, The Paradox of the Misuse of Administrative Law in ERISA Benefit Claims, 37 J. marshall L. rev. 727, 742 (2004); Andrew T. Kusner, Mertens v. Hewitt & Associates, and the ERISA Liability of the Professional Service Provider, 15 berkeley J. Emp. & Lab. L. 273, 304 (1994).

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The purpose of this Note is to determine whether ERISA, in light of its interpretation by the Supreme Court, permits a jury trial for plaintiffs seeking damages for a breach of fiduciary duty. Part I examines the nature, purposes, and scope of ERISA.⁶ After presenting a brief background, this Note surveys the development of Supreme Court case law relevant to the questions whether damages are available under § 502(a)(2) and whether damages are legal rather than equitable relief.⁷ Next, the requirements for invoking the

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Seventh Amendment right to a jury trial are discussed. Part II then applies relevant Supreme Court jurisprudence to demands for jury trials under § 502(a)(2) and discusses rationales of lower courts addressing the question directly.⁹ Part III suggests an answer to the question, hypothesizes contrary arguments, and discusses the likelihood of the Supreme Court squarely addressing the question.¹⁰ Finally, this Note concludes that at least some claims brought under ERISA § 502(a)(2) for breach of fiduciary duty permit a jury trial upon demand.

I. Background

A. Nature, Purposes, and Scope of ERISA

ERISA was enacted by the 93rd Congress¹¹ after a decade of legislative and executive branch inquiries into the private pension and

6. See discussion infra Part I.A-B.

7. See discussion infra Part I.C. The Court recognizes that some forms of restitution, for which money damages are available, are equitable rather than legal. Great-West, 534 U.S. at 212-13 (holding restitution is a legal remedy when the plaintiff "could not assert title or right to possession of particular property, but in which he might be able to show just grounds for recovering money to pay for some benefit the defendant had received from him"; but it is an equitable remedy "where 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").

8. See discussion infra Part I.D.

9. See discussion infra Part II.

10. See discussion infra Part III.

11. ABA Section of Labor and Employment Law, Employee Benefits Law 1, at xxxix (Steven J. Sacher et al. eds., BNA Books 1991). The 93rd Congress was one of the most active and influential, enacting two other pieces of landmark legislation, the War Powers Act and the Budget Reform and Impoundment Act. Id. Additionally, the 93rd Congress only avoided impeachment proceedings against President Nixon because he resigned first. Id.

2010] FIDUCIARY DUTY UNDER ERISA 973

employee welfare system. ERISA was enacted for the benefit of pension and welfare plan participants and their beneficiaries, regulating employee benefit plans and protecting the funds invested in such plans.¹³ Notwithstanding its simplicity of purpose, ERISA is "an enormously complex and detailed statute that resolved innumerable disputes between powerful competing interests—not all in favor of potential plaintiffs."¹⁴ Since its enactment, ERISA's scope has been evident from the burden it has placed on the federal courts—and the courts have noticed ERISA's complexity.¹⁵ The Court has often noted the careful drafting and integration of ERISA's enforcement provisions.¹⁶

ERISA fiduciary law undoubtedly draws heavily from the common law of trusts.¹⁷ However, ERISA does not merely codify the common law of trusts. For example, ERISA defines a fiduciary functionally as anyone who exercises control or authority over a plan, rather than in terms of formal trusteeship as is done at common law.¹⁸ By doing so,

12. Id. at 6-7.

13. ERISA Fiduciary Law 3 (Susan P. Serota ed., BNA Books 1995); see also 29 U.S.C. § 1001 (2000). For a general discussion of the purposes of ERISA see ABA Section of Labor and employment Law, supra note 11, at 17-19.

14. Mertens v. Hewitt Assocs., 508 U.S. 248, 262 (1993). The Court is thus cognizant of the legislative challenge to balance interests between protecting employees' promised benefits under private plans offered by employers and employers' interests in controlling costs. Id. at 262-63. The Court previously recognized that Congress was concerned that the cost of federal standards would discourage growth of private pension plans. Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 148 n.17 (1985). Presumably the Court recognized that its ERISA jurisprudence was subject to the same concerns.

15. Dana M. Muir, ERISA Remedies: Chimera or Congressional Compromise?, 81 iowa L. rev. 1, 3 (1995) (reporting that in 1993 Justice White lamented that Supreme Court Justices "have 'ERISA cases coming out of [their] ears'" (quoting Fiduciary Responsibility: Justices Question Whether Non-Fiduciary Is Liable for Money Damages Under ERISA, 20 pension & benefits rep. (BNA) 524 (Mar. 1, 1993))). The Court has perhaps also been lamenting when it has repeatedly observed that ERISA is a "comprehensive and reticulated statute." Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 209 (2002) (quoting Mertens, 508 U.S. at 251).

16. Great-West, 534 U.S. at 209; Mertens, 508 U.S. at 261-62; Russell, 473 U.S. at 146-47. In spite of the Court's repeated insistence that the remedial provisions were carefully drafted and integrated, these provisions have not been regarded as perfect. Mertens, 508 U.S. at 259 n.8; Russell, 473 U.S. at 156-57 (Brennan, J., dissenting). For a more thorough argument regarding the legislative shortcomings of the ERISA enforcement scheme, see Langbein, supra note 2, at 1345.

17. LaRue v. DeWolff, Boberg & Assocs., 128 S. Ct. 1020, 1024 n.4 (2008) (citing Varity Corp. v. Howe, 516 U.S. 489, 496-97 (1996)); Russell, 473 U.S. at 153 n.6 (Brennan, J., concurring); ERISA fiduciary Law, supra note 13, at 4; Langbein, supra note 2, at 1317; Muir, supra note 15, at 18.

18. Mertens, 508 U.S. at 262. ERISA § 3(21)(A) (codified as amended at 29 U.S.C. § 1002(21)(A) (2000)), provides:

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ERISA expands its coverage beyond that of common law trust principles.¹⁹ ERISA § 404 outlines fiduciary duties, the basic premise being that fiduciaries must act solely in the interest of beneficiaries, with fiduciary actions being tested under the prudent man standard. Section 409 describes the liability of fiduciaries for breaches of their duty.²¹ Finally, § 502 creates causes of action,²² including a right of action for fiduciary liability created under § 409.²³ However, despite ERISA's complexity and integration, the statute does not expressly provide whether a jury trial is available.²⁴

B. ERISA § 502(a)(2) and Other Relevant Enforcement Provisions

ERISA §...