That was a key assertion from two prominent Employee Retirement Income Security Act (ERISA) lawyers in the wake of the unanimous ruling in LaRue v. DeWolff Boberg & Associates, Inc.
Fred Reish, of the Los Angeles-based law firm of Reish Luftman Reicher & Cohen, and Mike Prame, head of the litigation practice at the Groom Law Group in Washington, D.C., pointed out that some lower courts have already reached similar conclusions as the high court. “That’s the way lower courts have viewed this as well,” said Prame. “The courts have been receptive to allowing the plaintiffs to proceed with these claims.”
For example, last month, the 6 th U.S. Circuit Court of Appeals, which hears federal appeals from courts inMichigan, Ohio, Kentucky, and Tennessee, ruled in favor of individual breach suits and put itself at odds with the 4 th Circuit Court of Appeals. The 4 th Circuit is the Richmond, Virginia-based court that ruled against plaintiff James LaRue and prompted the appeal that set up Wednesday’s landmark ruling (See Appellate Court Splits with Sister Court on 401(k) Breach Remedies ).
Reish pointed out that potential solo ERISA litigants still have to be able to plausibly argue they were the individual victim of an improper plan-related issue – a legal “bad act.” He predicted: “There won’t be a flood of lawsuits filed willy nilly.”
The Thomas-Scalia Viewpoint
Both Reish and Prame praised a separate opinion written by Justice Clarence Thomas in which Justice Antonin Scalia joined.
While agreeing with the majority opinion penned by Justice John Paul Stevens that LaRue deserved a chance to prove his fiduciary breach case (See Justices OK Individual ERISA Suits in Landmark Ruling ) – the court sent the matter back to the lower courts for further proceedings – Thomas and Scalia argued that the High Court should have ruled in LaRue’s favor by simply interpreting the language of ERISA.
The Stevens opinion asserted that the shift in legal and regulatory underpinning called for by the court was necessary because of the U.S. pension landscape is now so heavily DC-centric.
Finally, Prame pointed out two other items of note from a separate decision written by Chief Justice John G. Roberts Jr. in which Justice Anthony Kennedy joined:
- Roberts asserted that LaRue's type of lawsuit should be allowed as a claim to recoup lost benefits under ERISA section 502(a)(1)(B) instead of the fiduciary breach provision in 502(a)(2)."LaRue's right to direct the investment of his contributions was a right granted and governed by the plan," Roberts wrote. "In this action, he seeks the benefits that would otherwise be due him if, as alleged, the plan carried out his investment instruction. LaRue's claim, therefore, is a claim for benefits that turns on the application and interpretation of the plan terms, specifically those governing investment options and how to exercise them." Roberts called for the lower courts to consider whether the availability for plaintiffs to sue for lost benefits means they shouldn't also be able to use the fiduciary breach provision.
- Allowing individual participants to sue for fiduciary breach would effectively strip plan fiduciaries of the "safeguard" of requiring plaintiffs to first fully utilize any plan administrative appeal mechanism before turning to the courts.
LaRue a Texas management consultant, sued his employer, DeWolff, Boberg & Associates Inc., to regain $150,000 that he charged was lost from his 401(k) account because the plan administrators twice disregarded his order to move funds to different investment options.
Now a self-employed consultant to manufacturing and telecommunications companies , LaRue told the Washington Post he had tried unsuccessfully to move his retirement funds from equities into cash investments because of the stock market turbulence after the burst of the Internet bubble and in the wake of the September 11, 2001, terrorists attacks.
The 6th Circuit ruling in Tullis v. UMB Bank N.A., 6th Cir., No. 06-4632 1/28/08 - is here .
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