Former YRC Employees Denied Jury Trial in Stock-Drop Case

December 1, 2010 ( – A federal court has denied a request for a jury trial by former employees of YRC Worldwide who are suing the company for offering company stock as a 401(k) investment option when it was no longer prudent.

U.S. District Judge John W. Lungstrum of the U.S. District Court for the District of Kansas noted that the Employee Retirement Income Security Act (ERISA) Section 502(a)(3) authorizes an action by a plan participant to enjoin violations of ERISA or to obtain other appropriate equitable relief. The YRC plaintiffs seek “actual damages” to be paid to the plan to restore the loss in the value of the plan’s assets resulting from defendants’ alleged breaches of their fiduciary duties (see Stock-Drop Suit Survives Initial Challenge), and argue that, because they have sought legal relief in the form of damages, they are entitled to a jury trial under the Seventh Amendment to the Constitution.  

Lungstrum noted that all federal appellate courts have held that there is no right to a jury trial for ERISA claims. He also pointed out that courts have consistently characterized ERISA actions as akin to common law trust actions that are governed by common law trust principles. 

However, the plaintiffs argued that they have brought a legal claim requiring a jury trial—specifically their claim for monetary relief for breach of fiduciary duty under Section 502(a)(2)—in light of language in the Supreme Court’s opinion in Great-West Life & Annuity Insurance Co. v. Knudson. The court rejected that argument saying that Great-West “hardly governs the present situation, as it did not involve the right to a jury trial under the Seventh Amendment; it did not involve Section 502(a)(2) of ERISA; and it did not involve a claim against a trustee or fiduciary who had breached duties to participants or beneficiaries.”  

According to Lungstrum, in Great-West, the Supreme Court was considering a claim more akin to a breach of contract action, arising from a contractual duty instead of a fiduciary duty, and the Court quite unremarkably determined that such a claim was a legal claim, distinguished from equitable claims that ordinarily involved imposition of constructive trusts. The claim in the present case, on the other hand, is essentially a claim for breach of trust arising from a non-contractual, fiduciary duty.  

Lungstrum reasoned that the plaintiffs would not be entitled to money damages on behalf of the plan until they obtained a ruling that defendants breached their fiduciary duties—an issue traditionally within the court’s equitable domain. Thus, the plaintiffs’ monetary claim is inextricably intertwined with equitable claims, and so must be deemed equitable as well for purposes of applying the Seventh Amendment, he said.

The case is In re YRC Worldwide Inc. ERISA Litigation, D. Kan., No. 09-2593-JWL.