Judge Rules ERISA Equitable Remedy Cases Have No Right to Jury Trial

U.S. Magistrate Judge Marianne B. Bowler has allowed Massachusetts Institute of Technology’s motion to strike plaintiffs’ demand for a jury trial in an Employee Retirement Income Security Act (ERISA) suit alleging breach of duty of prudence by fiduciaries of MIT’s supplemental 401(k) plan.

In their lawsuit, the plaintiffs allege that “instead of leveraging the Plan’s bargaining power to benefit participants, defendants allowed a conflicted third party to dictate Plan decisions.” They claim the defendants permitted MIT donor Fidelity Investments, “the Plan’s recordkeeper and primary investment provider,” “to put hundreds of its proprietary investment funds in the plan” and “to collect unreasonable and excessive fees, all at the expense of participants’ retirement savings.”

They also contend that because they seek to hold the defendants personally liable “to make good to the plan all losses resulting from each breach of fiduciary duty,” the nature of their claim is legal rather than equitable. However, Bowler said that just because a plaintiff seeks a monetary remedy does not require that the action be viewed as legal rather than equitable in nature.

In her decision, Bowler pointed out that the Seventh Amendment establishes the right to a jury trial “in suits at common law” or those “‘suits in which legal rights [are] to be ascertained and determined, in contradistinction to those where equitable rights alone [are] recognized, and equitable remedies [are] administered.” She also noted that ERISA does not expressly permit or deny that claims brought for breach of fiduciary duty outlined in Section 404(a), and when a statute is silent on a matter, the court initially looks to the statute and its legislative history to determine legislative intent.

Citing cases both within and outside of the District Court’s Circuit, Bowler said, “The great weight of authority holds that no right to trial by jury applies to actions for breach of fiduciary duty under ERISA.”

Referring to Cigna v. Amara and Mertens v. Hewitt Assocs., she found that based on ERISA’s trust law roots, plan fiduciaries under ERISA have been treated as trustees and the plans as trusts. “Thus, a case involving a suit by a plan beneficiary against a plan fiduciary is a case involving a suit against a trustee typically only heard in a court of equity.”

According to Bowler, the cases on which the plaintiffs rely for their arguments for a jury trial are distinguishable because they are analogous to an action for breach of contract not breach of fiduciary duty. For example, the plaintiffs rely on a recent district court decision in the 2nd U.S. Circuit Court of Appeals, Cunningham v. Cornell Univ., for the proposition that a make-whole remedy is not equitable when the action seeks to hold defendants personally liable and the funds are not particular funds or property belonging to the plaintiffs in good conscious and in the defendants’ possession. Again citing Cigna, Bowler said, “Yet, when a trustee commits an intentional breach or falls below the required standard of care, it is equity that seeks to place the beneficiary at least in the position that it would have been in had there not been a breach of trust. In the trust context what is being made whole is the beneficiary’s equitable property interest in the trust estate.”

She concluded, “In accord with the great weight of authority in the federal courts holding actions under ERISA to remedy alleged violations of fiduciary duties are equitable in nature, there is no right to a jury trial under the Seventh Amendment in this action.”