LawyersUSA

An employee participating in a defined contribution pension plan can recover damages under ERISA for lost growth in his personal account where the fiduciary failed to make changes as directed by the employee, the U.S. Supreme Court has ruled.

The employee enrolled in an ERISA-regulated 401(k) plan and requested that changes be made to the investments in his account. When the consulting firm that managed the plan failed to make the changes, the employee sued under §502(a)(2) of ERISA.

He claimed that the defendants breached their fiduciary duty by failing to make his requested changes, and he sought to recover the amount his account would have appreciated.

The defendants argued that because §502(a)(2) doesn't provide a remedy for individual accounts, the plaintiff didn't have a cause of action unless the plan as a whole had lost value.

A U.S. District Court agreed and the 4th Circuit affirmed.

But in an opinion by Justice John Paul Stevens, the Court reversed.

Section 502(a)(2) of ERISA "authorizes the Secretary of Labor as well as plan participants, beneficiaries, and fiduciaries, to bring actions on behalf of a plan to recover for violations of the obligations defined in §409(a). The principal statutory duties imposed on fiduciaries by that section 'relate to the proper management, administration, and investment of fund assets,' with an eye toward ensuring that 'the benefits authorized by the plan' are ultimately paid to participants and beneficiaries. The misconduct alleged by the [plaintiff] in this case falls squarely within that category. … Whether a fiduciary breach diminishes plan assets payable to all participants and beneficiaries, or only to persons tied to particular individual accounts, it creates the kind of harms that concerned the draftsmen of §409. …

"We therefore hold that 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," the Court said.

Chief Justice John Roberts filed a concurring opinion – joined by Justice Anthony Kennedy – as did Justice Clarence Thomas, joined by Justice Antonin Scalia.

U.S. Supreme Court. LaRue v. DeWolff, Boberg & Associates, Inc., No. 06-856. Feb. 20, 2008. Lawyers USA No. 9939316. Click here for the full text of this opinion.