remedies

Mertens v. Hewitt Associates, 508 U.S. 248 (1993).

Mertens v. Hewitt Associates, 508 U.S. 248 (1993).  Plaintiffs were employees who participated in the Kaiser Steel Retirement Plan.  The Plan failed to change its actuarial assumptions resulting in inadequate funding of the plan and a decrease in vested pension benefits due them under the plan.  Plaintiffs sued, among others, the plan’s actuary, whom it alleged knowingly failed to disclose the plan’s funding shortfall.  The case went the Supreme Court on the question of whether ERISA permits suits for money damages against nonfiduciaries who knowingly participate in a fiduciary’s breach of fiduciary duty. 

 

The actuary was not a fiduciary under § 1002(21)(A) because it did not exercise discretionary control or authority over the plan’s management, administration, or assets.  Plaintiffs instead sued under § 1132(a)(3) “(A) to enjoin any act or practice which violates any provision of [ERISA] or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of [ERISA] or the terms of the plan…”  Specifically, Plaintiff’s contended that requiring the actuary to make the plan whole again for the losses resulting from its alleged knowing participation in the plan’s breach of fiduciary duty would constitute “other equitable relief.”

 

Justice Scalia first doubts whether ERISA § 1132(a)(3) allows actions against nonfiduciaries, noting that the statute allows not for appropriate equitable relief “at large” but only for the purpose of “redress[ing any] violations or …enforce[ing] any provisions” of ERISA or an ERISA plan.  But the actuary disclaimed reliance on this point, so he moved on.

 

Justice Scalia interpreted “appropriate equitable relief” in this context to mean categories of relief that were typically available in equity, such as injunction, mandamus and restitution, but not compensatory damages, which is what plaintiffs were seeking here.  Id at 257.  He reasoned that there are two senses of the phrase equitable relief, one of which was any relief that one could obtain in a court of equity, but the other of which were those remedies typically available in equity.  He argued principally that since all relief available for breach of trust (the kind of breach at issue here) was available from a court of equity, using that sense of the term would result in limiting the relief under § 1132(a)(3) “not at all.”  (emphasis in original).  Id at 257. 

 

Justice Scalia was nonplussed by the argument that so limiting § 1132(a)(3) would mean that the ERISA statute – which was enacted to protect plan participants and beneficiaries – would offer less protection than they had prior to its enactment, since before its enactment nonfiduciaries were liable under state law for the kind of acts alleged in this case.  He dismissed the vague notion of a statute’s basic purpose, while pointing out that the definition of fiduciary in ERISA is broader than under traditional law and that nonfiduciaries would become liable when they met the function definition of a fiduciary of having control and authority under the plan.  Id. at 262, citing § 1002(21)(A).  He finished by pointing out the increased premium costs that on his view would result from exposure of nonfiduciaries to this kind of liability.  Id. at 262-263.

 

Justice White dissented, arguing that the words appropriate equitable relief referred to all remedies available in equity under the common law of trusts, whether or not they were the exclusive remedies of breach of trust.  Id. at 268.  Among other arguments he pointed out that the majority was wrong to suggest that equitable relief would not be limited at all under § 1132(a)(3) on this interpretation, since there were legal remedies not available at common law for a breach of trust that were available at law, namely extracompensatory relief such as punitive damages.