1. Does Section 502(a)(2) of ERISA permit a plan participant to bring an action to recover losses caused by a fiduciary's breach but which are attributable only to his (defined contribution plan) account and not to the entire plan?
2. Does Section 502(a)(3) of ERISA permit a plan participant to bring an action for monetary "make-whole" relief (known in equity as a surcharge) to compensate for losses directly caused by a fiduciary breach?
In LaRue, the fiduciary failed to invest the petitioner's money in a 401(k) plan as he had directed, resulting in losses to his account. The question thus boils down to, are losses to one participant's account actionable under Section 502(a)(2) as "losses to the plan" even though it affects only his one account, and not the plan as a whole or any other account within the plan?
This ruling creates a conflict with every other court to have addressed the issue -- the Third, Fifth, Sixth and Seventh Circuits. The Sixth Circuit case is Kuper v. Iovenko, 66 F.3d 1447 (6th Cir. 1995). In Kuper, the court allowed a participant to sue under Section 502(a)(2) to recover losses to a defined contribution plan that were caused by fiduciary breaches even though the recovered losses were allocated only to the plaintiff's individual account and not to all accounts in the plan as a whole.
Regarding the second question, Section 502(a)(3) of ERISA authorizes a civil action by a plan participant, beneficiary or fiduciary to enjoin or to "obtain other appropriate equitable relief to redress" violations of ERISA or the terms of the plan. In Mertens v. Hewitt Associates, 508 U.S. 248, 256 (1993), the Court held that the term "appropriate equitable relief" means "those categories of relief typically available in equity . . . but not compensatory damages."
So, the issue is whether "make-whole" monetary relief against a fiduciary for losses caused by his breaches is authorized by Section 502(a)(3) because such relief was generally and typically available in equity -- as a "surcharge" against the fiduciary. The import of LaRue is that a growing majority of the circuits are holding it is not authorized because such monetary relief was not available as an "equitable" remedy.
Since ERISA was enacted to remedy "misuse and mismanagement of plan assets by plan administrators," the United States urged the Court to grant cert. "to clarify that ERISA provides monetary remedies to recompense plans and participants who have been harmed by fiduciary breaches."
Counsel for petitioners are Jean-Claude Andre, the incredibly successful advocate who won the consolidated PLRA-exhaustion cases, Jones v. Bock (Case No. 05-7058) and Williams v. Overton (Case No. 05-7142), and the case establishing the right of parents to advocate for their disabled children under the IDEA, Winkelman v. Parma City School District (Case No. 05-983), during the October 2006 term, reversing the 6th Circuit in all three cases, and Professor Peter K. Stris of Whittier Law School. Further information can be obtained from the petition for certiorari, BIO and reply brief.
Scotusblog has had two posts on the case located here and here. Stephen Rosenberg of The McCormack Firm has this post on LaRue in his Boston ERISA & Insurance Litigation Blog. Professor Paul M. Secunda of WorkplaceProfBlog has two posts on the case here and here.