View PDF Version

No. 06-856

In the Supreme Court of the United States




JAMES LARUE, PETITIONER
v.
DEWOLFF, BOBERG & ASSOCIATES, INC., ET AL.




ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT




BRIEF FOR THE UNITED STATES AS AMICUS CURIAE SUPPORTING PETITIONER



PAUL D. CLEMENT
Solicitor General
Counsel of Record
EDWIN S. KNEEDLER
Deputy Solicitor General
MATTHEW D. ROBERTS
Assistant to the Solicitor
General
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217


JONATHAN L. SNARE
Acting Solicitor of Labor
TIMOTHY D. HAUSER
Associate Solicitor
ELIZABETH HOPKINS
Counsel for Appellate and
Special Litigation
Department of Labor
Washington, D.C. 20210






QUESTIONS PRESENTED
1. Whether Section 502(a)(2) of the Employee Retire ment Income Security Act of 1974 (ERISA), 29 U.S.C. 1132(a)(2), authorizes a participant in a defined contribution pension plan to sue to recover losses to the plan caused by a fiduciary breach when the losses are attributable to the partic ipant's individual plan account.

2. Whether an action by a plan participant against a fidu ciary to recover losses caused by a fiduciary breach seeks "equitable relief" within the meaning of ERISA Section 502(a)(3), 29 U.S.C. 1132(a)(3).

In the Supreme Court of the United States

 

No. 06-856

JAMES LARUE, PETITIONER

v.

DEWOLFF, BOBERG & ASSOCIATES, INC., ET AL.

ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

 

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE SUPPORTING PETITIONER

<

 

INTEREST OF THE UNITED STATES

This case concerns the scope of two civil enforcement provi sions in Title I of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1001 et seq. The Secretary of Labor has primary authority for enforcing and administering Title I of ERISA. In response to an invitation from the Court, the United States filed an amicus brief in this case at the petition stage.

STATEMENT

1. Petitioner is a participant in an ERISA-covered Section 401(k) pension plan sponsored by his employer, respondent DeWolff, Boberg & Associates, Inc. (DeWolff). Pet. App. 2a; see 26 U.S.C. 401(k) (2000 & Supp. IV 2004). DeWolff administers the plan and is thus an ERISA fiduciary. Pet. App. 2a; 29 U.S.C. 1002(21)(A)(iii). The plan is a "defined contribution" or "individ ual account plan." That type of plan "provides for an individual account for each participant and for benefits based solely upon the amount contributed to the participant's account, and any income, expenses, gains and losses, and any forfeitures of ac counts of other participants which may be allocated to such participant's account." 29 U.S.C. 1002(34). Although each participant has an individual account, all of the assets are held in trust by plan trustees, who retain title to and authority over the assets. 29 U.S.C. 1103(a); Rev. Rul. 89-52, 1989-1 C.B. 110.

Under the plan, participants may choose among several in vestment options and direct DeWolff, as plan administrator, to invest the amounts allocated to their accounts in specified per centages among those options. Pet. App. 2a. Petitioner claimed that DeWolff breached its fiduciary duties by failing to follow petitioner's directions, causing a loss of approximately $150,000 to his "interest in the plan." Id. at 2a-3a. Petitioner sought to have the plan reimbursed for that loss, as "appropriate 'make whole' or other equitable relief pursuant to [ERISA Section 502(a)(3), 29 U.S.C. 1132(a)(3)]." Br. in Opp. App. 4a; id. at 50a. Section 502(a)(3) authorizes a plan participant and others to sue for, among other things, "appropriate equitable relief * * * to redress" "any act or practice which violates" ERISA. 29 U.S.C. 1132(a)(3). The district court entered judgment on the pleadings for respondents, concluding that the monetary remedy sought by petitioner is unavailable under ERISA. Pet. App. 15a-21a.

2. The court of appeals affirmed. Pet. App. 1a-14a. The court first rejected petitioner's argument that respondents are liable for the $150,000 loss to the plan under ERISA Sections 502(a)(2) and 409(a), 29 U.S.C. 1109(a), 1132(a)(2). Those provi sions authorize a participant, beneficiary, fiduciary, or the Secre tary of Labor to sue a fiduciary to recover "losses to the plan" resulting from a breach of fiduciary duty. 29 U.S.C. 1109(a); see 29 U.S.C. 1132(a)(2). The court held that, "[e]ven if the [Section 502(a)(2)] argument were not * * * waived," petitioner could not state a claim under that provision because "[r]ecovery under [Section 502(a)(2)] must 'inure[] to the benefit of the plan as a whole,' not to particular persons with rights under the plan." Pet. App. 5a (quoting Massachusetts Mut. Life Ins. Co. v. Rus sell, 473 U.S. 134, 140 (1985)). The court concluded that peti tioner's suit would not benefit the plan as a whole for three rea sons: (1) he sought "recovery to be paid into his plan account, an instrument that exists specifically for his benefit;" (2) "[t]he mea sure of that recovery is a loss suffered by him alone;" and (3) "that loss itself allegedly arose as the result of [respondent's] failure to follow [petitioner's] own particular instructions, thereby breaching a duty owed solely to him." Id. at 6a.

The court of appeals also held that petitioner could not state a claim under Section 502(a)(3). Pet. App. 7a-13a. In the court's view, petitioner sought monetary relief indistinguishable from compensatory damages, which are not available under Section 502(a)(3). Id. at 9a-10a. The court rejected petitioner's argu ment that he was seeking equitable relief because he was suing a fiduciary to recover losses caused by a fiduciary breach-relief that was historically available only in equity. Id. at 10a-13a. The court concluded that petitioner's argument was foreclosed by Mertens v. Hewitt Associates, 508 U.S. 248 (1993), and Great- West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204 (2002), because the relief he sought was available in equity only against a trustee and not "as a general rule." Pet. 12a (citation omitted); see id. at 9a-13a.

3. Petitioner sought panel and en banc rehearing on the Section 502(a)(2) issue, and the Secretary of Labor filed an ami cus brief in support of his petition. The court of appeals denied the petition. Pet. App. 22a-29a.

SUMMARY OF ARGUMENT

ERISA does not leave a participant in petitioner's position without an effective remedy. To the contrary, a participant in a defined contribution plan may sue to recover losses to the plan, including losses attributable to his own account, under Section 502(a)(2), 29 U.S.C. 1132(a)(2), and may also recover for breach of fiduciary duty under Section 503(a)(3), 29 U.S.C. 1132(a)(3).

I. A. Section 502(a)(2), together with ERISA Section 409(a), authorizes a plan "participant" to sue to recover "any losses to the plan" resulting from each breach of "any of the responsibili ties, obligations, or duties imposed upon fiduciaries" by ERISA. 29 U.S.C. 1109(a), 1132(a)(2) (emphases added). Whenever a defined contribution plan suffers losses, they will be attributable to the individual accounts of plan participants. But that does not alter their character as "losses to the plan." Although the assets of a defined contribution plan are allocated, as a bookkeeping matter, to individual accounts for the beneficial interest of the participants, the assets are held in trust and legally owned by the plan trustees. Thus, losses attributable to a participant's individ ual plan account are "losses to the plan" recoverable under Sec tion 502(a)(2). That conclusion is reinforced by 29 U.S.C. 1104(c) (2000 & Supp. IV 2004), which, in certain circumstances, exempts fiduciaries from liability for losses caused by a participant's exer cise of control over assets in his plan account. That provision would be superfluous if fiduciaries never had liability for losses attributable to an individual plan account.

B. Allowing suits to recover plan losses attributable to a par ticipant's account furthers ERISA's purpose of protecting partic ipants by "providing * * * appropriate remedies * * * and ready access to the Federal courts" to enforce ERISA's fiduciary duties. 29 U.S.C. 1001(b). That purpose would be undermined if Section 502(a)(2) did not authorize such suits. At a minimum, fiduciaries of defined contribution plans would be immunized from liability for breaches of duty, no matter how egregious, if they primarily affected the plan account of only a single partici pant. Moreover, there is no statutory or logical basis to limit a holding that Section 502(a)(2) does not provide relief to suits affecting only a single participant's account. Thus, a holding that petitioner is not entitled to sue here would seriously undermine the protection ERISA provides for the retirement savings of millions of Americans.

C. A holding that Section 502(a)(2) authorizes petitioner's suit is fully consistent with Massachusetts Mutual Life Insur ance Co. v. Russell, 473 U.S. 134 (1985). Unlike petitioner, the plaintiff in Russell did not seek to recover for the plan losses to the plan. Instead, she sought to recover for herself compensa tory and punitive damages that she suffered personally because of a delay in receiving her benefits.

II. A. ERISA Section 502(a)(3), which provides for "appro priate equitable relief" to redress violations of ERISA, 29 U.S.C. 1132(a)(3), also authorizes suits against fiduciaries to recover losses from fiduciary breaches.

The "equitable relief" authorized by Section 502(a)(3) is relief that was "typically available in equity" rather than at law. Mertens v. Hewitt Assocs., 508 U.S. 248, 256 (1993) (emphasis omitted). Relief is equitable if both the claim and the remedy sought would have been considered equitable in the days of the divided bench. See Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 213 (2002); Sereboff v. Mid Atl. Med. Servs., Inc., 126 S. Ct. 1869, 1873-1877 (2006). Historically, eq uity courts exercised virtually exclusive jurisdiction over claims by a beneficiary against a trustee for breach of trust. In those actions, equity provided a variety of remedies, one of which was to compel the trustee to redress the breach through the payment of money. That remedy, which was sometimes referred to as "surcharge," allowed the beneficiary to charge the trustee either for any profits made as a result of the breach or for the amount necessary to restore losses that would not have been suffered if the trust had been properly administered. Although surcharge was a form of monetary redress, it was distinct from legal dam ages and was available only in equity for a claim over which eq uity had exclusive jurisdiction. A suit against an ERISA fidu ciary to recover losses caused by a breach of duty is therefore "equitable relief" under Section 502(a)(3).

B. Construing Section 502(a)(3) to authorize suits to redress fiduciary breaches also accords with the central role of fiducia ries and fiduciary duties under ERISA. Given that central role, it is hard to imagine that Congress would have left participants who have been injured by fiduciary breaches without any effec tive federal remedy. But that it is precisely the result that re spondents seek.

C. Indeed, a holding that Section 502(a)(3) does not authorize monetary redress for fiduciary breaches would do more than deprive a large number of injured participants of an effective federal remedy. It would leave them without any meaningful remedy because virtually all state-law remedies for breach of fiduciary duty would be preempted by ERISA.

D. Suits under Section 502(a)(3) against fiduciaries for mone tary redress of fiduciary breaches are consistent with both Mertens and Great-West. Mertens was a suit not against a fidu ciary, but against a third party who provided services to the plan. Third-party service providers have no real power to control plan actions. This Court therefore concluded in Mertens that Con gress reasonably decided not to provide damages actions against them. And there is little need for such an ERISA remedy be cause state-law remedies will generally be available. Fiduciaries, in contrast, are central to the ERISA regime, and state-law rem edies against them are generally preempted. Moreover, unlike petitioner, who seeks the equitable remedy of surcharge, the plaintiffs in Mertens sought compensatory and punitive damages, relief that was typically available from courts of law. Likewise, Great-West was not a suit against a fiduciary seeking the equita ble remedy of surcharge, but a suit by a plan against beneficia ries seeking money damages for breach of contract. That dispute did not implicate the concern to protect the interests of plan par ticipants that motivated Congress to enact ERISA.

ARGUMENT

ERISA is a complicated statute. But it is neither so compli cated nor so counterintuitive that it leaves someone in peti tioner's position without a remedy. Congress enacted ERISA "to protect * * * the interests of participants in employee benefit plans and their beneficiaries * * * by establishing standards of conduct, responsibility, and obligation for fiduciaries of [those] plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts." 29 U.S.C. 1001(b). To that end, ERISA imposes stringent duties on plan fiduciaries, 29 U.S.C. 1104 (2000 & Supp. IV 2004), and includes several "care fully integrated" provisions authorizing participants and other interested parties to sue to enforce those duties, as well as other ERISA requirements. Massachusetts Mut. Life Ins. Co. v. Rus sell, 473 U.S. 134, 146 (1985). Despite the evident congressional intent to provide appropriate remedies and ready access to fed eral court, the court of appeals adopted a construction of Sections 502(a)(2) and 502(a)(3), 29 U.S.C. 1132(a)(2) and (3), that leaves participants in the most common form of pension plan who have been injured by a breach of fiduciary duty without a meaningful remedy from any court, state or federal. Under a correct read ing of Sections 502(a)(2) and 502(a)(3), a participant whose ac count in a defined contribution plan suffers losses as the result of a fiduciary breach has a remedy under both those provisions.

I. SECTION 502(a)(2) AUTHORIZES A PARTICIPANT IN A DEFINED CONTRIBUTION PLAN TO SUE TO RECOVER LOSSES TO THE PLAN THAT ARE ATTRIBUTABLE TO HIS INDIVIDUAL PLAN ACCOUNT

4. A. ERISA's Text Establishes That A Participant May Seek Relief For Any Losses To The Plan, Including Losses At tributable To His Individual Plan Account

Section 502(a)(2) provides that "[a] civil action may be brought" by a plan "participant," beneficiary, or fiduciary, or by the Secretary of Labor, to obtain "appropriate relief" under Sec tion 409 of ERISA. 29 U.S.C. 1132(a)(2). Section 409(a), in turn, provides that "[a]ny person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations or du ties imposed upon fiduciaries by this title shall be personally liable to make good to such plan any losses to the plan resulting from each such breach, and to restore to such plan any profits * * * and shall be subject to such other equitable or remedial relief as the court may deem appropriate, including removal of such fiduciary." 29 U.S.C. 1109(a). Those provisions authorize a participant in a defined contribution plan to sue to recover losses to the plan that are attributable to his individual account.

Petitioner claims that DeWolff violated its fiduciary duties by failing to invest assets in his plan account in accordance with his directions and that, as a result, the plan and his account held approximately $150,000 less than they would otherwise have held. Pet. App. 2a-3a; Br. in Opp. App. 3a-4a. Petitioner seeks an order requiring DeWolff "to reimburse to the plan amounts necessary so that [his] interest in the plan is what it should have been, but for the breach of fiduciary duty." Id. at 50a.

Petitioner's suit falls squarely within the text of Sections 502(a)(2) and 409(a). Those provisions authorize a "participant" to sue "[a]ny" fiduciary to recover "any losses to the plan" re sulting from "each * * * breach" of "any of the responsibilities, obligations, or duties imposed upon fiduciaries" by ERISA. 29 U.S.C. 1109(a), 1132(a)(2) (emphases added). As this Court has observed, "the word 'any' has an expansive meaning, that is, 'one or some indiscriminately of whatever kind.'" HUD v. Rucker, 535 U.S. 125, 131 (2002) (quoting United States v. Gonzales, 520 U.S. 1, 5 (1997)). Sections 502(a)(2) and 409(a) thus allow recov ery of all plan losses caused by a breach of ERISA's fiduciary duties-including losses that are in turn visited upon the account of a particular participant.

Whenever a defined contribution plan suffers losses, those losses necessarily will affect the balances in the plan accounts of one or more participants. Likewise, a recovery of those losses will always be allocated to one or more individual plan accounts. But that does not alter their character as "losses to the plan." It simply reflects the nature of a defined contribution plan. By statutory design, the assets of a defined contribution plan (in cluding "gains and losses" and legal recoveries) are allocated, as a bookkeeping matter, to individual accounts within the plan for the beneficial interest of the participants, whose benefits are dependent on the amounts so allocated. 29 U.S.C. 1002(34); Em ployee Benefits Sec. Admin. (EBSA), DOL, Field Assistance Bulletin 2006-1, at 8 (Apr. 2006) <http://www.dol.gov/ebsa/pdf/ fab2006-1.pdf>. At the same time, ERISA requires the assets to be held in a trust and legally owned by the plan trustees. See 29 U.S.C. 1103(a); 26 U.S.C. 401(a) (2000 & Supp. IV 2004); Rev. Rul. 89-52, 1989-1 C.B. 110. Accordingly, losses attributable to the plan account of an individual participant are "losses to the plan," and they may be recovered in a suit under Section 502(a)(2).

That conclusion is reinforced by Section 404(c) of ERISA, 29 U.S.C. 1104(c) (2000 & Supp. IV 2004). Section 404(c) provides that, if a defined contribution plan "permits a participant * * * to exercise control over the assets in his [plan] account," and the participant exercises that control as defined in the Secretary's regulations, "no person who is otherwise a fiduciary shall be lia ble under this part for any loss, or by reason of any breach, which results from such participant's * * * exercise of control." 29 U.S.C. 1104(c)(1). That provision would serve no purpose if fidu ciaries had no liability in the first place for losses that are attrib utable to an individual participant's plan account. Congress's decision to include Section 404(c)-a limitation on liability in the context of individual plan accounts-thus confirms that fiducia ries are generally liable for losses attributable to individual plan accounts. See Mertens v. Hewitt Assocs., 508 U.S. 248, 258 (1993) (refusing to read ERISA in manner that would "render" a provi sion "superfluous").1

B. Allowing Suits To Recover Plan Losses Attributable To Individual Plan Accounts Furthers ERISA's Purposes

One of ERISA's express purposes is "to protect * * * par ticipants * * * and their beneficiaries" by establishing stan dards of conduct for fiduciaries and "providing * * * appropri ate remedies * * * and ready access to the Federal courts" to enforce those standards. 29 U.S.C. 1001(b). "[T]he crucible of congressional concern was misuse and mismanagement of plan assets by plan administrators." Russell, 473 U.S. at 141 n.8. Sections 502(a)(2) and 409(a) "reflect[] [that] special congressio nal concern about plan asset management" by providing partici pants and others with a remedy for the breach of "fiduciary obli gations related to the plan's financial integrity." Varity Corp. v. Howe, 516 U.S. 489, 511-512 (1996). ERISA's goals are thus well served by construing Section 502(a)(2) to authorize a participant to sue to recover losses attributable to his individual plan account that have resulted from fiduciary mismanagement of plan assets.

In contrast, ERISA's purposes would be undermined if this Court affirmed the court of appeals' holding that Section 502(a)(2) does not authorize such suits. At a minimum, fiducia ries would be immunized from liability for breaches of duty, no matter how egregious, if the breaches primarily affected the account of a single participant in a defined contribution plan. Plan fiduciaries, participants, and even the Secretary of Labor would be unable to recover losses caused by those breaches. Currently, the Secretary brings many cases each year against fiduciaries who fail to forward employee contributions to their plans. See EBSA, DOL, Fact Sheet: Retirement Security Ini tiatives (Apr. 2007) <http://www.dol.gov/ebsa/newsroom/fsecp. html>. Under the court of appeals' approach, the Secretary would likely be unable to recover losses caused by the diversion of contributions from a single participant's account, even though the plan clearly received fewer assets than it should have. Those limitations on redress for fiduciary breaches would have a sub stantial impact on the retirement savings of American workers. Defined contribution plans are the predominant type of pension plan in the United States and hold approximately $3.3 trillion in assets. See Board of Governors of the Fed. Reserve Sys., Flow of Funds Accounts of the United States: Flows and Outstand ings, First Quarter 2007, Statistical Release Z.1, at 113 (June 7, 2007)<http://www.federalreserve.gov/releases/Z1/current/Z1. pdf>.

It is difficult, moreover, to envision how a holding that Sec tion 502(a)(2) does not allow relief could be limited to suits that involve losses to a single participant's account. As discussed above, any losses suffered by a defined contribution plan are always attributable to individual accounts, because ERISA re quires the allocation of all of the plan's assets among those ac counts. Thus, regardless of the number of participants affected, the nature of the loss remains the same. It is no more a "loss to the plan" when it affects a large number or percentage of partici pants than when it affects only one. There is therefore no statu tory or logical basis on which to draw a line between cases involv ing losses to a single plan account and cases involving losses to the accounts of many or most participants.

There is also no basis on which to limit a ruling that Section 502(a)(2) does not allow relief to situations where the breach is "individual in nature," Br. in Opp. 6, or the breached duty is "owed solely" to a single participant, Pet. App. 6a. ERISA's fiduciary duties apply to all of the assets of a plan and protect all plan participants. See 29 U.S.C. 1104(a). And Sections 502(a)(2) and 409(a) provide a remedy for the breach of "any of the re sponsibilities, obligations, or duties imposed upon fiduciaries" by ERISA, regardless of whether the breach affects one participant or all of them. 29 U.S.C. 1109(a) (emphasis added).

Thus, if this Court affirmed the court of appeals' Section 502(a)(2) holding, the Court would, at the very least, create sub stantial uncertainty about when participants in defined contribu tion plans may sue to recover plan losses caused by fiduciary breaches. The lower federal courts would likely become mired in litigation as they sought to decide what number or percentage of participants was sufficient to "serve as a legitimate proxy for the plan in its entirety" or when a plan's loss resulted from the breach of "a duty owed solely to" an individual participant. Pet. App. 6a. Indeed, because there is no coherent way to distinguish this case from cases involving losses affecting many or most plan participants, affirmance of the decision below could lead to a rule that Section 502(a)(2) suits are permissible for a defined contri bution plan only when all or virtually all participants have been affected by the breach. That will seldom be the case for Section 401(k) plans, because they usually offer an array of investment options, and different participants elect different options. See EBSA, DOL, Private Pension Plan Bulletin: Abstract of 2004 Form 5500 Annual Reports 44 (Mar. 2007) <http://www. dol.gov/ebsa/PDF/2004pensionplanbulletin. pdf>. Because Sec tion 401(k) plans comprise the majority of ERISA-covered pen sion plans, id. at 2, 44, adopting the court of appeals' approach could significantly reduce the protection that ERISA provides for the retirement assets of millions of Americans.

C. Construing Section 502(a)(2) To Authorize Relief In This Case Is Consistent With This Court's Decision In Russell

The court of appeals mistakenly concluded that Section 502(a)(2) does not authorize relief in this case primarily because it misinterpreted this Court's decision in Russell. See Pet. App. 5a-6a. Contrary to the court of appeals' belief, Russell poses no barrier to a suit like petitioner's, in which a participant in a de fined contribution plan seeks to recover for the plan losses caused by a fiduciary breach and manifested in the participant's plan account. The plaintiff in Russell did not seek a recovery for the plan of losses to the plan . Instead, she sought a recovery for herself of compensatory and punitive damages that she had suf fered personally because of a delay in her receipt of disability benefit payments. 473 U.S. at 137-138. Russell's holding that Section 502(a)(2) does not authorize damages payable directly to a participant does not affect the availability of relief payable to a plan, even if the participant who initiates the suit knows that the plan will allocate the award to the participant's plan account.

Indeed, Russell's reasoning supports the availability of relief here. The Court distinguished the relief sought in Russell- damages payable directly to a participant for pain and suffer ing-from relief payable to the plan to recoup "losses to the plan" arising from mismanagement of plan assets, which the Court understood to be available under Section 502(a)(2). See 473 U.S. at 140-141 & n.8, 142, 144. That is precisely what peti tioner seeks here-a payment to the plan equal to the losses to the plan that resulted from respondent's mismanagement of plan assets. The fact that the losses and recovery are both attribut able to petitioner's plan account does not change the result. In deed, Congress, in specifically empowering a participant to sue to recover for the plan, presumably anticipated that a participant would have an incentive to sue precisely because relief for the plan would also inure to the participant's benefit.

The court of appeals mistakenly concluded that Russell pre cludes relief because it gave an overly literal reading to this Court's statement in Russell that a recovery under Section 502(a)(2) "must 'inure[] to the benefit of the plan as a whole.'" Pet. App. 5a (quoting 473 U.S. at 140). As this Court has admon ished, it is "generally undesirable, where holdings of the Court are not at issue, to dissect the sentences of the United States Reports as though they were the United States Code." St. Mary's Honor Ctr. v. Hicks, 509 U.S. 502, 515 (1993). The state ment in Russell sought to distinguish between a recovery for the plan of losses to the plan (which is permitted by Section 502(a)(2)) and a recovery for an individual participant in his per sonal capacity of compensatory or punitive damages suffered by that participant alone (which is not). In emphasizing that distinc tion, the court may have had in mind a situation where the recov ery would benefit all participants equally, but the Court did not hold that Section 502(a)(2) is limited to that situation. Russell did not present that issue. Nor does anything in the text of Sections 502(a)(2) or 409(a) suggest that relief is barred simply because it also benefits plan participants. And imposing such an extratex- tual limitation on the otherwise broad statutory language would be inconsistent with the Court's "reluctan[ce] to tamper with an enforcement scheme crafted with such evident care as the one in ERISA." 473 U.S. at 147. It would also be inconsistent with the fundamental purpose of ERISA (including its remedial provi sions), which is to protect plan participants and their beneficia ries, not simply the plan itself for its own sake.

Moreover, a recovery for the plan of losses attributable to a participant's individual account actually benefits "the plan as whole," even if most of the benefit inures to the individual ac count holder. A payment to the plan to restore losses to an indi vidual account increases the total assets held by the plan as a whole, and a portion of the recovered assets, like any assets of the plan, generally are available to defray the operating expenses of the entire plan. See EBSA, DOL, Field Assistance Bulletin 2003-3 (May 19, 2003) <http://www.dol.gov/ebsa/regs/fab_2003- 3.html>. The court of appeals therefore erred in concluding that Section 502(a)(2) does not authorize petitioner's suit.

II. SECTION 502(a)(3) AUTHORIZES AN ACTION AGAINST A PLAN FIDUCIARY TO RECOVER LOSSES CAUSED BY A FIDUCIARY BREACH

The court of appeals also erred in holding that Section 502(a)(3) does not permit a suit against a fiduciary to recover losses resulting from a breach of fiduciary duty. Section 502(a)(3) authorizes a plan participant, beneficiary, or fiduciary to bring a civil suit "to enjoin any act or practice which violates" ERISA, including its fiduciary duties, or "to obtain other appro priate equitable relief * * * to redress such violations." 29 U.S.C. 1132(a)(3). A suit to compel a fiduciary to provide mone tary redress for a breach of fiduciary duty seeks "equitable re lief," and it is therefore authorized under Section 502(a)(3).2

A. A Suit Against A Fiduciary To Obtain Monetary Redress For A Breach Of Fiduciary Duty Seeks "Equitable Relief," Because Both The Claim And The Remedy Were Typically Available In Equity In The Days Of The Divided Bench

1. In Mertens, this Court concluded that the "equitable re lief" authorized by Section 502(a)(3) is relief that was "typically available in equity." 508 U.S. at 256 (emphasis omitted). Apply ing that standard, the Court held that Section 502(a)(3) did not permit a suit to recover money damages from a non-fiduciary third party who provided services to a plan. See id. at 256-263. The Court explained that "[m]oney damages are * * * the clas sic form of legal relief," and Congress could reasonably have decided not to provide that relief against non-fiduciaries because, unlike fiduciaries, they have "no real power to control what the plan d[oes]." Id. at 255, 262.

The Court revisited the scope of Section 502(a)(3) in Great- West Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204 (2002). In Great-West, the Court held that Section 502(a)(3) did not authorize an ERISA plan to sue to enforce a plan provision requiring beneficiaries to reimburse the plan for medical benefits for which they received a recovery from third parties. See id. at 206, 221. The Court concluded that the plan was not seeking "equitable relief" because, in essence, the plan sought compensa tory damages from the beneficiaries "for a contractual obligation to pay money-relief that was not typically available in equity," id. at 210 (emphasis added); accord id. at 211-213. The Court rejected the plan's effort to characterize that relief as equitable restitution because the plan sought a recovery from the general assets of the beneficiaries rather than from specific funds to which the plan claimed a right. See id. at 212-218. The Court explained that, in the days of the divided bench, restitution was available at both law and equity, and, therefore, "whether it is legal or equitable" under Section 502(a)(3) "depends on 'the basis for [the plaintiff's] claim' and the nature of the underlying reme dies sought." Id. at 213 (citation omitted).

The Court most recently addressed the meaning of "equita ble relief" in Sereboff v. Mid Atlantic Medical Services, Inc., 126 S. Ct. 1869 (2006). There, the Court concluded that a plan could enforce a reimbursement provision under Section 502(a)(3) be cause the beneficiary had preserved the disputed funds pending resolution of the claim, and the plan sought to enforce "an equita ble lien established by agreement" against those funds. Id. at 1873-1877. The Court held that the plan sought "equitable re lief" under Section 502(a)(3) because both the basis for the plan's claim and the relief sought would have been considered equitable in the days of the divided bench. Ibid.

2. Under the analysis in those cases, a suit against a plan fiduciary to recover losses caused by a breach of fiduciary duty seeks "equitable relief." Both the claim and the relief were typically-indeed, exclusively- available in equity in the days of the divided bench.

a. A suit against an ERISA fiduciary to recover losses caused by the fiduciary's breach is precisely analogous to a tradi tional action by the beneficiary of a trust to compel the trustee to redress a breach of trust. Those claims have always been at the heart of equitable jurisdiction. The courts of equity first recog nized the trust as an institution and fostered and developed it. George G. Bogert & George T. Bogert, The Law of Trusts and Trustees § 870, at 123 (rev. 2d ed. 1995) (Bogert). In a trust, the legal title to property is held by the trustee for the benefit of the beneficiary. Because the beneficiary has only an equitable rather than a legal interest in the trust property, and the trustee's duty to the beneficiary is also equitable, the beneficiary generally could not enforce that duty in a court of law. See 1 Austin W. Scott & William F. Fratcher, The Law of Trusts §§ 2.6-2.7, at 48- 49 (4th ed. 1987) (Scott); James P. Holcombe, An Introduction to Equity Jurisprudence on the Basis of Story's Commentaries 10 (1846) (Holcombe). Equity therefore exercised exclusive ju risdiction over claims by a beneficiary against a trustee for breach of trust, subject to limited exceptions not relevant here. Restatement (Second) of Trusts § 197, at 433 (1959) (Second Re statement); id. § 198, at 434; see Duvall v. Craig, 15 U.S. (2 Wheat.) 45, 56 (1817) ("A trustee, merely as such, is, in general, only suable in equity."); Manhattan Bank v. Walker, 130 U.S. 267, 271 (1889) ("The suit is plainly one of equitable cognizance, the bill being filed to charge the defendant, as a trustee, for breach of trust.").

b. In an action for breach of trust, equity provided a variety of remedies. See Second Restatement § 199, at 437. One of those remedies was "to compel the trustee to redress [the] breach," including by "the payment of money." Ibid.; 3 Scott § 199.3, at 206; see 4 John N. Pomeroy, A Treatise on Equity Jurispru dence § 1080, at 229 (5th ed. 1941) (Pomeroy) ; John Adams, Jun., The Doctrine of Equity; Being a Commentary on the Law as Administered by the Court of Chancery 93 (1850) (Adams); 2 Joseph Story, Commentaries on Equity Jurisprudence §§ 1266- 1278, at 519-534 (12th ed. 1877) (Story). Depending on the cir cumstances, the beneficiary could "charge the trustee with any loss that resulted from the breach of trust, or with any profit made through the breach of trust, or with any profit that would have accrued if there had been no breach of trust." 3 Scott § 205, at 237; see Restatement (Third) of Trusts-Prudent Investor Rule § 205, at 222-223 (1992) (Third Restatement).

This monetary recovery for breach of trust was sometimes referred to as "surcharge," because the trustee was "chargeable" for the recovery on top of the trust balance reflected in his ac counting. Third Restatement § 205 & cmt. a at 223 (noting that "the beneficiaries may surcharge the trustee" if a fiduciary breach causes a loss); see Bogert § 862, at 36 (explaining that liability for breach of trust may be imposed "either in a suit brought for that purpose or on an accounting where the trustee is surcharged beyond the amount of his admitted liability"); 3 Scott § 205, at 238-239 (describing the defalcations for which "the trustee is subject to a surcharge"); Black's Law Dictionary 1482 (8th ed. 2004) (defining "surcharge" as "[t]he amount that a court may charge a fiduciary that has breached its duty"); e.g., United States v. Mason, 412 U.S. 391, 398 (1973) (holding that United States was not subject to "surcharge" for paying state tax on property held in trust for Indians because it acted with requisite care (quoting 2 Scott § 176, at 1419 (3d ed. 1967))); Mosser v. Darrow, 341 U.S. 267, 270-273 (1951) (holding that district court properly imposed "surcharge" on bankruptcy trustee); Princess Lida of Thurns & Taxis v. Thompson, 305 U.S. 456, 458, 464 (1939) (describing authority of Pennsylvania state court, in "suit in equity," "to surcharge [trustee] with losses incurred").3

Courts and treatise writers also used a variety of other terms to refer to surcharge, including "personal liability," "compensa tion," "indemnification," and "the payment of money." See 4 Pomeroy § 1080, at 229; 3 Scott § 199.3, at 206. They even some times called surcharge "damages," particularly after the merger of law and equity. See, e.g., Bogert § 862, at 34; United States v. Mitchell, 463 U.S. 206, 226 (1983). Despite the varying labels attached to it, surcharge has a long history as a distinct remedy available exclusively in equity. That remedy also differed from the legal remedy of damages in significant ways: First, sur charge was sometimes measured by the trustee's improper gains, rather than the beneficiary's loss. See 3 Scott § 205, at 237 (trustee may be charged "with any profit made through the breach of trust"). Second, even when measured by the benefi ciary's loss, surcharge provided compensation only for economic injury, not non-pecuniary harm. See id. at 237-250 (describing extent of trustee's liability and making no mention of liability for non-economic injury); Third Restatement § 205, at 223 (same). Third, at least in the days of the divided bench, surcharge was limited to make-whole relief, and neither nominal nor exemplary damages were available. See 2 Story § 1278, at 534 (purpose of remedy is "to compensate the cestui que trust"); 3 Scott § 205, at 239 (trustee "is not subject to a surcharge for a breach of trust that results in no loss"); Dan B. Dobbs, Law of Remedies § 3.11(1), at 315 (1993) (punitive damages were traditionally not available in equitable actions, although courts have begun to award them since the merger of law and equity); accord Tull v. United States, 481 U.S. 412, 422 (1987). Thus, although sur charge was a form of monetary redress, it was an equitable rem edy distinct from legal damages that was available only in equity for a claim over which equity had exclusive jurisdiction.

Moreover, surcharge was available for the precise breach of duty that petitioner has alleged here-a fiduciary's purchase of improper investments. See Third Restatement § 205 cmt. a, at 233; Adams 94; 2 Story §§ 1273-1274, at 526-529; Gates v. Plainfield Trust Co., 194 A. 65 (N.J. 1937) (per curiam). Thus, a suit against a fiduciary to recover investment losses caused by a breach of fiduciary duty seeks "equitable relief" and is autho rized by Section 502(a)(3).4

B. Suits Under Section 502(a)(3) To Redress Fiduciary Breaches Accord With The Central Role Of Fiduciaries And Fiduciary Duties Under ERISA

Fiduciaries and fiduciary duties have a central role in the ERISA regime. Fiduciaries have primary responsibility for ad ministration and control of ERISA-covered plans. See Mertens, 508 U.S. at 262; 29 U.S.C. 1002(21)(A). Congress therefore viewed the fiduciary duties imposed by ERISA as affording criti cal protection for plan participants and beneficiaries. 29 U.S.C. 1001(b). And Congress intended ERISA to provide "appropriate remedies" and "ready access to the Federal courts" to prevent and to redress violations of those fiduciary duties. Ibid.

It is thus "hard to imagine" that Congress would have left participants and beneficiaries who have been injured by a breach of ERISA's fiduciary duties without any effective federal rem edy. Varity, 516 U.S. at 513. But that is what would occur in many situations if this Court held that Section 502(a)(3) does not authorize suits against fiduciaries to recover losses for fiduciary breaches. As discussed above, relief under Section 502(a)(2) is available for breaches of fiduciary duty that result in "losses to the plan." 29 U.S.C. 1109(a). But many breaches, particularly in the context of welfare plans, cause losses only to individual par ticipants and beneficiaries and not to the plan. For example, a fiduciary's negligence in submitting health insurance premiums may leave a plan participant without coverage during a costly illness. E.g., McFadden v. R&R Engine & Mach. Co., 102 F. Supp. 2d 458 (N.D. Ohio 2000). Similarly, a fiduciary's negligent processing of a life insurance application or premiums may leave a participant's beneficiaries without the insurance proceeds that they expected. E.g., Strom v. Goldman Sachs & Co., 202 F.3d 138, 140-141 (2d Cir. 1999). And a fiduciary's provision of inaccu rate information about the tax consequences of distribution op tions may cause a participant to suffer a substantial tax liability that should have been avoided. E.g., Griggs v. E.I. DuPont de Nemours & Co., 237 F.3d 371, 373-374 (4th Cir. 2001). Thus, if Section 502(a)(3) did not permit traditional suits in equity for monetary redress of fiduciary breaches that caused participants or beneficiaries to lose payments or distributions from the plan (see Third Restatement § 205(b) at 233), ERISA would provide no meaningful relief for a large class of participants and benefi ciaries who have been seriously injured by those breaches. The adverse consequences would even more severe if this Court held, contrary to our submission in Part I, that Section 502(a)(2) is not available in a case like this one even though a recovery would be paid into the plan.

The court of appeals suggested that, even if monetary relief were precluded under Section 502(a)(3), participants and benefi ciaries would not lack an ERISA remedy, because they could seek an injunction compelling the fiduciary to fulfill its duties or, in some circumstances, bring suit on the plan's behalf to remove the fiduciary. Pet. App. 13a. But those remedies, even in the limited circumstances in which they are available, are hollow ones for individuals who have already suffered devastating finan cial losses as a result of fiduciary misdeeds. Leaving those par ticipants and beneficiaries without a meaningful federal remedy cannot be squared with ERISA's purpose of providing them with "ready access to the Federal courts" to redress violations of ERISA's fiduciary duties. 29 U.S.C. 1001(b). It is particularly appropriate to interpret Section 502(a)(3) as providing the neces sary remedy. As this Court has noted, Congress intended Sec tion 502(a)(3) to be a "'catchall' provision[]" that would "act as a safety net, offering appropriate equitable relief for injuries caused by violations that § 502 does not elsewhere adequately remedy." Varity, 516 U.S. at 512.

C. Suits Under Section 502(a)(3) To Redress Fiduciary Breaches Are Necessary To Achieve ERISA's Goal Of Pro tecting Plan Participants And Beneficiaries

A holding that Section 502(a)(3) does not authorize monetary redress for fiduciary breaches would do more than deprive a large number of injured participants and beneficiaries of an ef fective federal remedy. It would leave them without any mean ingful remedy. Congress could not have intended that result.

ERISA contains an expansive preemption provision, which generally displaces all state laws that "relate to any [ERISA- covered] plan." 29 U.S.C. 1144(a). That preemption provision overrides state-law remedies against plan fiduciaries arising from a breach of an ERISA fiduciary duty. See, e.g., Peralta v. Hispanic Bus., Inc., 419 F. 3d 1064, 1069 (9th Cir. 2005); Eckelkamp v. Beste, 315 F.3d 863, 870 (8th Cir. 2002); Dudley Supermkt., Inc. v. Transamerica Life Ins. & Annuity Co., 302 F.3d 1, 4 (1st Cir. 2002); Kramer v. Smith Barney, 80 F.3d 1080, 1083 (5th Cir. 1996); see also Aetna Health Inc. v. Davila, 542 U.S. 200, 208-209 (2004). Consequently, if a participant or benefi ciary who has been injured by a fiduciary breach has no effective remedy under ERISA, he has no effective remedy at all. Con gress could not have intended to replace otherwise available state-law remedies with nothing. Leaving participants and bene ficiaries without any meaningful remedy would severely under mine ERISA's goal of "protect[ing] * * * the interests of par ticipants in employee benefit plans and their beneficiaries." 29 U.S.C. 1001(b).

For that reason, the narrow reading of Section 502(a)(3) mis takenly adopted by the court of appeals, and by several other courts since Mertens and Great-West, has led to a "rising judicial chorus urging" the correction of "an unjust and increasingly tangled ERISA regime." Davila, 542 U.S. at 222 (Ginsburg, J., joined by Breyer, J., concurring) (citation omitted). See, e.g., Eichorn v. AT&T Corp., No. 05-5461, 2007 WL 1574869, at *1-*2 (3d Cir. May 31, 2007) (Ambro, J., concurring in denial of petition for rehearing en banc); Lind v. Aetna Health Inc., 466 F.3d 1195, 1200 (10th Cir. 2006); Pereira v. Farace, 413 F.3d 330, 345-346 (2d Cir. 2005) (Newman, J., concurring), cert. denied, 126 S. Ct. 2286 (2006); Cicio v. Does 1-8, 321 F.3d 83, 106 (2d Cir. 2003) (Calabresi, J., dissenting in part), vacated, 542 U.S. 933 (2004); DiFelice v. Aetna U.S. Healthcare, 346 F.3d 442, 467 (3d Cir. 2003) (Becker, J., concurring).

Legal scholars have echoed the judicial concern that partici pants and beneficiaries cannot be left "betrayed without a rem edy." Colleen E. Medill, Resolving the Judicial Paradox of "Eq uitable" Relief Under ERISA Section 502(a)(3), 39 J. Marshall L. Rev. 827, 852 (2006); see, e.g., John H. Langbein, What ERISA Means by "Equitable": The Supreme Court's Trail of Errors in Russell, Mertens, and Great-West, 103 Colum. L. Rev. 1317, 1353-1362 (2003); Randall J. Gingiss, The ERISA Foxtrot: Cur rent Jurisprudence Takes One Step Forward and One Step Back in Protecting Participants' Rights, 18 Va. Tax Rev. 417 (1998); Jayne E. Zanglein, Closing the Gap: Safeguarding Participants' Rights by Expanding the Federal Common Law of ERISA, 72 Wash. U. L.Q. 671 (1994). Accordingly, this Court should correct the court of appeals' misinterpretation of Section 502(a)(3) and hold that make-whole monetary relief is available against fiducia ries who breach their ERISA duties.

D. Neither Mertens Nor Great-West Precludes Suits Under Section 502(a)(3) Against Fiduciaries For Monetary Re dress Of Fiduciary Breaches

1. Contrary to the conclusion of the court of appeals (Pet. App. 9a-13a), suits under Section 502(a)(3) against fiduciaries for monetary redress of fiduciary breaches are fully consistent with this Court's decision in Mertens. Mertens was a suit against not a fiduciary but a third party who provided services to the plan. As this Court explained, in contrast to fiduciaries, third-party service providers are not central to the ERISA regime. Unlike fiduciaries, they have "no real power to control" the actions of the plan. Mertens, 508 U.S. at 262. And ERISA does not ex pressly provide any remedies against them, whereas it provides an express remedy against fiduciaries for losses to the plan that result from a breach of their ERISA duties. See id. at 253. Given the peripheral role of third-party service providers and the absence of any express remedy, the Court concluded that Con gress reasonably decided not to provide a damages action against them, particularly since monetary relief is available against fidu ciaries. See id. at 262-263.

There is also less need for ERISA to provide monetary relief against third-party service providers because state-law remedies are generally available against those defendants. The courts of appeals "routinely find that garden-variety malpractice or negli gence claims against non-fiduciary plan advisors, such as accoun tants, attorneys, and consultants, are not preempted" by ERISA, especially when the claims are brought by or on behalf of plans. Gerosa v. Savasta & Co., 329 F.3d 317, 324 (2d Cir.) (citing cases), cert. denied, 540 U.S. 967, and 540 U.S. 1074 (2003). Those courts have reasoned that Congress did not intend "to preempt state laws that do not affect the relationships among" the "core ERISA entities: beneficiaries, participants, adminis trators, employees, trustees and other fiduciaries, and the plan itself." Ibid. Thus, claims against third-party service providers are generally not preempted unless they "'provid[e] alternate enforcement mechanisms' for employees to obtain ERISA plan benefits." LeBlanc v. Cahill, 153 F.3d 134, 147 (4th Cir. 1998) (citation omitted); e.g., Gibson v. Prudential Ins. Co., 915 F.2d 414, 418 (9th Cir. 1990). In contrast, state-law remedies against fiduciaries who have breached their fiduciary duties generally are preempted. See p. 22, supra.

In addition, unlike petitioner, who seeks the "'make whole' * * * equitable relief" provided by surcharge, Br. in Opp. App. 4a, the plaintiffs in Mertens did not seek equitable relief. See Mertens, 508 U.S. at 255 (plaintiffs "do not * * * seek a remedy traditionally viewed as 'equitable.'"). Although their claim-an action against a third party for participating in a breach of trust-was cognizable in equity, see Bogert § 870, at 135, they sought as a remedy "all damages according to proof" and "puni tive damages." J.A. at 17, Mertens, supra (No. 91-1671). Com pensatory and punitive damages, unlike surcharge, were typi cally available from courts of law rather than courts of equity. See Mertens, 508 U.S. at 255; p. 18-19, supra (discussing the differences between surcharge and legal damages).

As the Court noted in Mertens, courts of equity would some times provide legal remedies under the clean-up doctrine, see 508 U.S. at 256 (citing 1 Pomeroy § 181, at 257), but, under Mertens, the fact that equity would occasionally award legal remedies does not make those remedies "equitable relief" within the meaning of Section 502(a)(3). See id. at 256-258. Indeed, equity would sometimes award legal relief under the clean-up doctrine in suits against third parties who injured a trust. For example, if a third party committed a tort or a breach of contract against the trust, the appropriate remedy was an action by the trustee against the third party, which the trustee generally had to bring at law. Second Restatement § 280, at 38-42; Holcombe 22 n.2. If the trustee refused to sue, the beneficiary could sue the trustee in equity for breach of trust. Second Restatement § 282 & cmt. e, 44-45. In that suit, equity would permit the beneficiary to join the third party as a defendant, in order to avoid the need for multiple suits-one at equity by the beneficiary against the trustee and the other at law by the trustee against the third par ty. See ibid.; 4 Scott § 282.1, at 30. This Court may have viewed the relief sought by the plaintiffs against the non-fiduciary third party in Mertens as a kind of legal relief that equity courts would sometimes award under the clean-up doctrine. See 508 U.S. at 256-258.

Suits under Section 502(a)(3) to obtain redress for fiduciary breaches are also entirely consistent with this Court's decision in Great-West. Like Mertens, Great-West was not a suit by a par ticipant against a fiduciary for breach of fiduciary duty. Instead, Great-West was in essence a suit by a plan against beneficiaries for breach of contract. The dispute in Great-West thus did not implicate the concern to protect the interests of plan participants and beneficiaries that led Congress to enact ERISA. See 534 U.S. at 221 (noting that Congress gave participants and benefi ciaries broad rights to enforce plan terms, without placing any limitation on the nature of the permissible relief, but it provided more limited rights to plan fiduciaries). In addition, like the plaintiffs in Mertens, the plan in Great-West was not seeking the equitable remedy of surcharge. Rather, the plan was seeking compensation for the beneficiaries' failure to comply with a con tractual obligation to reimburse the plan for a tort recovery from a third party. Although the plan argued that it sought the equi table remedy of restitution, the Court concluded that, in reality, the plan sought the legal remedy of money damages for breach of a contractual obligation. See id. at 210, 221.

2. The court of appeals adopted an unduly narrow construc tion of Section 502(a)(3) in large part because it misunderstood this Court's statements in Mertens and Great-West that "equita ble relief" under Section 502(a)(3) is relief that was "typically available in equity." Pet. App. 7a (quoting Mertens, 508 U.S. at 256); see Great-West, 534 U.S. at 210 (quoting Mertens, 508 U.S. at 256). The court of appeals mistakenly reasoned that a remedy qualifies as "typically available in equity" only if equity courts awarded that remedy "as a general rule," rather than in certain cases or against certain defendants. Pet. App. 11a (quoting Rego v. Westvaco Corp., 319 F.3d 140, 145 (4th Cir. 2003)) (emphasis added by court of appeals); see id. at 12a-13a (concluding that the remedy sought by petitioner is not equitable because it was avail able only against fiduciaries who committed a breach of trust). But the Court in Mertens did not intend to exclude traditional remedies in equity that were available only in relatively atypical factual scenarios. Rather, the Court intended to exclude reme dies that were typically available only in courts of law, and not in equity, in the days of the divided bench.5 The remedy of sur charge was not the kind of remedy that the Court intended to exclude. As discussed above, surcharge was not only typically available in courts of equity rather than courts of law; it was ex clusively available in equity courts.

It would make little sense to conclude that a remedy, such as surcharge, which was available only in courts of equity, does not qualify as "equitable relief" because those courts imposed limits on its availability. Indeed, that conclusion cannot be squared with this Court's cases. For example, the Court held that the plan in Sereboff sought equitable relief even though equity would enforce an "equitable lien 'by agreement'" only against a defen dant who had agreed to make specific property available to sat isfy his obligation to the plaintiff. See 126 S. Ct. at 1875. More over, as the Court explained in Great-West, the equitable remedy of restitution was available only against a defendant who had possession of particular funds or property claimed by the plain tiff. See 534 U.S. at 214. And, in Harris Trust & Savings Bank v. Salomon Smith Barney Inc., 530 U.S. 238 (2000), the Court stated that an action for restitution or disgorgement of profits against someone who had benefitted from a breach of trust quali fied as equitable relief, even though that remedy was available only against a limited category of defendants-those who had received ill-gotten trust assets with knowledge "of the trust and the circumstances that rendered the transfer in breach of the trust." Id. at 251, 253. Thus, this Court has repeatedly held that a remedy was "typically available in equity," and therefore quali fied as "equitable relief" under Section 502(a)(2), even though the remedy was available only in limited circumstances and against particular defendants.

That conclusion has particular force in this case, which unlike the prior cases considered by this Court, involves a remedy against a fiduciary for breach of fiduciary duties in managing plan assets-a subject at the very core of ERISA. ERISA was enacted against the backdrop of the law of trusts, and Congress specifically intended that the law of trusts would inform interpre tation of the Act, including its remedial provisions. Varity, 516 U.S. at 502; Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 110-111 (1989); H.R. Conf. Rep. No. 1280, 93d Cong., 2d Sess. 295 (1974). It therefore is especially appropriate for relief to be avail able against a breaching fiduciary under Section 502(a)(3) if it would have been available against a trustee in a court of equity.

The court of appeals also misinterpreted (Pet. App. 11a) statements in Mertens and Great-West that "equitable relief" does not include "whatever relief a court of equity is empowered to provide in the particular case at issue" or "all relief available for breach of trust at common law." Mertens, 508 U.S. at 256- 258; Great-West, 534 U.S. at 210; see id. at 219 ("In Mertens, we rejected the claim that the special equity-court powers applicable to trusts define the reach of § 502(a)(3)."). Those statements reflect the proposition that the legal remedies that equity courts sometimes awarded in trust cases under the clean-up doctrine do not in themselves constitute "equitable relief" under Section 502(a)(3). See Mertens, 508 U.S. at 256 (explaining that "there were many situations-not limited to those involving enforce ment of a trust-in which an equity court could 'establish purely legal rights and grant legal remedies which would otherwise be beyond the scope of its authority'" (quoting 1 Pomeroy § 181, at 257)). The remedy of surcharge was not, however, a legal rem edy that courts of equity sometimes awarded under the clean-up doctrine. On the contrary, it was quintessential "equitable re lief"-awarded only by courts of equity, for a claim over which courts of equity had exclusive jurisdiction.6

CONCLUSION

The judgment of the court of appeals should be reversed.

Respectfully submitted.

 

PAUL D. CLEMENT
Solicitor General
EDWIN S. KNEEDLER
Deputy Solicitor General
MATTHEW D. ROBERTS
Assistant to the Solicitor
General



JONATHAN L. SNARE
Acting Solicitor of Labor
TIMOTHY D. HAUSER
Associate Solicitor
ELIZABETH HOPKINS
Counsel for Appellate and
Special Litigation
Department of Labor

 

 

 

AUGUST 2007

1 Respondents have not contended that they are exempt from liability under Section 404(c).

2 A plan participant, such as petitioner, may seek relief for a fiduciary breach under both Sections 502(a)(2) and 502(a)(3) under ordinary principles of civil procedure, which permit the joinder of alternative claims in a single action. Fed. R. Civ. P. 8(a), 8(e)(2); 5 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure §§ 1257, 1282, 1283 (3d ed. 2004). If this Court rejects the argument that Section 502(a)(2) provides a remedy here, or if relief for the breach otherwise proves unavailable under Section 502(a)(2), then the participant could recover under Section 502(a)(3). If, however, adequate relief is available under Section 502(a)(2), then the participant would generally not be entitled to relief under Section 502(a)(3), because additional relief would not be "appropriate," 29 U.S.C. 1132(a)(3). See Varity, 516 U.S. at 515.

3 The term "surcharge" was also used to refer to the situation, on an equitable bill for account, in which an equity court would permit a stated account to be reopened and adjusted to add a credit that had been improperly omitted. See 1 Story § 525, at 520; Black's Law Dictionary 1482. In this brief, we use the term not in that sense but to refer to the monetary redress that equity courts provided for breach of fiduciary duty.

4 That conclusion is supported by the case law on the right to jury trial in breach-of-trust cases. Until this Court's decision in Great-West, all the courts of appeals that had considered an action for monetary relief against a breaching fiduciary under either Section 502(a)(2) or Section 502(a)(3) of ERISA had concluded that there was no right to a jury trial because the claims were equitable. See, e.g., Phelps v. C.T. Enters., Inc., 394 F.3d 213, 222 (4th Cir. 2005); Borst v. Chevron Corp., 36 F.3d 1308, 1323-1324 (5th Cir. 1994), cert. denied, 514 U.S. 1066 (1995). Likewise, courts generally held that there was no right to a jury trial in non-ERISA fiduciary-breach cases. See, e.g., In re Evangelist, 760 F.2d 27, 29 (1st Cir. 1985); Uselman v. Uselman, 464 N.W.2d 130, 137 (Minn. 1990); First Ala. Bank, N.A. v. Spragins, 475 So. 2d 512, 513 (Ala. 1987) (per curiam); but see Pereira v. Farace, 413 F.3d 330, 339-341 (2d Cir. 2005) (reading Great-West to require a jury trial in a non-ERISA breach- of-fiduciary-duty case), cert. denied, 126 S. Ct. 2286 (2006).

5 See Mertens, 508 U.S. at 255 (rejecting idea that money damages are equitable relief on the ground that they are "the classic form of legal relief"); id. at 256 (noting that, although equity courts sometimes awarded legal relief under the clean-up doctrine, such relief was generally provided by courts of law); id. at 258 (noting that Section 502 of ERISA, 29 U.S.C. 1132, distinguishes "between 'equitable' and 'legal' relief"); see also Sereboff, 126 S. Ct. at 1873- 1877 (concluding that a plan's action to enforce a reimbursement provision "qualifies as an equitable remedy because it is indistinguishable from an action to enforce an equitable lien established by agreement," relief available in equity in the days of the divided bench).

6 Respondents argue in their motion to dismiss the writ (at 3-6) that petitioner is no longer a "participant" because he withdrew the balance in his plan account in July 2006, and that the case is therefore moot. That contention is without merit. ERISA defines a "participant" as "any employee or former employee of an employer * * * who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer." 29 U.S.C. 1002(7). Petitioner seeks an order requiring DeWolff to reimburse the plan for the losses he suffered as a result of DeWolff's alleged fiduciary breach. If petitioner prevails, the plan will obtain a recovery equal to the losses suffered by petitioner's plan account, and petitioner will have a claim for additional benefits to be distributed out of that recovery. Petitioner therefore is a former employee who "may become eligible to receive a benefit" from the plan if he prevails in his suit, and he is thus a "participant" under 29 U.S.C. 1002(7). See Firestone, 489 U.S. at 117-118 ("participant" includes "former employees who * * * have 'a colorable claim' to vested benefits"). For those reasons, the courts of appeals that have addressed the issue have allowed participants in defined contribution plans who have withdrawn their account balances to sue to recover investment losses caused by fiduciary breaches that occurred before the withdrawals. Graden v. Conexant Sys., Inc., No. 06-2337, 2007 WL 2177170 (3d Cir. July 31, 2007); Harzewski v. Guidant Corp., No. 06-3752, 2007 WL 1598097 (7th Cir. June 5, 2007); Sommers Drug Stores Co. Employee Profit Sharing Trust v. Corrigan, 883 F.2d 345, 347-350 (5th Cir. 1989).

In any event, whether petitioner is a "participant" and therefore has a statutory cause of action under Section 502(a), 29 U.S.C. 1132(a) (2000 & Supp. IV 2004), is a question on the merits that can be considered by the court of appeals on remand if this Court reverses the judgment below on one of the grounds urged by petitioner. It is not a question about whether there is a live case or controversy. See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 89-90, 97 (1998); Harzewski, 2007 WL 1598097, at *3.

 

APPENDIX

 

1. Section 1002 of Title 29 (Section 3 of ERISA) of the United States Code provides, in pertinent part:

Definitions

* * * * *

(21)(A) Except as otherwise provided in subparagraph (B), a person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or re sponsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan. Such term includes any person designated under sec tion 1105(c)(1)(B) of this title.

* * * * *

(34) The term "individual account plan" or "defined con tribution plan" means a pension plan which provides for an individual account for each participant and for benefits based solely upon the amount contributed to the participant's ac count, and any income, expenses, gains and losses, and any forfeitures of accounts of other participants which may be allocated to such participant's account.

* * * * *

 

2. Section 1104 of Title 29 of the United States Code (Section 404 of ERISA) provides, in pertinent part:

Fiduciary duties

(a) Prudent man standard of care

(1) Subject to sections 1103(c) and (d), 1342, and 1344 of this title, a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficia ries and-

(A) for the exclusive purpose of:

(i) providing benefits to participants and their beneficiaries; and

(ii) defraying reasonable expenses of administer ing the plan;

(B) with the care, skill, prudence, and diligence un der the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such mat ters would use in the conduct of an enterprise of a like character and with like aims;

(C) by diversifying the investments of the plan so as to minimize the risk of large losses, unless under the cir cumstances it is clearly prudent not to do so; and

(D) in accordance with the documents and instru ments governing the plan insofar as such documents and instruments are consistent with the provisions of this subchapter and subchapter III of this chapter.

* * * * *

(c) Control over assets by participant or beneficiary

(1) In the case of a pension plan which provides for indi vidual accounts and permits a participant or beneficiary to exercise control over the assets in his account, if a participant or beneficiary exercises control over the assets in his account (as determined under regulations of the Secretary)-

(A) such participant or beneficiary shall not be deemed to be a fiduciary by reason of such exercise, and

(B) no person who is otherwise a fiduciary shall be liable under this part for any loss, or by reason of any breach, which results from such participant's or benefi ciary's exercise of control.

* * * * *

 

3. Section 1109(a) of Title 29 of the United States Code (Section 409(a) of ERISA) provides:

Liability for breach of fiduciary duty

(a) Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this subchapter shall be person ally liable to make good to such plan any losses to the plan resulting from each such breach, and to restore to such plan any profits of such fiduciary which have been made through use of assets of the plan by the fiduciary, and shall be subject to such other equitable or remedial relief as the court may deem appropriate, including removal of such fiduciary. A fiduciary may also be removed for a violation of section 1111 of this title.

* * * * *

4. Section 1132(a) of Title 29 of the United States Code (Section 502(a) of ERISA) provides, in pertinent part:

Civil enforcement

(a) Persons empowered to bring a civil action

A civil action may be brought-

(1) by a participant or beneficiary-

(A) for the relief provided for in subsection (c) of this section, or

(B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan;

(2) by the Secretary, or by a participant, beneficiary or fiduciary for appropriate relief under section 1109 of this title;

(3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such vio lations or (ii) to enforce any provisions of this subchapter or the terms of the plan;

(4) by the Secretary, or by a participant, or benefi ciary for appropriate relief in the case of a violation of 1025(c) of this title;

(5) except as otherwise provided in subsection (b) of this section, by the Secretary (A) to enjoin any act or practice which violates any provision of this subchapter, or (B) to obtain other appropriate equitable relief (i) to redress such violation or (ii) to enforce any provision of this subchapter;

(6) by the Secretary to collect any civil penalty under paragraph (2), (4), (5), (6), or (7) of subsection (c) of this section or under subsection (i) or (l) of this section;

* * * * *

 

5. Section 1144(a) of Title 29 of the United States Code (Section 514(a) of ERISA) provides:

Other laws

(a) Supersedure; effective date

Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chap ter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan de scribed in section 1003(a) of this title and not exempt under section 1003(b) of this title. This section shall take effect on January 1, 1975.

* * * * *