LaRue v. DeWolff Boberg ( 2006 )

Vacated by Supreme Court, February 20, 2008
PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
JAMES LARUE, 
Plaintiff-Appellant,
v.
DEWOLFF, BOBERG & ASSOCIATES,  No. 05-1756
INCORPORATED; DEWOLFF, BOBERG &
ASSOCIATES, INCORPORATED,
Employees’ Savings Plan,
Defendants-Appellees.

Appeal from the United States District Court
for the District of South Carolina, at Charleston.
David C. Norton, District Judge.
(CA-04-1747-2)
Argued: May 22, 2006
Decided: June 19, 2006
Before WILKINSON and TRAXLER, Circuit Judges,
and Richard L. WILLIAMS, Senior United States District Judge for
the Eastern District of Virginia, sitting by designation.
Affirmed by published opinion. Judge Wilkinson wrote the opinion,
in which Judge Traxler and Senior Judge Williams joined.
COUNSEL
ARGUED: Robert Edward Hoskins, FOSTER LAW FIRM, L.L.P.,
Greenville, South Carolina, for Appellant. Thomas Peter Gies, CRO-
2 LARUE v. DEWOLFF, BOBERG & ASSOC.
WELL & MORING, L.L.P., Washington, D.C., for Appellees. ON
BRIEF: Rebecca Lee, CROWELL & MORING, L.L.P., Washington,
D.C., for Appellees.
OPINION
WILKINSON, Circuit Judge:
The plaintiff in this case alleges that defendant fiduciaries breached
their duty to him by failing to implement the investment strategy he
had selected for his employee retirement account. Relying on two
separate provisions of the Employee Retirement Income Security Act
of 1974 (ERISA), 29 U.S.C. §§ 1132(a)(2) and 1132(a)(3) (2000), he
seeks recovery of the amount by which his account would have appre-
ciated had defendants followed his instructions. The district court
concluded that his complaint did not request a form of relief available
under ERISA, and it therefore granted defendants’ motion for judg-
ment on the pleadings.
We affirm. Section 1132(a)(2) provides remedies only for entire
plans, not for individuals. And while § 1132(a)(3) does in some cases
furnish individualized remedies, the Supreme Court’s decisions in
Mertens v. Hewitt Associates, 508 U.S. 248 (1993), and Great-West
Life & Annuity Insurance Co. v. Knudson, 534 U.S. 204 (2002), com-
pel the conclusion that it does not supply one here. Plaintiff has
alleged no unjust enrichment, unlawful possession, or self-dealing on
the part of defendants, and the remedy he seeks falls outside the scope
of the "equitable relief" that § 1132(a)(3) authorizes.
I.
DeWolff, Boberg & Associates, Inc. is a nationwide management
consulting firm organized under the laws of South Carolina. It admin-
isters, and is thus a fiduciary of, an ERISA-regulated 401(k) retire-
ment savings plan in which its current and former employees
participate. The plan permits participants who so desire to manage
their own accounts by selecting from a menu of various investment
options.
LARUE v. DEWOLFF, BOBERG & ASSOC. 3
Plaintiff James LaRue has participated in this 401(k) plan since
1993. He alleges that in 2001 and 2002, he directed DeWolff to make
certain changes to the investments in his plan account, but that these
directions were never carried out. In 2004, he brought suit against
DeWolff and the plan, claiming that this omission amounted to a
breach of fiduciary duty.* According to the complaint, his "interest in
the plan ha[d] been depleted approximately $150,000.00" as a result
of defendants’ failure to follow his instructions. To recover for this
loss, the complaint sought "appropriate ‘make whole’ or other equita-
ble relief pursuant to [29 U.S.C. § 1132(a)(3)]."
Defendants subsequently filed a Rule 12(c) motion for judgment on
the pleadings, contending that plaintiff’s requested remedy was not
available under § 1132(a)(3). The district court agreed, and thereafter
dismissed the case with prejudice.
Plaintiff appeals. We review de novo a district court’s decision to
grant judgment on the pleadings. See Burbach Broad. Co. of Del. v.
Elkins Radio Corp., 278 F.3d 401, 405-06 (4th Cir. 2002).
II.
In enacting ERISA, Congress sought to uniformly regulate the
wide universe of employee benefit plans. See Aetna Health Inc. v.
Davila, 542 U.S. 200, 208 (2004). A salient feature of this effort was
the careful delineation of civil remedies available to litigants seeking
to enforce their rights under such plans. See id. at 208-09. Congress
broadly preempted previously available state-law causes of action, see
29 U.S.C. § 1144(a), and set forth in a single section of ERISA the
exclusive list of civil actions available to parties aggrieved by a statu-
tory violation, see id. § 1132(a); see also Ingersoll-Rand Co. v.
McClendon, 498 U.S. 133, 144 (1990).
Section 1132(a) stops short of providing ERISA complainants with
a full arsenal of relief. ERISA is "an enormously complex and
detailed statute that resolve[s] innumerable disputes between power-
*Accepting the allegations as pled, as we must, we shall assume with-
out deciding that defendants’ alleged conduct amounted to a breach of
their fiduciary duties.
4 LARUE v. DEWOLFF, BOBERG & ASSOC.
ful competing interests — not all in favor of potential plaintiffs."
Mertens v. Hewitt Assocs., 508 U.S. 248, 262 (1993). Its civil enforce-
ment provision in particular attempts to settle "a tension between the
primary ERISA goal of benefiting employees and the subsidiary goal
of containing pension costs." Id. at 262-63 (internal quotation marks
and alterations omitted). Congress has consequently made various
"policy choices" resulting in "the inclusion of certain remedies and
the exclusion of others." Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41,
54 (1987).
Interpretation of § 1132(a) is therefore no easy task. As the
Supreme Court’s ERISA decisions have repeatedly cautioned, "vague
notions of a statute’s ‘basic purpose’ are . . . inadequate to overcome
the words of its text regarding the specific issue under consideration."
Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 220
(2002) (internal quotation marks omitted); Mertens, 508 U.S. at 261(same). Section 1132(a) represents an "interlocking, interrelated, and
interdependent remedial scheme" that "provide[s] strong evidence that
Congress did not intend to authorize other remedies that it simply for-
got to incorporate expressly." Mass. Mut. Life Ins. Co. v. Russell, 473
U.S. 134, 146 (1985).
With these constraints in mind, we consider whether the statute’s
text provides the particular relief at issue here.
III.
Plaintiff first suggests that remuneration of his plan account finds
express authorization in the text of 29 U.S.C. § 1132(a)(2). That sub-
section allows for a civil action "by a participant, beneficiary or fidu-
ciary for appropriate relief under section 1109 of this title." Section
1109, in turn, provides that
[a]ny 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 sub-
LARUE v. DEWOLFF, BOBERG & ASSOC. 5
ject to such other equitable or remedial relief as the court
may deem appropriate . . . .
29 U.S.C. § 1109(a).
Plaintiff’s argument regarding the applicability of § 1132(a)(2) is
made for the first time on appeal. Even if the argument were not
therefore waived, see, e.g., Jones v. Liberty Mut. Ins. Co. (In re Wal-
lace & Gale Co.), 385 F.3d 820, 835 (4th Cir. 2004), he could not
succeed on the merits. Recovery under this subsection must "inure[]
to the benefit of the plan as a whole," not to particular persons with
rights under the plan. Russell, 473 U.S. at 140 (emphasis added); see
also Coyne & Delany Co. v. Blue Cross & Blue Shield of Va., Inc.,
102 F.3d 712, 714 (4th Cir. 1996). "A fair contextual reading of the
statute makes it abundantly clear that its draftsmen were primarily
concerned with the possible misuse of plan assets, and with remedies
that would protect the entire plan, rather than with the rights of an
individual beneficiary." Russell, 473 U.S. at 142 (footnote omitted).
It is difficult to characterize the remedy plaintiff seeks as anything
other than personal. He desires recovery to be paid into his plan
account, an instrument that exists specifically for his benefit. The
measure of that recovery is a loss suffered by him alone. And that loss
itself allegedly arose as the result of defendants’ failure to follow
plaintiff’s own particular instructions, thereby breaching a duty owed
solely to him.
We are therefore skeptical that plaintiff’s individual remedial inter-
est can serve as a legitimate proxy for the plan in its entirety, as
§ 1132(a)(2) requires. To be sure, the recovery plaintiff seeks could
be seen as accruing to the plan in the narrow sense that it would be
paid into plaintiff’s personal plan account, which is part of the plan.
But such a view finds no license in the statutory text, and threatens
to undermine the careful limitations Congress has placed on the scope
of ERISA relief.
This case is much different from a § 1132(a)(2) action in which an
individual plaintiff sues on behalf of the plan itself or on behalf of a
class of similarly situated participants. See Smith v. Sydnor, 184 F.3d
356, 363 (4th Cir. 1999); see also In re Schering-Plough Corp. ERISA
6 LARUE v. DEWOLFF, BOBERG & ASSOC.
Litig., 420 F.3d 231, 233, 235 (3d Cir. 2005); Kuper v. Iovenko, 66
F.3d 1447, 1452-53 (6th Cir. 1995). In such a case, the "remedy will
undoubtedly benefit [the plaintiff] and other participants in the
[p]lan," but "it does not solely benefit the individual participants."
Smith, 184 F.3d at 363 (emphasis added); see also Roth v. Sawyer-
Cleator Lumber Co., 61 F.3d 599, 605 (8th Cir. 1995) (permitting
recovery for losses to the plan but not losses to the individual plaintiff
beneficiaries for defendants’ alleged breach of fiduciary duty). Here,
by contrast, plaintiff seeks to particularize the recovery to himself.
Section 1132(a)(2) is not a proper avenue for him to obtain such
relief.
IV.
We thus turn to plaintiff’s second theory of relief, which relies on
a different ERISA remedial provision, 29 U.S.C. § 1132(a)(3). That
section authorizes a civil action
by a participant, beneficiary, or fiduciary (A) to enjoin any
act or practice which violates any provision of this subchap-
ter or the terms of the plan, or (B) to obtain other appropri-
ate equitable relief (i) to redress such violations or (ii) to
enforce any provisions of this subchapter or the terms of the
plan.
Plaintiff contends that the "make whole" relief he seeks constitutes
one of the forms of "other appropriate equitable relief" that the provi-
sion authorizes.
A.
In construing the scope of § 1132(a)(3), the Supreme Court has
stressed that the term "equitable" is one of limitation. In Mertens v.
Hewitt Associates, the Court held that the phrase "equitable relief"
refers only to "those categories of relief that were typically available
in equity" in the days of the divided bench. 508 U.S. at 256; see also
Sereboff v. Mid Atl. Med. Servs., Inc., 126 S. Ct. 1869, 1873 (2006).
The Court reasoned that other sections of ERISA expressly refer to
"equitable or remedial relief," 29 U.S.C. § 1109(a), and "legal or equi-
LARUE v. DEWOLFF, BOBERG & ASSOC. 7
table relief," e.g., id. § 1132(g)(2)(E), thereby demonstrating that "eq-
uitable relief" connotes only a subset of the full palliative spectrum.
See Mertens, 508 U.S. at 258. The Court refused to "read the statute
to render the modifier superfluous," id., a construction that would
undermine Congress’s exclusive remedial scheme by opening a back
door through which uninvited remedies might enter, id. at 257.
The particular definition of "equitable" that the Court has adopted
finds support in a well-known principle of statutory construction.
"The maxim noscitur a sociis, that a word is known by the company
it keeps, while not an inescapable rule, is often wisely applied where
a word is capable of many meanings in order to avoid the giving of
unintended breadth to the Acts of Congress." Jarecki v. G.D. Searle
& Co., 367 U.S. 303, 307 (1961). Section 1132(a)(3) expressly men-
tions the right to "enjoin" certain acts or practices "or . . . to obtain
other appropriate equitable relief" (emphasis added). The understand-
ing of what "equitable" means in this context is necessarily informed
by its association with injunctive relief, the quintessential exemplar of
a remedy that equity alone would typically provide.
Determining the applicability of § 1132(a)(3) therefore requires a
court to examine whether the form of relief a plaintiff seeks is, like
an injunction, historically one that a court of equity rather than a court
of law would have granted. See Sereboff, 126 S. Ct. at 1874. The
Supreme Court has, in addition to injunctions, listed mandamus and
restitution as examples of traditional equitable remedies. See Mertens,
508 U.S. at 256. Subsequent decisions of both the Supreme Court and
this court have been wary of expanding the list beyond these arche-
types and their closely related kin. See, e.g. Varity Corp. v. Howe, 516
U.S. 489, 495, 515 (1996) (reinstatement to a plan); Griggs v. E.I.
Dupont de Nemours & Co., 385 F.3d 440, 449 (4th Cir. 2004) (rescis-
sion); Denny’s, Inc. v. Cake, 364 F.3d 521, 526 n.6 (4th Cir. 2004)
(declaratory relief incident to an injunction).
B.
Mertens and its progeny compel the conclusion that the remedy
plaintiff desires falls outside the scope of § 1132(a)(3). As in Mertens,
although he "often dance[s] around the word," what plaintiff "in fact
seek[s] is nothing other than compensatory damages — monetary
8 LARUE v. DEWOLFF, BOBERG & ASSOC.
relief for all losses . . . sustained as a result of the alleged breach of
fiduciary duties." 508 U.S. at 255. "Money damages are, of course,
the classic form of legal relief," id., and have therefore remained con-
spicuously absent from the list of traditional equitable remedies avail-
able under § 1132(a)(3), id. at 256.
While that list does include "restitution," id., this form of recovery
is not so broad as to include the compensatory relief that plaintiff
seeks. As the Supreme Court explained in Great-West Life & Annuity
Insurance Co. v. Knudson, "not all relief falling under the rubric of
restitution is available in equity." 534 U.S. at 212. In particular, "for
restitution to lie in equity," as opposed to at law, "the action generally
must seek not to impose personal liability on the defendant, but to
restore to the plaintiff particular funds or property in the defendant’s
possession." Id. at 214; see also id. at 214 n.2 (noting a single "limited
exception" applicable to "an accounting of profits").
The Supreme Court’s most recent § 1132(a)(3) decisions demon-
strate how the absence of unjust possession is fatal to an equitable res-
titution claim. In Knudson, the Court denied a restitutionary remedy
under § 1132(a)(3) where "‘the funds to which petitioners claimed an
entitlement’ were not in Knudson’s possession, but had instead been
placed in a ‘Special Needs Trust’ under California law." Sereboff, 126
S. Ct. at 1874 (quoting Knudson, 534 U.S. at 207, 214) (internal alter-
ations omitted). More recently in Sereboff v. Mid Atlantic Medical
Services, Inc., the Court allowed a claim for equitable restitution to
proceed where "Mid Atlantic sought specifically identifiable funds
that were within the possession and control of the Sereboffs." Id.(internal quotation marks omitted). The Court in Sereboff reaffirmed
the possession requirement it had announced in Knudson, but found
that the "impediment to characterizing the relief in Knudson as equita-
ble [was] not present" in the Sereboffs’ case. Id.The impediment is, however, present in this case, and it precludes
plaintiff from recovering under an equitable restitution theory. Plain-
tiff does not allege that funds owed to him are in defendants’ posses-
sion, but instead that these funds never materialized at all. He
therefore gauges his recovery not by the value of defendants’ nonexis-
tent gain, but by the value of his own loss — a measure that is tradi-
tionally legal, not equitable. See, e.g., Kerr v. Charles F. Vatterott &
LARUE v. DEWOLFF, BOBERG & ASSOC. 9
Co., 184 F.3d 938, 944 (8th Cir. 1999); see also Sereboff, 126 S. Ct.
at 1874 (claim may be characterized as legal if plaintiff does not
"seek to recover a particular fund from the defendant"). Thus, at core,
he seeks "to obtain a judgment imposing a merely personal liability
upon the defendant[s] to pay a sum of money." Knudson, 534 U.S. at
213 (internal quotation marks omitted). As Knudson explained, histor-
ically "[s]uch claims were viewed essentially as actions at law," and
they are therefore unavailable under § 1132(a)(3). Id.
C.
Plaintiff attempts to avoid this conclusion by arguing that his
requested "make whole" relief represents something entirely different
from the types of remedies that we or the Supreme Court have hereto-
fore considered in the context of § 1132(a)(3). In particular, he
emphasizes that this case involves a situation where a participant or
beneficiary is suing a fiduciary for a breach of fiduciary duty. In his
view, the scope of "equitable" remedies available in such a case is
broader than when a fiduciary sues a beneficiary (as was the case in
Knudson and Sereboff) or when a beneficiary sues a non-fiduciary (as
was the case in Mertens). Unlike either of those scenarios, the argu-
ment goes, this case can be analogized to a common law breach-of-
trust action by a beneficiary seeking to recover lost trust profits, a
remedy that trust treatises have labeled "equitable." See Restatement
(Second) of Trusts §§ 197, 205(c) (1959); see also George Gleason
Bogert & George Taylor Bogert, The Law of Trusts & Trustees § 861
(rev. 2d ed. 1995).
The governing precedent, however, does not point as plaintiff sug-
gests. In fact, Mertens squarely "rejected the claim that the special
equity-court powers applicable to trusts define the reach of
[§ 1132(a)(3)]." Knudson, 534 U.S. at 219; see Mertens, 508 U.S. at
256-57. While the generally exclusive jurisdiction of equity courts
over breach-of-trust suits renders all remedies in such cases "equita-
ble" in the sense that a court of equity has power to grant them, "equi-
table" in the context of § 1132(a)(3) has a narrower meaning.
Mertens, 508 U.S. at 256. Under Mertens, "the relevant question is
. . . whether a given type of relief was available in equity courts as
a general rule," Rego v. Westvaco Corp., 319 F.3d 140, 145 (4th Cir.
2003) (emphasis added), rather than merely in the context of "the par-
10 LARUE v. DEWOLFF, BOBERG & ASSOC.
ticular case at issue," Mertens, 508 U.S. at 256. "Equitable relief"
therefore does not encompass the "many situations — not limited to
those involving enforcement of a trust — in which an equity court
could," by virtue of its jurisdiction over the claim at issue, "grant legal
remedies which would otherwise be beyond the scope of its author-
ity." Id. (internal quotation marks omitted).
That plaintiff can analogize this suit to a common law breach of
trust action therefore proves of no avail in characterizing the relief he
seeks as equitable. Plaintiff admits that he lacks support for the notion
that "make whole" relief was available in equity outside the context
of trusts. It is therefore impossible for us to conclude that such relief
"was available in equity courts as a general rule," Rego, 319 F.3d at
145.
The Sixth Circuit has reached a similar conclusion in a case pre-
senting facts nearly identical to those before us here. In Helfrich v.
PNC Bank, Kentucky, Inc., 267 F.3d 477 (6th Cir. 2001), a benefi-
ciary of an employee 401(k) plan sued a plan fiduciary for failing to
comply with written directions to roll over his assets into a specific
set of mutual funds. Id. at 479-80. The plaintiff asserted an entitle-
ment to the difference between the "amount he would have earned"
had the fiduciary followed his instructions and "the amount he in fact
earned" as a result of the fiduciary’s alleged breach of duty. Id. at
480. The court concluded that his requested remedy was unavailable
under § 1132(a)(3). Id. at 481-83. It found that the plaintiff could not
style his relief as "restitution" when he was measuring recovery by his
own losses rather than the defendant’s gains, id. at 482-83, and it
rejected a strict congruence between § 1132(a)(3) and the common
law of trusts, id. at 482 (citing Mertens, 508 U.S. at 256). It therefore
dismissed the suit because "ERISA does not permit plan beneficiaries
to claim money damages from plan fiduciaries." Id. at 482.
As Helfrich shows, the fact that a plaintiff happens to be a partici-
pant or beneficiary suing a fiduciary is entirely beside the point in the
§ 1132(a)(3) inquiry; the status of the parties does not determine the
nature of the relief. Many other circuits, both before and after Knud-
son, have likewise rejected the notion that whether a particular form
of relief is "equitable" depends on the identity of the parties. See Per-
eira v. Farace, 413 F.3d 330, 340 (2d Cir. 2005); Calhoon v. Trans
LARUE v. DEWOLFF, BOBERG & ASSOC. 11
World Airlines, Inc., 400 F.3d 593, 598 (8th Cir. 2005); Callery v.
U.S. Life Ins. Co. in the City of N.Y., 392 F.3d 401, 409 (10th Cir.
2004); McLeod v. Oregon Lithoprint Inc., 102 F.3d 376, 378 (9th Cir.
1996); Armstrong v. Jefferson Smurfit Corp., 30 F.3d 11, 13 (1st Cir.
1994); see also Brosted v. Unum Life Ins. Co. of Am., 421 F.3d 459,
466 (7th Cir. 2005) (noting that compensatory damages are unavail-
able under § 1132(a)(3) in suit for breach of fiduciary duty); D’Amico
v. CBS Corp., 297 F.3d 287, 289, 292 n.5 (3d Cir. 2002) (same). The
teachings of Mertens and Knudson obligate us to agree, and plaintiff’s
contrary argument therefore fails to cast doubt upon our conclusion
that the compensatory relief he seeks is legal, not equitable.
V.
Though Congress may one day take the remedial step plaintiff
desires, it has not yet done so. It is not difficult to imagine why. In
crafting ERISA, Congress sought a careful balance between the goals
of "ensuring fair and prompt enforcement of rights under a plan" on
the one hand and "encourag[ing] . . . the creation of such plans" on
the other. Aetna Health, 542 U.S. at 215 (internal quotation marks
omitted). It would certainly be reasonable for Congress to have con-
cluded that imposing personal financial liability on fiduciaries under
circumstances such as this — where there was no unjust enrichment,
unlawful possession, or self-dealing — would seriously deter plan
formation and the service of qualified individuals and institutions as
fiduciaries. Compare, e.g., Mertens, 508 U.S. 262-63 (discussing neg-
ative effects of expansive ERISA liability).
Congress’s decision to omit such liability hardly leaves a plan par-
ticipant or beneficiary in plaintiff’s position without recourse. He
could, for example, seek an injunction compelling compliance with
his investment instructions, see 29 U.S.C. § 1132(a)(3), or, under
appropriate circumstances, bring suit on the plan’s behalf to remove
the fiduciary, see 29 U.S.C. § 1109(a). In Congress’s view, such alter-
native remedies are sufficient to keep fiduciaries from breaches of
fiduciary duty that result in no benefit whatsoever to themselves. We
possess no authority "to adjust the balance . . . that the text adopted
by Congress has struck." Mertens, 508 U.S. at 263. Accordingly, we
affirm the judgment.
AFFIRMED